Bills

Motor Vehicles (Compulsory Third Party Insurance) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 4 April 2019.)

The Hon. S.C. MULLIGHAN (Lee) (12:05): I rise to speak on the Motor Vehicles (Compulsory Third Party Insurance) Amendment Bill, a bill introduced in the other place and now before us. It is a relatively straightforward one. I indicate from the outset the opposition's support for the bill and also that I am the opposition's lead speaker.

As you would be aware, in 2016 the former Labor government approved four private insurers to underwrite the compulsory third-party motor vehicle insurance scheme and established an independent CTP regulator to oversee the insurers and the scheme. This was the first time that private insurers had provided insurance in the motor vehicle market or, I should say more specifically, the compulsory third-party insurance market relating to motor vehicles.

As I mentioned, there are four insurers competing for business from 1 July this year, three years on from that reform in 2016. I was advised in the briefing I received from the government that they are QBE, Allianz, AAMI and SGIC. QBE, I am advised, has a 35 per cent market share; Allianz, a 15 per cent market share; AAMI, a 30 per cent market share; and SGIC, 20 per cent.

Those allocations to the different insurers were based primarily on the response to the invitations to tender from those insurers about what proportion of the market they sought. Since that time, motorists' CTP insurance policies have been automatically allocated to these approved insurers. This automatic allocation will no longer apply after the expiry of the transitional period, which ends on 30 June this year just before the commencement the following day of 'full competition'.

The need for this bill is to provide for some further arrangements, principally around the allocation of insurers to people purchasing new vehicles, usually from a dealer, and then more specifically about having a regime whereby somebody who was allocated an insurer and who wishes to change insurer to avail themselves of a different insurance product, or perhaps be insured by an insurer that they are more familiar with, for example, will allow them to change their insurer and provide a period of time and a process by which that may occur.

It has also been mooted that there will be a particular form that registration renewal notices will take that will give people a choice of insurer and indicate the price that each insurer is demanding for the insurance they are offering. There will also be a consumer satisfaction rating, which is to be derived from and administered by the CTP insurance regulator. That will not only give motorists an opportunity to choose a price but will also give the deemed performance of an insurer when selecting with whom they wish to be insured. This is all relatively straightforward and eminently sensible.

However, there is also a further change in the bill that provides for a regime of inducements that an insurer may be able to offer when offering a motorist the opportunity to be insured. This is commonplace in other insurance markets. With home and compulsory motor vehicle insurance and other forms of insurance there may be incentives that are not specifically related to that product to attract custom—for example, multipolicy discounts. If you insure your home and your car as well as perhaps a boat or another asset, then a discount can be applied across the value of all those insurance premiums.

I understand there are also in place in other jurisdictions reward program memberships. For example, gift cards and at-fault driver protection policies and so on are all offered as inducements to motorists who are seeking to have themselves insured for CTP insurance. This provides for those inducements to be offered here in South Australia. That, in itself, as far as the opposition sees, is not controversial and provides for a regime whereby the Treasurer can approve those inducements to be provided to the market.

The opposition did have some concern with that element of it and indeed did move an amendment in the other place requiring that those inducements be of a prescribed class, which essentially would mean that, rather than be merely approved by the minister, they would have to be approved via regulation. That was important for a couple of reasons: firstly, to provide transparency and assure transparency on what inducements had been sought and approved by the market and who had received approval for which inducements.

While during the briefing on the bill I was provided with an assurance that it was the intention of the CTP regulator to publish those inducements on the website, there is no legislative instrument that requires this at the moment. It is also important for the benefit of providing a level playing field. It is conceivable that the regime the bill introduces enables one insurer to approach the Treasurer and seek approval for an inducement, which can be approved without the remainder of the market, let alone the consumers, being aware of the availability of that inducement.

If that were to eventuate, that provides, how can I put it, an inside running to one insurer over another because the other insurers may also be able to offer that inducement; however, they are not aware of the approval of the inducement. The regulator assures me and has assured the other place that that would be ameliorated by publication on the website; however, as I just said, there is no requirement to do this. I thought it was a reasonable amendment to the bill in the other place to require this by regulation.

One of the strongest arguments against that proposition, I am advised, was the timeliness of managing the bill so that it can come into effect by mid-May—mid-May, of course, being approximately six weeks out from the end of financial year and government, for many years, seeking at least a six-week period in which to be able to start issuing new vehicle re-registration notices to the community—and here we are, of course, right on the cusp of the beginning of May.

