Subjects: Insurance; Telstra
E&OE...........
JONES:
Good morning, Prime Minister.
PRIME MINISTER:
Good morning.
JONES:
Thank you for your time. You're quoted today in the paper as having written to the Chairman of United Medical Protection, UMP, saying in light of the continued deterioration of the group's financial position the Government has decided that it would be inappropriate to provide the assistance that you've sought. I have just been advised in the last half hour that UMP, in the light of that letter, are going to call an extraordinary general board meeting in the next 48 hours and it's expected at that meeting that they will decide not to continue trading because of the absence of directors' liability insurance. Now, this company, as you know, covers professional indemnity for 90% of New South Wales' doctors. We've got a crisis on our hands.
PRIME MINISTER:
Well, Alan, there are some things I can say and there are some things I can't say.
JONES:
Yep.
PRIME MINISTER:
But one of the things I can say is that the Government has already offered a guarantee worth $35 million to keep this particular company going. Further assistance in relation to the position of the directors was sought because they could not reach satisfactory terms with their previous, or their current insurer. For reasons which I can't really go into any detail we…the Cabinet considered that and, we considered it and for reasons I can't go into detail we felt that to go a step further and respond to that additional request, which would have involved a potentially greater call, then that would not be appropriate. But I have given indications in that letter that in certain circumstances we would discuss with the company ways of continuing protection for doctors. I can't say any more than that for…
JONES:
Right. Well, just let me sum that up for the benefit of our listeners and I might just sum that up because the $35 million is separate from the directors' liability insurance.
PRIME MINISTER:
It is separate and it's not…I think your listeners should understand it is not normal for a government to offer…
JONES:
Definitely not.
PRIME MINISTER:
I mean…
JONES:
Definitely not.
PRIME MINISTER:
I mean, any suggestion that we have just sort of washed our hands of this would be quite unfair. I mean, we had a lot of debate about the $35 million but we offered it and we thought it was the right thing to do because I'm quite worried about this whole medical indemnity…
JONES:
Well, I just wanted to take you through it, if I could, because so is everybody listening to you now, who may have to go to a specialist surgeon of some kind in the next week…
PRIME MINISTER:
Well, Alan, that is the situation that I have indicated that the Government will address in a way that doesn't leave doctors…
JONES:
Right, so that means…
PRIME MINISTER:
But, Alan, please you must understand there are some things I can't say and I'm dealing with an individual company and it is a matter for the directors. I want to make it very clear, what the directors do is a matter for them and I have no right to tell the directors what to do or how to conduct themselves, that is a matter for them.
JONES:
But you won't stand by and see a neuro-surgeon or an orthopaedic or a gynaecologist without professional indemnity cover.
PRIME MINISTER:
We are dealing with a particular company. I can't give you a generic guarantee because I don't want somebody who hasn't behaved responsibly then to come along and say, well, you told me everything was okay on Alan Jones's programme on the 24th of April. What I'm saying is that we are - and this is in the context of this company - we are prepared to take certain steps to ensure…
JONES:
That the capital reserves are met…
PRIME MINISTER:
Well, I'm just…I'm confining myself to those words.
JONES:
Can I just take a generic comment here from you. Is it your intention that, because up until now of course these are not insurance companies medical defence organisations, they're just discretionary organisations, should they be regulated and if they are regulated then, of course, contingent liabilities would have to be incorporated in the overall balance sheet for the purpose of capital requirements and this would mean, would it not, that there'll be shortfalls of something like 400 or $500 million? Now, either of two things would happen. The poor neuro surgeon would have to pay a premium of $500,000 a year or us, the taxpayer, are going to have to underwrite all this.
PRIME MINISTER:
Well, generally speaking you're heading in the right direction. That is right…
JONES:
I thought we usually were, Prime Minister.
PRIME MINISTER:
I beg your pardon.
JONES:
I thought we usually did head in the right direction.
PRIME MINISTER:
I know, but I mean, what you're saying is an indication of the dimension of the problem. Now, the greatest single difficulty we have in this whole insurance area is that there is a much greater resort to litigation than used to be the case. I said yesterday and I repeat it on your programme this morning that I think we have to very strenuously endeavour as a nation not to go down the American path of suing at the drop of a hat over anything at all that might happen to us. Now that is not to say that there aren't serious cases of negligence in the medical profession and elsewhere. We have to find a way of dealing with those but it has been the proliferation of claims because of a far more litigious prone community that lies at the heart of this dilemma that we face and it's something that's got to be solved by everybody. It';s not the Federal government's responsibility alone, it's not the States government's, the profession has a role and public expectations have to be scaled back. Because you can't have it both ways. We can';t expect to be able to sue at the drop of a hat, yet complain if a doctor is not available because he can';t afford to pay the premium to open his door. And the areas where it hits hardest are things like obstetrics and neurologists, and the dwindling number of specialties available in those sorts of disciplines in country areas is one of the big problems that we have and not so much a problem with the GP …..
JONES:
Well I don't want to commit you beyond what you've said; I'm not trying to do that. I just want to raise another point because this outfit - United Medical Protection, which is now going to have an extraordinary general board meeting in the next 48 hours it may discontinue trading. But they cover 60 per cent of doctors, 90 per cent of them here and we've already covered the fact that perhaps professional indemnity will still be available by other means. But I notice that the chairman of Professional Insurance Australia, which is another outfit, has dismissed claims and we should be fair to say this shouldn't we, that there is an industry wide crisis. They are not seeking Federal government assistance he says - this fellow Barry Gilbert, that the medical indemnity problem is not an industry wide problem. Now does this mean that yet again in the insurance industry we've got joints like HIH that have been badly run?
