Bills

Compulsory Third Party Insurance Regulation Bill

Committee Stage

In committee.

(Continued from 12 April 2016.)

Clause 1.

The Hon. K.J. MAHER: I note that this bill has been postponed a couple of times by the opposition this week, so I trust that we are now in a position to deal with it reasonably swiftly so that we can get on with other important business this afternoon. I note that the Hon. Rob Lucas asked a number of questions on Tuesday of this week in relation to this, so I might put on record the answers to those questions and trust that they will satisfy the Hon. Rob Lucas so that we can very quickly finish this bill and move on to other important matters.

In relation to criteria for setting premiums under the bill and removal of 'fair and reasonable', I am advised that there are a number of different CTPI schemes within Australia with a number of different mechanisms for setting premiums. Ultimately, the government has taken expert advice from PricewaterhouseCoopers and others and is fully informed about those other schemes, but the scheme that will commence from 1 July 2016 is the best for South Australia. The scheme will take effect whether or not the bill is passed, with the CTP regulator carrying out the same processes either way. The only outstanding issue is whether South Australians will have an independent statutory regulator or a public servant within a department.

This bill facilitates allowing an independent statutory regulator to go about the premium setting task in a way that best reflects the needs of the various stakeholders in the scheme as the CTPI market and the interests of its stakeholders evolve over time to reflect new technologies and the like. It avoids the risks of specifying now in legislation a particular premium setting method, which becomes outdated or unworkable as the scheme and the market mature and evolve. It also avoids using the legally vague formulation in the setting of premiums, which are to be 'fair and reasonable'.

The Crown Solicitor's Office advises that this phrase is legally vague in the context of section 129 of the Motor Vehicles Act because it does not specify any consideration that must be taken into account, that is, it does not specify 'fair and reasonable' to which stakeholders or by reference to which factors or considerations.

The crown has considered the submission of the plaintiff lawyers to SARC and respectfully advises that, in their view, they are legally misconceived. Instead, those words are being replaced with just 'scheme', which is far more robust, as referred to below.

In any modern regulatory environment, it is appropriate to empower the regulator to carry out the necessary steps to set premiums by reference to the scheme design and its operations. In the case of CTPI premiums under the CTPI Regulation Bill, that process will largely carry forward the process previously undertaken by the TPPC under the Motor Vehicles Act. This historically included the provision of actuarial reports and, in respect of scheme costs, information as to average weekly earnings in respect of affordability of premiums and appropriate cash flows to ensure the ongoing solvency of insurers and the health of the scheme.

Importantly, under the bill, for the first three years of the reformed scheme premiums will be fixed with CPI-like increases. After the initial three-year period the role of the regulator will be to set premiums within bands, with floor and ceiling limits. Having regard to the expert advice received, this is considered by the government to be an appropriate system for South Australia, particularly given that the market will be new rather than mature.

The modern regulatory environment is multifaceted and complex. In that environment, it is counterproductive to cement in legislation a number of criteria that must be considered by the regulator in setting premiums. By identifying several matters while excluding others, there is a risk that undue weight will be placed on the matter so identified, whether by the regulator or by others in the interpretation of the legislation. It is not possible to provide an exhaustive list of matters that must be taken into account in setting premiums and will remain relevant for years to come as the market matures and evolves.

While the matters which have informed the TPPC's consideration to date and will inform the regulator's determination going forward are currently known, those matters may evolve over time. The SA CTP Insurance Regulation Bill at clause 5(1)(b)and clause 5(1)(f)(i) specifically provide that the CPT regulator will have the functions of setting premiums and making compulsory rules about the determination of premiums. The regulator will outline the relevant matters to be considered in the determination of premiums in those rules. This approach facilitates a robust and flexible system that is capable of remaining relevant and current into the future, even when the CTPI market is evolved or changed.

While it is not possible to identify every matter, the CTP regulator will consider and determine premiums over years to come, and we would expect that the regulator will take the following into account in preparing rules and guidelines for premiums, as advised by the CTP insurance market reform lead commercial adviser, PricewaterhouseCoopers. In setting the annual premium, the regulator will consider the affordability of premiums and sustainability of the CTP schemes in South Australia.