To seek a regulation in this environment, we were advised, was not feasible or too onerous for the government. I do not really think this holds water. Such a regulation can easily be made at such short notice and, while the member for Morphett might be taken by surprise that I have mentioned him in the scheme of the bill, I will give an example about how quickly regulations can be made.

He and I, both in former roles, worked together to ensure that both the council of which he was mayor at the time—the City of Holdfast Bay—and the Department of Planning, Transport and Infrastructure had a shared responsibility for the infrastructure, which comprised the breakwater jutting out not too far away from the Holdfast Shores Marina, near which, unfortunately, there was a tragic drowning some time ago. Hopefully, it is not even a footnote in history, given the tedium to which this anecdote must necessarily relate to.

The breakwater was a shared responsibility because the council governed access to the breakwater and the transport department managed the actual asset of the infrastructure, so if the council and the government had a mind, as we did, to ban pedestrian access to the breakwater to ensure that people could not swim off it and potentially come to ill, as that unfortunate person had done during that summer, then a regulation quickly needed to be made and rushed through in order to prevent access to that breakwater.

I do not mind telling you that I encountered some of the resistance, the treacle-like momentum, that can confront ministers from time to time due to some reluctance from the department to make that regulation. In fact, I was told that it certainly would not be possible. I asked this question on a Tuesday afternoon and to expect it to be considered, approved and made by the Governor by Thursday was wholly unreasonable.

It was not a particularly complex regulation to be made: merely a number of geographical coordinates needed to be ascertained and written into a document and there needed to be a brief supplementary cabinet meeting and presentation to the Governor and Executive Council. That was all able to be done at quite short notice; in fact, the regulation was in place by Thursday. That may only be of interest to the member for Morphett and I. It may only be of interest to me and not the member for Morphett, but it does illustrate the point that regulations can be made very quickly when need be, and sometimes there is an urgent need to make them.

Regulations can also commence by certificate of early commencement and hence may not be subject to the cursory 30 days laying before both houses of parliament to give any member the opportunity to move a motion of disallowance. All this could be achievable with such a regulation made in relation to this bill; however, we put those arguments. Those arguments were not supported by the other place, and my mathematics tells me that, if they are not supported by the other place, my chances of successfully moving them here are somewhat less than they were elsewhere.

Mr Pederick: Limited.

The Hon. S.C. MULLIGHAN: Yes, they are somewhat limited, as the member for Hammond says, so I will not be progressing that regulation here, but I do think it is an important point and one that needs to be placed on the record. This is the first time these four companies will be touting for business. They will be in hard competition with each other. I made mention of those different market allocations between those insurers. Those insurers are of a different size and scale from one another.

Those insurance companies have a different size and scale from the CTP motor vehicle insurance market here and will be competing very hard for South Australians' business from 1 July. The offering of inducements will be a key strategy for them to attract new clientele. I believe it is important to note in this place that there should be a regime of greater transparency around this. I think it is regrettable that the government did not accept the amendment and did not seek to exert a little more energy as a result and make these approvals via regulation, but there we are.

We will have to wait and see what the behaviour of the market is over the coming months, and perhaps years, to see if all the insurers feel they have had equal, open and transparent access to the Treasurer for approval of these inducements so that they all feel they have an equal run at the market and that consumers feel that the insurer they are contemplating may be able to offer them the full suite of inducements that have been approved by the Treasurer. Nonetheless, I feel I am getting close to exhausting the argument in that respect.

I will leave my contribution there, notwithstanding any other members looking to make a second reading contribution. I indicate to the government our support and also that we will not require any time in committee—unless, of course, the government has an amendment or anything of that nature.

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General) (12:20): I thank the member for his indication that the opposition will be supporting the bill and that it will not be necessary, as per his advice, for there to be any committee. On that basis, I indicate that the government will not be proposing any amendment and that therefore we will not seek to go into committee either.

There was one matter that was again raised by the opposition in this house, and it had been traversed in the other place during the debate of first instance on this bill, that is, the basis upon which there had been opposition to their opposition's proposal for an inducement model to be incorporated in regulations. It was presented to the other place as a measure that would add to the transparency of the model being proposed.

Again today we hear from the member, the speaker for the opposition, of their disquiet at the rejection of that in the other place. I put this to the house as some assurance: in other privately underwritten CTP schemes—in New South Wales, Queensland and the ACT—the types of inducements are not prescribed in law. The bill being presented by the government adds an additional requirement of controlling inducements by requiring the minister to approve the class or type of inducement allowed to be offered by the CTP insurers. This additional protection for the motoring community does not appear in other jurisdictions.

