Compulsory Third Party Insurance Regulation Bill

Second Reading

Adjourned debate on second reading.

(Continued from 23 September 2015.)

The Hon. R.I. LUCAS (15:54): I rise on behalf of Liberal members to speak to the second reading of the Compulsory Third Party Insurance Regulation Bill. The government second reading indicates that they believe this bill is about ensuring a fair and affordable CTP scheme and consumer protection for motorists and CTP insurance claimants by establishing an industry specific and independent regulator.

As you and other members will be aware, on 1 July this year the Legislative Council passed a motion which referred the whole issue of the privatisation of MAC to the Statutory Authorities Review Committee for an urgent inquiry. That committee has already commenced that inquiry and commenced taking evidence. On 9 September of this year, the Legislative Council passed a motion referring the impact of the lifetime care and support scheme and the CTP insurance scheme on persons injured in motor vehicle accidents to the Social Development Committee for inquiry.

During briefings by government advisers on this legislation, I asked a series of questions to the government advisers in terms of the progress of the government's privatisation process. As you know, the government is proceeding with the privatisation process as we speak. I was advised by the government that it does not need any legislation to proceed with and to conclude the process.

I was also advised that the current process is that the government is at the RFT stage (which is the request for tender stage), having been through an expression of interest stage sometime earlier this year, and the government's intention is to finalise that process and announce between three and five successful private operators by no later than December of this year. We were further advised that private operators have indicated they will need about six months to employ staff and to establish functioning offices to be ready to service customers from the newly privatised market on 1 July next year.

We were further advised that the government has considerable powers under the existing Motor Vehicles Act to undertake everything that it needs to undertake for the privatisation of MAC and that is why legislation is not required, and that the government's intentions are that, with the contractual requirements on private operators, it will be able to conclude the privatisation process. We were further advised that those same powers under the Motor Vehicles Act will be used by the government to ensure the continuation of MAC's existing community programs such as road safety, etc., at exactly the same level.

Let me indicate clearly that I put a specific question to the government and asked: if the Legislative Council was to defeat this bill, or if the Legislative Council was to delay the passage of this bill until next year, what impact would that have on the privatisation process? It was a clear, explicit question, and the clear and explicit response was it would have no impact, or it would not stop the government's privatisation process. The government has all the powers it requires under the Motor Vehicles Act and, through binding contractual arrangements on the operators, will conclude the process by the end of this year.

I think, to be fair to the government, their position is that they strongly prefer the passage of the legislation as quickly as possible. Their argument for that is that future private sector operators are strongly supportive of knowing the detailed nature of the proposed independent regulatory model beyond the three-year transition period, but again, and I repeat, the clear and explicit question I put was: if the Legislative Council was to defeat this bill, or if the Legislative Council was to delay the passage until next year, would it stop the process of privatisation? The government indicated no, it would not.

I think it is important for all members in this chamber to therefore understand where we are in the process. We clearly have the capacity to influence the nature of the regulatory environment, but we have no capacity to either prevent or halt the privatisation process which, as I said, will conclude in the next month or two, on the advice from the government.

I put a series of questions to the government and I will ask the government to, in their response, put on the public record the government's responses to the questions. The questions I put were: given the claims that have been made in relation to premium impacts of privatisation in New South Wales and Queensland, can the government provide their response to those claims about the premium impacts in those two states as a result of privatisation? Secondly, I asked some questions in relation to an issue which I will address in the second reading, which is the fair and reasonable provisions within the existing Motor Vehicles Act. I will address some comments to those in my contribution to the second reading.

The third question which I asked the government to place a response to is the following: how is the stronger regulatory model the government claims proposed for South Australia reflected in either this bill or in the contract? Fourthly, my question was: why did the government not choose to use ESCOSA as the independent regulatory authority, but rather establishing a separate independent regulatory authority?

Fifthly, on the government's future commitment to road safety funding and the mechanism by which that will be achieved, I asked the government to provide some detail in terms of how in practice the government proposes that existing commitments for road safety funding and other community programs would be maintained at the same level. As I said, I seek a response from the government or putting on the public record the responses they have already provided to me in private.

There are very many questions in relation, obviously, to the whole privatisation process but also in relation to this proposed regulatory arrangement. The government's proposal is that, for a three-year period, there will be what they refer to as 'CPI like' increases. I seek further clarification from the government (given that they are, I would imagine, already engaged in contractual discussions) as to exactly what the government means by 'CPI like'.

It is quite clear, through the use of that phrase, that they are not using CPI. They are leaving themselves some wriggle room for something, either a bit above or a bit below—one would imagine a little bit above, but that is not clear. Nevertheless, one would assume that there will be some basis for what they are referring to as 'CPI like' and I think it is important that that is placed on the record as to where the government is in relation to their interpretation of 'CPI like'.

As I said, there are many questions. The only one that I do want to flag here in some detail is that in the government's bill there is a reference to clause 17, and this is what it says:

Repeal of section 129 [of the Motor Vehicles Act]

The proposed amendment repeals section 129 of the principal Act which provides for the appointment of a committee to inquire into and determine premiums in respect of insurance under Part 4 of the Act. This amendment is consequential on the establishment of the CTP Regulator.

On the surface of that, it is a fairly pedestrian clause. It is saying, 'We are establishing an independent regulator; we therefore don't need the third party premiums committee and all this is doing is repealing that particular section.' But it is important for what is not included in that explanation of the clauses, nor in the government's explanation in the bill, as to what the government has deliberately excluded from both of those. That is, when you go to section 129(1) of the Motor Vehicles Act, it says:

Upon the recommendation of the Minister, the Governor may appoint a committee to inquire into and determine from time to time what premiums in respect of insurance under this Part are fair and reasonable.