PRIME MINISTER:
Well I can't in the context of our earlier discussion say yes or no to that because it could be misconstrued and that would not be a helpful thing because directors may be considering their position and their obligations both under the law and otherwise, and that is a matter for them to make a judgement on their own circumstances. But I'm interested that somebody else in the industry is saying well it's not a total crisis, I think that is encouraging. It's a problem, we are prone to many things and calling a difficulty a crisis is one of the things that we are prone to from time to time. And I think it's encouraging because if indeed there are other players and participants in this area who don't see it as a crisis, that holds hope in the event that other organisations may get into difficulty.
JONES:
Well if I could just shift from that to public liability. I know predominantly this is a state issue except that your Assistant Treasurer Helen Coonan conducted a "summit" on March 27. Now remembering that Treasury is a notoriously conservative organisation, they commissioned a report by Trowbridge consulting which says in part about public liability, there';s a crisis today in public liability insurance, the crisis is that there are many people seeking insurance who can either find it at very high prices or can';t find it all. It then says it's likely to persist another year or two at least, unless there's some external stimulus to, or intervention in the market. It then talks about the problem being a consequence of one - continuing increases in claims cost which you've just alluded to but this public liability; an insurance market dominated by defensive pricing, in other words they've been under writing and under pricing the premiums. But then it says although 2002 prices are expected to be on average 30 per cent higher than 2001 we - that's Treasury, find that 20 per cent increases will be common, increases of 50 to 100 per cent won';t be uncommon, some policy holders will be asked for increases of 500 to 1000 per cent, some policy holders will be denied cover altogether. Now question to you the Prime Minister - this is just putting volunteer and community groups out of business so then your electorate or some other electorate, the cake stall, or the daffodil show, or the country music festival will be wound up because of public liability. Now that';s a high political price some people are going to have to pay, isn't it?
PRIME MINISTER:
Well it's a high community price and you raised two issues, you raised the natural pressure on premiums because of changed circumstance, you also raised the possibility that some premiums are being put up more than they should be. Now in relation to that second issue we are in cooperation with the States and the various regulatory authorities investigating that to ensure that as best as we can, we don't allow that to happen. But the broader issue still is that there are expectations about… you talk about the cake stall, I think it is ridiculous that people have to take out insurance if they have a cake stall. And I mean if somebody has to, if the community as a whole has to give up a possible right in relation to the injury arising from a cake stall, well maybe we have to consider giving it up.
JONES:
Definitely.
PRIME MINISTER:
I mean I think most people would rather take the risk on that than not have cake stalls, to put it that way….
JONES:
But there';s another issue….
PRIME MINISTER:
…choices we';ve got to make…
JONES:
Quite. But see there is another issue that's sticking in peoples craw and that is there was a survey done of 700 charity and volunteer groups just in this State. It was found in that survey that only three and a half per cent of their premiums went in claims, most of them had made no claim at all, the RSL was one, in 80 years and their premiums go up by 300 per cent. There's something wrong somewhere in the system.
PRIME MINISTER:
Well there's a combination of things that are wrong. I mean the propensity to sue has gone through the roof and that's a driver of premiums, everybody's nervous, the whole world wide insurance market was shattered after September 11 and that has had a huge impact on premiums. You've got to remember that the insurance industry is built on reinsurance and a shockwave in one part of the industry that';s unrelated to the area that you';re covered by, by another part of the industry can have repercussion through the whole lot. So insurance premiums on everything have gone up because everybody feels more jittery and that's had a ripple effect all around the world. Now that's one of the reasons. But also there may be instances of some companies riding off the back of a national pressure to increase premiums and increase them more than they should have, that obviously has to be addressed.
JONES:
Lets talk about increases. Many people have rung me, not just pensioners, low income earners saying that no matter how much they try to cut down on their phone bills because they think by not making a lot of phone calls they'll cut down on their phone bill, they can't escape because the rental component is the thing that's going up and while that's going up these people are faced with astronomical phone bills even though they've made few phone calls. Do you understand that point?
PRIME MINISTER:
Yeah I do. Because the rental';s a fixed cost.
JONES:
Yeah, I mean but the rental charge two years ago was $11.50, we're now being told today that Richard Alston has approved something that's nearly $30.00 a month, that's $90.00 a quarter. So some person on lower socio-economics who'd made 15 phone calls is still minimum up for $90.00 for a phone bill.
PRIME MINISTER:
Yeah well we have tried and can I say in defence of Telstra and the government on this issue with the support and approval of ACOSS which represents all of the welfare bodies, we have developed a package which does look after the really needy and it does allow some increase across the board, I accept that, but if you look at the totality of telecommunications charges in this country they are lower when you think of the cost of living than they were some years ago. It is one of the areas where there has been a fall in prices. I mean you can pick two figures in one isolated area and say, well that's higher than what it was a few years ago but it is one of the few areas where costs have really fallen in real terms.
JONES:
Well listen, as always we're beaten by the bell, but thank you for your time and particularly for that input on insurance - a big issue.
PRIME MINISTER:
Thank you.
[ends]