The CTP regulator will conduct an actuarial analysis of the SA CTP insurance scheme. This analysis will be at a whole-of-scheme level and include consideration of the cost of claims, the cost of the scheme administration expenses, such as road safety, bulk-billed hospital and ambulance costs, policy administration services, scheme management and regulatory services delivered through the regulator's office, reasonable allowances for approved insurers expenses and profit margin, and any further factors that affect the financial soundness of the scheme, including solvency levels set by APRA or any other relevant commonwealth prudential regulatory body.

In undertaking this review, the CTP regulator may seek information from approved insurers and may consider any submissions provided by approved insurers. The CTP regulator may also seek information from other stakeholders at its discretion. These are examples of the types of matters the CTP regulator would consider and it is not exhaustive. Therefore, over time it is vitally important that the CTP regulator have sufficient flexibility to discharge their duties and not be legally restricted to a point in time legislation prescription which does not reflect the reality of a CTP insurance market in the future and as it changes over time.

In response to the question: in what ways were the plaintiff lawyers misguided, the crown advised that the phrase 'fair and reasonable' is legally vague. In providing that advice, the crown had the benefit of reviewing submissions made by plaintiff lawyers to the SARC on Monday 7 December 2015. The crown respectively points out that the plaintiff lawyer's evidence was misguided in the following ways.

Firstly, the plaintiff lawyer submitted that there has been judicial interpretation of the expression 'fair and reasonable' by the Supreme Court. It is clearly implied from the substance of the evidence that this interpretation might be used to understand the meaning of that phrase as used in the Motor Vehicles Act 1959 and in respect of the TPPC's task to determine premiums that are fair and reasonable.

However, the phrase that is used in the Motor Vehicles Act has not been specifically the subject of judicial consideration and the judicial interpretation referred to by the plaintiff lawyers appears to be in costs agreement cases. For a number of reasons, the judicial analysis contained in costs agreement cases is not easily applied to the use of the phrase 'fair and reasonable' for the Motor Vehicles Act.

Also the plaintiff lawyer submitted that the term 'fair and reasonable' appeared in Don Dunstan's speech in parliament at the time of the introduction of SGIC and that this speech was the basis of the phrase. The speech referred to related to the reasons behind the introduction of SGIC. It did not use the term 'fair and reasonable', but instead stated that the bill then before the committee was required to keep premiums at reasonable levels.

The Don Dunstan passage was not the basis of the inclusion of the term 'fair and reasonable' in section 129. The introduction of section 129 predated the 1970 SGIC legislation by many years. Section 129 originated from the Road Traffic Act Amendment Act 1936 when it was inserted into the Road Traffic Act in its original form, along with sections relating to third party insurance. The relevant provision of that act provided section 70M(1):

Upon the recommendation of the Treasurer the Governor may from time to time appoint a committee to enquire into and report upon the question whether the premiums charged for insurance under this Part are fair and reasonable.

No specific discussion was had at the time regarding the phrase 'fair and reasonable', although the purpose of the committee was to ensure that the government could be satisfied premiums were reasonable.

Finally, on this issue, the plaintiff lawyer submitted that 45 years on from Don Dunstan's speech, the phrase 'fair and reasonable' is now being deleted and there is no basis for that deletion. In his view, fair and reasonable has the connotation that you will look at all interests, not just the interests of the government, Treasury and insurers but most particularly the motorists. There is a basis for the removal of that phrase, given that it is unclear why that phrase was originally included in the Motor Vehicles Act and noting that that the phrase is legally vague. 'Fair and reasonable' does not have the connotation that most particularly the motorists' interests will be looked at. There is no legal basis for making that comment.

In response to the issue regarding the New South Wales regulator and premium settings, I am advised that the New South Wales premium setting system is fundamentally different from that in South Australia. New South Wales has a file and write system where insurers can file with the regulator any premium they like at any time and the regulator has six weeks in which to approve or reject it.

Accordingly, the role of the New South Wales regulator is not to set premium bands, but instead simply to approve or reject premiums proposed by the New South Wales insurers. This is covered in 2.3 of the New South Wales Motor Accidents Compensation Act 1999. The New South Wales act makes no reference to fair and reasonable in premium setting. The existing requirements as to affordability, which is an entirely different requirement from fairness and reasonableness, appear in the guidelines issued under that act.