That section provides for the establishment of a third-party premiums committee, and the minister's explanation refers to its abolition because we are establishing an independent regulator. What the minister's explanation does not include, clearly by deliberate intent, is the provision that says that the guidelines for the third-party premiums committee state that they have to determine premiums that are fair and reasonable.

The government is removing that 'fair and reasonable' provision for the independent regulator. One question I did not put to the government—but, clearly, I can now—is: why didn't you actually put that in the second reading explanation and the detailed explanation of clauses? Putting that aside, my question to them was: why are you getting rid of the 'fair and reasonable' provision in relation to the proposed regulatory environment for compulsory third-party?

I note particularly that the first sentence of the minister's second reading explanation says, 'This bill is about ensuring a fair, affordable CTP scheme.' The second reading explanation says it is all about ensuring a fair and affordable CTP scheme, but it actually removes the provision that says that premiums need to be fair and reasonable. I seek a response from the government on this.

The best response we could get from the government in relation to why they had abolished the provision was that 'fair and reasonable' is a legally vague concept and does not provide any specific guidance to the third-party premiums committee. I have lost count of the number of pieces of legislation that have used certainly the term 'reasonable' within them.

I am sure members who have been in this chamber for longer than one parliamentary session will be well aware of examples where the word 'reasonable' is used frequently in government bills. There are also a reasonable number of examples where the notion of 'fair' is used as well. Anyway, the bottom line is that it already exists within the Motor Vehicles Act and has done so for many years. It is not as if it is a new phrase. It is something that the third-party premiums committee has obviously successfully interpreted and used for a long period of time.

Before this bill passes the parliament, there needs to be debate about a number of issues and that one in particular, as to whether the government can give us a good argument—and there may well be a good argument; certainly that one was not a good argument, but there may well be one—in relation to why the government has not included that particular protection within the new regulatory environment.

A cynic might suggest—and I am not going to suggest that at this stage; I will give the government the benefit of response—that maybe the government does not want to see fair and reasonable CTP premium increases after the three-year transition period. I would hope that that is not going to be the case, but it is for the government to justify to the parliament why they have not included within the proposed regulatory environment the protection that exists within the existing regulatory environment.

There are two final points I want to make. First, as I indicated at the outset, the Statutory Authorities Review Committee inquiry into the MAC privatisation has already commenced taking evidence and, to be fair, we have already taken some evidence in public session from witnesses referring to the importance of the proposed regulatory environment.

As you would well know, Mr Acting President, some witnesses have already referred to the fact that the proposed regulatory environment is going to be an important part of how the market operates in the future, and one would expect that as a matter of common sense, anyway.

The Liberal Party has indicated publicly that our original intention was to refer this bill to the Statutory Authorities Review Committee upon passage of the second reading. However, that is not possible under the standing orders that apply to our procedures in this place, and that is why I have given notice today that tomorrow I will be moving a motion to ask the Statutory Authorities Review Committee in its current inquiry to ensure that it looks at the existing regulatory environment that applies to the Motor Accident Commission and any proposed changes. That is really through an excess of caution because, as I said, the committee has already been taking evidence on that and I think as a matter of course we probably would have.

I will do so formally. I will indicate tomorrow that, given the fact that the committee has already commenced taking evidence, I will seek a vote on it—not tomorrow but on the next sitting week after that—so that if the Legislative Council agrees, that advice can go to the Statutory Authorities Review Committee to assist it in its deliberations. If that motion were to be successful, it is my view that the Statutory Authorities Review Committee has a body of work to do to look at the regulatory arrangements that are most akin to the proposed model in South Australia, and they exist in New South Wales, Queensland and the ACT.

It may well be an issue for that committee as to whether it will need to take evidence in some way in relation to those independent regulatory environments. I think it would make sense because clearly the government is going ahead with the process come what may. I will be indicating that on behalf of the Liberal Party, given that course of action, we will not be supporting this bill proceeding to a final vote.

We will be moving at the appropriate stage for this bill's progress to be adjourned in the Legislative Council until the Statutory Authorities Review Committee can conclude its urgent inquiry into the Motor Accident Commission and, if the subsequent motion is successful, ensuring that it looks at the regulatory environment that exists and the proposed one which would mean that it could take evidence on this proposed model. It could also offer advice in relation to whether or not removing the requirement that premiums be fair and reasonable is a reasonable decision by the government in this bill and there are, of course, other issues that will need to be addressed as well.

If I can wrap that up by saying that we will await further contributions to the second reading. But probably either at the end of the second reading stage or at the start of the committee stage, we will either move for adjournment of the debate or a continued series of motions to report progress. I accept the government is unlikely to, even though it has supported the Statutory Authorities Review Committee inquiry into the privatisation motion. I expect the government's position will not be to support this reference but I will leave that as a judgement to the government.

For other members I can only repeat that the government's clear advice is that, irrespective of whether this bill is defeated or delayed, the government will be announcing the successful private sector competitors in the next month or two so, well prior to final resolution of this bill, and that is why we believe some inquiry into what would be a reasonable regulatory environment for the privatised compulsory third party market would make a lot of sense, and it would make a lot of sense that the Statutory Authorities Review Committee undertakes that work urgently on behalf of the council as part of its current inquiry.

Debate adjourned on motion of Hon. J. S. Lee.