FOR PRESS: P. M. No 86/ 1970
COMMONWEALTH TO LEGISLATE OIN
GENERAL INSURANCE
Statement by the Prime Minister, _ Mr. Joh-i Gorton
The Government has given close consideration, ' in the light of recent
developments in the insurance industry, to the broad question of supervision of the
affairs of general ( non-life) insurance companies. I have received letters on the
subject fram the Premier of New South VWales and Sir Arthur Rylah when Acting
Premier of Victoria and we have also~ had the benefit o views conveyed to the
Government by a number of organisations in the insurance field.
We have reached the conclusion that there is a need for better supervision oi
general insurance companies coniducting business in Australia. At present, Qujeensland
is the only State which exercises a comprehensive form of supervision, and
existing Commonwealth legislation the Insurance Act 1932-1966 is very limited in
scope. While the deposit requirements of the Linsurance Act have served a useful
purpose over the years, recent devehbpments have sho-, mn that deposit requirements
on their own do not provide adequate protection a; T the interests of policy-owners.
They need to be supplemented by a system of stripervision under which companies are
required to meet specified standards before they are authlorised to begin carrying
on general insurance business and in the conduct of their affairs thereafter.
The Government has given careful thought to the question whether supervision
should be a Commonwealth responsibility or whether it is best regarded as a matter
for the States. For various reasons, it seems to us that Commonwealth legislation
is the preferable co3urse.
The fact that the Commonwealth has powers in respect of insurance under the
Constitution is itself a very relevant consideration. The Commonwealth has already
legislated for supervision of life insurance ai~ d since its, enactment in 1945 that
legislation has been successful in ensuring sound and stable conduct of life insurance
business in Australia. As in the case of life offices, many general insurance companies
operate in a number of States and in the interests of the smooth running of their
businesses it seems desirable that they should deal with one supervisory authority.
In the representations they have made the main insurance organisations in Australia
have all accepted the need for greater supervision of general insurance and have
expressed a strong belief that it should be conducted by the Commonwealth.
At the same time, we recognise that the State Governments have a close and
practical interest in irsurance in a number of ways. Queensland is involved in
general insurance over the whole field, both irn an overall regulatory capacity and
through the operations of its State insurance off-Lce. Most of the other States are
engaged in insurance business through their government insurance offices and they
all have statutory provisions covering the licenSing of insurers for workers'
compensation and compulsory third party insurance pur-poses.
In these circumstances vie feel it would be most helpful if, before proceeding
further, we could have the benefit of the views of State Governments as to the kind
of provisions they think it would be desirable for Commonwealth legislation to
contain. Accordingly, I have written to the Premiers o~ f all the States inviting
their -idvice and comments and indicating that, if they so desire, we would be
happy to have discussions with representatives of State Governments.
The Government regards the subject as one of urgency and we will press
ahead with it with all possible speed. I should perhaps say, however, that the
preparation of a comprehensive legislative scheme will be a large and complex
operation, and I am unable at this stage to indicate a lilhely timetable for the
introduction of legislation.
CA NBERRA
0 Oeptember 1970