Reinsurers view Australia as the most litigious market in the world, Insurance Council of Australia CEO Andrew Hall told an inquiry today, as the industry body pushes for a civil liability review.

“If we think we’re less litigious than the United States, we’re wrong,” Mr Hall told the federal parliamentary inquiry into small business insurance.

“They’ve said to us, ‘Australia needs to get on top of this, because you are taking the global crown for uncapped, increasing payouts.’ ”

Reinsurers are looking at growth in claims costs and the local litigation funding market in assessing trends, he said.

ICA has made a range of proposals to ease insurance costs for small business, but Mr Hall said the single most important recommendation the inquiry could make would be a national review of civil liability settings.

Earlier today, IAG’s Jarrod Hill – CEO of CGU and WFI – said there is an opportunity to improve efficiencies and reduce costs around liability claims, which are largely for bodily injury.

Related article: ‘Near monopoly’ keeps premiums high for tattoo artists

Mr Hill said about 60% of reserves set aside for future claims goes to indemnity payments for injured parties, while the remaining 40% represents frictional costs.

“That is too high a weighting of the reserves, and the overall claims cost,” he said. “There’s an opportunity to create a more efficient overall legal framework and part of that would be tort reform.”

Mr Hill said significant capacity has returned to the commercial insurance market in the past two years.

“From an underwriting agency perspective, there are 60-plus underwriting agencies now that have the capacity and authority to quote professional indemnity business. So we do see quite a flex in capital and available markets to quote business in the commercial space.”

But insurers said parts of the market remain challenging, including for higher-risk sectors and regions.

Outdoor Council of Australia chair Lori Modde told the inquiry the sector has invested in an Australian adventure activity safety standard and worked with specialist brokers to obtain cover following problems gaining affordable insurance.

But she said costs remain too high and called for action on public liability limit requirements and tort reform.

“We have owned the risk, but there are structural issues that no individual business and no industry can solve alone,” she told the told the Joint Committee on Corporations and Financial Services.

Ms Modde said working with specialist brokers has been key to improving insurance cover, and the sector is working with brokers and the industry on a review of its activity safety standard.

---

From the latest Insurance News magazine: Why some businesses in regional Australia are taking desperate measures on coverage

---