The South Australian system will see the regulator set premiums within bands with floor and ceiling limits after the initial three-year period of fixed premiums with CPI-like increases. This is considered by the government to be a better system for South Australia, particularly given the market will be new rather than mature. Accordingly, the role of the SA regulator is quite different from that of the New South Wales regulator.

The South Australian CTP Insurance Regulation Bill at clause 5(1)(b) and clause 5(1)(f)(i) specifically provide the CTP regulator will have the functions of setting premiums and making compulsory rules about the determination of premiums. Those rules will be set by the regulator and, regardless of whether or not the CTP bill is passed, include factors such as actuarial findings, average weekly earnings, insured profit margins and cost controls in the role of the state as the ultimate insurer of last resort through the nominal defendant. The processes under the CTP regulation bill in this respect reflect the process in New South Wales, where guidelines are issued under the legislation which provides the detail in respect of the determinations of premiums.

In response to the question of notice of the New South Wales regulator, I am advised that the questions on notice received by the New South Wales regulator in the SARC are merely matters of confirming details and so the pending provisions of the responses to those questions should not be a barrier to the passage of the CTP regulation bill. In our response to the issue about the role of the regulator pre-2019, I am advised that the CTP regulator will be performing many functions from 1 July 2016. The regulator will perform five key functions, which include:

1. determination of premiums;

2. issuing of rules and guidelines;

3. enforcement of rules and guidelines;

4. monitoring of the CTP insurance business; and

5. the provision of information to consumers and insurers.

The design of the new private sector CTP insurance models has the CTP regulator sitting at the centre and is effectively the glue that holds the CTP scheme together through the transition period and beyond.

It will be important that the CTP regulator is on board and dealing directly with the key stakeholders, including the approved insurers, from 1 July 2016. The CTP regulator will have a high level of public visibility through public information statements, the CTP regulator website, the 1300 helpline and other means. The public has a right to know who the CTP regulator is and to have confidence in the CTP regulator's accessibility. The CTP regulator's office will be overseeing a number of administrative functions, including managing the ability to change approved insurer, allocating a claim through the 1300 helpline, actuarial assessments of CTP scheme performance and bedding down of other processes between key CTP stakeholders.

ICT builds are currently being completed to capture the performance of the CTP scheme. Information from these ICT builds will begin to flow from 1 July 2016, and that information will inform the development of the rules and guidelines, including future price determinations. The preparation for the 2019 premium price determinations will likely start in late 2017 or early 2018, and the rules and guidelines will need to be issued as a draft for these determinations, possibly as early as late 2016 or early 2017.

While the 2019 price determinations appear to be a long way off, there is a significant body of work to be undertaken before then. The CTP regulator will also be overseeing and enforcing certain aspects of consumer information protection in the CTP market from 1 July 2016. Other ad hoc issues will need to be resolved, for example, if new classes of vehicles are introduced and appropriate premiums are to be set. To reflect this important body of work, and based on advice to the government from PricewaterhouseCoopers, it is necessary for the regulator's office to be built up with a number of staff, starting in 2016. The exact number will be recommended by the CTP regulator as he or she develops these matters.

In response to the question of urgency, why it is necessary to pass the bill, I am advised that the registration renewal forms will contain new scheme information in the lead-up to 1 July 2016 and thereafter, once the new scheme has commenced. Those updated forms will be sent out to motorists in May. If the CTP regulation bill is not passed by early May, those registration renewal forms will contain information which will subsequently be out of date and incorrect if and when the bill is passed. This includes information which will facilitate the novation of motorists' policies from the Motor Accident Commission to the approved insurers on 1 July 2016.

If the bill is passed, the novation of insurance policies is not required, as the bill in its transitions provisions, clause 15 of part 3, provides for the transfer of policies on the commencement of the scheme. The registration forms also contain information designed to enable motorists to undertake a selection of insurer processes as permitted by section 99A(2) of the Motor Vehicles Act. That process will be amended if and when the bill is passed.

It is not in the public interest to unnecessarily provide outdated and incorrect information to motorists as part of their registration renewal papers. Such provision will tend to confuse. Further updating the form sometime in the future is an unnecessary administrative burden if parliament is minded to pass the bill and it is merely a question of timing.

I might just outline very briefly now that in response to Lucas amendment No. 1, I am advised that subclause (3)(b) remains legally vague, and for the reasons provided in detail just previously on sophisticated regulatory environment which can stand for many years, it is inappropriate, and subclause (3)(a) is merely a recitation of clause 5(3) of the bill and is therefore unnecessary where no subclause 3(b) is inserted.