The minister-approved class of inducements will be publicly available on the CTP regulator's website. That was noted in the contribution from the opposition to be an indication by Ms Kim Birch, the regulator—who is present here today—and I am puzzled at the suggestion by the member that in some way this suggests there might be some failing on behalf of the regulator to do just that.

The imputation by the member in respect of the benefit of this disclosure on the website, or indeed the bona fides of the CTP regulator to both assume that responsibility and undertake the indication she has made, is, I think, quite disturbing. Nevertheless, as has been identified, this is a measure in the bill which does not apply even in other jurisdictions and which is an extra protection for consumers, in particular the motoring community.

Prescribing in regulation would remove the intended flexibility and is inconsistent with the intention of how a privately underwritten competitive scheme would operate. Direct policy holder inducements offered by one or some of the CTP insurers will be a lever used to win and hold market share and should be able to be released to market as soon as possible. The model outlined in this bill will enable the minister to approve within days any new class of inducement that becomes available. It also enables responsiveness to withdraw approval by the minister, should it become apparent that the inducement is not appropriate.

Examples of class of inducements are discounts off other insurance products, reward programs, gift cards, roadside services and crash and injury reduction products. The regulator, who, as I have indicated, is present here today, will be responsible to monitor the types of inducements being offered by insurers and to notify all insurers written into insurer contracts of changes to all classes of inducement.

I commend the honourable Treasurer of the government in another place for the presentation of this bill to ensure that there is an additional requirement in the model for controlling of inducements, and I also thank the CTP Insurance Regulator for both her current role and anticipated further responsibility in this important area.

I would hope that members would therefore appreciate the significance of the benefits of this legislation, the reason for it and the additional basis, relative to other jurisdictions, upon which it is offered. I am also mindful that there have been some considerable findings in the recent national royal commission and the highlighting in that commission of misconduct in the banking/superannuation/financial services industry surrounding the issue of commissions and inducements that impact on customer outcomes.

Recommendation 4.4 of that royal commission's final report proposed that there should be a cap on the amount of commissions that may be paid to vehicle dealers in relation to sale or add-on insurance products, and that is something of which this government is mindful. It may be that other jurisdictions that currently have these models, when they review the royal commission reports in detail, may make some advance in this area as well, but we have had the benefit of the opportunity to review the commission's recommendations before this bill was presented to the house.

A final point I would like to place on the record relates to the time frame and the significance of the timeliness of this legislation. The previous government some years ago now introduced the proposal to privatise compulsory third-party insurance in this state. That is a matter they determined back in 2015 in announcing a market-based model for the private sector to provide compulsory third party, and they set a number of parameters.

The first thing they did was enter into the whole process by contract. That came under severe criticism, both publicly and from our side of politics, because we felt that it was important, as happened in other jurisdictions, that this sale, the privatisation of this product, should be within the parameters of a statute, not a secret contract. As we know, the repeated conduct of the previous government, a standard they set themselves, was to enter into contracts, whether for the sale and privatisation of the lands titles services or other such—

Mr Cregan: Gillman.

The Hon. V.A. CHAPMAN: Yes, well, let's not even start on Gillman; that could really keep me here for days. It was a standard they set themselves, which, frankly, is a standard or threshold with which we do not agree. We take the view that, in respect of this whole exercise, it should have been under statute and it should have been something this parliament could scrutinise. However, having not done that and having announced that some years ago, whilst there was the establishment of the insurance regulator as an independent statutory authority—which we welcome, and I commend the regulator for her work to date and her continued commitment to this role—it is a model which was born within a contract.

Whilst this government embraces the establishment of the regulator and their obligations, we very clearly feel that it is important to add the extra protection in this legislation. The time frame we were given to deal with this was set by the former government. They are the ones who set 1 July 2019 as the commencement date for the new regime. So, please, spare us the suggestion in this parliament today that in some way the delay or obligation to deal with this matter expeditiously is the fault of the Treasurer or the government. The former government set the time frame for this.

The process was identified and taken through cabinet, which, as the member well knows, is the proper process. It was brought to the attention of the house in adequate time, complying with the rules in the other place, and earlier this month it was introduced to this place and available for consultation, briefings and debate in the parliament. It is fair to say that the opposition indicated, and maintain today, their support for the legislation. We welcome that, but please do not come in here with crocodile tears about being expected to in some way expeditiously deal with this matter as we are approaching 1 July 2019, given that the parameters of the implementation of this policy was set by the former government. With those words, I endorse the passage of the bill.

Bill read a second time.

Third Reading

The Hon. V.A. CHAPMAN (Bragg—Deputy Premier, Attorney-General) (12:33): I move:

That this bill be now read a third time.

Bill read a third time and passed.