The Hon. R.I. LUCAS: At the outset, can I say that I am disappointed that the government has decided to give this complicated bill, in relation to the Motor Accident Commission, priority ahead of the child protection legislation.

The Hon. K.J. Maher: You are the one who put it off constantly, Mr Lucas—

The CHAIR: Order!

The Hon. R.I. LUCAS: I have had a series of discussions with the Attorney-General—

The Hon. K.J. Maher: You put it off two days in a row.

The CHAIR: The honourable minister will sit and suffer for a minute and just listen.

The Hon. R.I. LUCAS: I have had a series of discussions with the Attorney-General over the past few days and indicated quite clearly that our view, as a Liberal Party, was that the child protection legislation was important and critical legislation. It needed to be passed immediately after question time—or we could have actually sat this morning and passed the child protection legislation this morning. So I want it on the public record that the Liberal Party's position has been not to want to delay the child protection legislation. That is a decision minister Maher has taken, evidently by himself, in relation to the priorities of the government.

This is a complicated bill which will take quite some time, if the majority in this parliament decide to proceed with it. As I indicated whenever we debated this, Tuesday or Wednesday of this week, I will again be testing the view of the chamber in relation to reporting progress for the reasons outlined on Tuesday; that is, there is a series of detailed questions that the Statutory Authorities Review Committee intends to put to Treasury and other government officers at the final evidence taking meeting next Monday afternoon.

I think the minister has taken almost 20 minutes of time in the committee stage in a quickly read, garbled response to a series of questions that was hard for us to hear, and we have not been provided with a copy of his prepared answers to the questions. There is a series of complicated issues that we are going to have to explore during the committee stage of the debate, if the majority view of this parliament is to force it to a vote today.

As I said, I hope that minister Maher will ensure that the House of Assembly does not get up early because if we do not get to do the child protection legislation until late this afternoon the message then has to go down to the House of Assembly, and if the government chooses to get the House of Assembly up early that will mean that the legislation will not be able to be fully enacted through both houses of the parliament. That is not our preferred course of action; it is a decision the Weatherill government, and minister Maher in particular, appears to have taken in terms of the government's priorities.

In relation to this, there is a series of issues that the minister has raised at clause 1, including an initial response to an amendment I intend to move later with regard to the operation of the fair and reasonable principle in terms of premium setting. Much of what the minister is now saying—and I acknowledge that is based on advice from his officers—is completely contrary to the advice that I and others were given by government officers in the briefing late last year.

I put specific questions to the officers, asking, 'What happens if the parliament actually defeats this bill or defers consideration of it?' They were quite explicit questions, unambiguous, and the explicit and unambiguous response I got was that it did not matter because the government was going to write into the contracts with the private sector insurers all the requirements of the operation of private sector insurers under the motor vehicles legislation. In addition, I was told that the provisions of the existing motor vehicles legislation are quite onerous in terms of the powers the minister has over private sector operators, but they were more than sufficient for the government to be able to do it.

I hasten to say that the government officers' advice was that their preferred position was obviously to have this bill, or some form of this bill, passed in the parliament but, as I said, there was an unambiguous response that if this parliament actually voted against the bill, voted it down, it would not matter. The privatisation was going to go ahead—which indeed the government has done—and it would put all the provisions into the contracts and some version of the third party premiums committee would continue under that particular arrangement.

That is the advice we were given. It is contrary to the advice the minister is now giving in relation to the importance of this legislation before the house at the moment. I intend to explore in the committee stage of the debate the different advice we were given as members of parliament by government officers late last year in relation to the bill and what the minister has just put on the public record as we go through the clauses.

In relation to the operation of the independent regulator, can the minister indicate to the committee what action, if any, the independent regulator will take if it is established between now and June 2019 as it relates to the premiums that will be set in the next three years, or is it correct that all the issues in relation to premiums have already been written into the contracts for the four private sector operators?

The Hon. K.J. MAHER: I thank the honourable member for his questions and his contribution. I might point out, however, that he is often either misleading directly or misleading by omission to come in here and pretend that we do not want to deal with another bill when every day this week it was he who put off this bill previously—every single day this week. He was the one who got up and said, 'No, I don't want to deal with this bill.'

We could have been dealing with any other bill today if it had not been for the Hon. Rob Lucas deferring this bill every single day this week. It is clear he is ready to deal with it; he has been ready to deal with it for quite some time, but he has decided to put it off. I am happy to sit here as late as it takes tonight to get through this and any other bill. I will sit here as late as it takes tonight to get through these bills. I will sit here as late as it takes tonight.

In relation to his specific questions of determining the premiums, that it is not a function that the CTP regulator will undertake until 2019. They will undertake other important functions, however, including issuing of rules and guidelines, enforcement of the rules and guidelines, moderating of the CTP insurance business, and the provision of information to consumers and insurers.

The Hon. R.I. LUCAS: That was not the question I put to the minister. I asked the question about premiums, that is, the critical issue of premiums. In relation to premiums, will the regulator, if this bill is passed, have any role or function between now and June 2019 in relation to the premiums that will be charged between now and June 2019, or is it a fact that those premiums have been and are written into the contracts for the four private sector operators?

The Hon. K.J. MAHER: I thought I answered that but, just to make it exceptionally clear for the Hon. Rob Lucas: no, they will not be setting premiums for the first three years. However, they will be playing a role in the preparation of premiums for 2019 afterwards, but they will have the other important functions prior to 2019 which I outlined before and which I outlined just a moment ago.

The Hon. R.I. LUCAS: In relation to the minister's game playing earlier, when he said he was happy to sit as late tonight as possible, and that is fine, he would not answer the question: will he ensure that the House of Assembly will stay sitting until tonight?

There is no point if the Legislative Council sits tonight, Mr Chairman, as you know, if the House of Assembly gets up and goes home; they cannot receive the message and the legislation cannot pass. The minister would not answer that question, and the reason is that the House of Assembly will not sit. That is why we wanted to do child protection first so that we could then do the Motor Accident Commission after that particular issue.

Before we get off the topic of premiums, the minister keeps using the phrase 'CPI-like'. Clearly, the contracts have been written since December or January. What is the actual CPI-like premium increase that is going to operate for next year, the year after, and the year after?

The Hon. K.J. MAHER: I am advised that the average increase of the premiums for each year will be 3 per cent.

The Hon. R.I. LUCAS: Given the minister's advice is the average premium increase, can the minister indicate, therefore, what the range is? Is he indicating that the average across the classes is 3 per cent and that in some cases for some classes it will be higher than 3 per cent, in other cases it will be lower, and the average is three? If that is the case, what is the range of premium increases that punters will face for next year, and then we can talk about the future years?

The Hon. K.J. MAHER: I thank the honourable member for his question. I do not have all the detail of exactly those figures, but I will be happy to supply them to him once we have passed this bill today.

The Hon. R.I. LUCAS: If the government is trying to jam a bill through in relation to premium setting and premium increases, I think it is a bit rich to stand up in this council and say, 'I'm not going to tell you what the premium increases are going to be until we pass the legislation, and then I'll come back and tell you, look, the average is 3 per cent but in some cases it's 15 per cent and in some cases it's 1 per cent and we've calculated the average in this particular way.'

Who do they think we are? Do they think we are just mugs in this chamber, that we are going to accept this rubbish that is being provided to the members of this chamber in relation to a critical issue? The government is proceeding with the privatisation of the Motor Accident Commission. It is able to do that without legislation. Some members, like the Hon. Mr Brokenshire and others, said they were vehemently opposed to that if they could not express a view on it.

We are now talking about how it is going to be regulated. This is the independent regulator. We are told we have to pass this legislation today. Again, as I said, this is contrary to what we were told previously. The critical issue of premiums should be an issue that members are aware of before they actually sign off on this.

I think it is unacceptable for the minister, based on advice, to say, 'Well, look, the average is 3 per cent but there is a range but I'm not going to tell you what that range is because'—well, not 'because'—'I won't tell you what the range is until after the legislation is passed.' Frankly, from our viewpoint, we do not accept that sort of argument. The government's advisers have all this information, they know what the range is, they know whether it is only 3½ per cent, 2½ per cent, or it is 10 per cent for some classes. Which classes do they happen to be?

We are talking about locking in, or the government has evidently already locked in by way of contract premium increases for the three years. For the first year, we are talking about an average of 3 per cent. I want to know then, what have they locked in for the following year and for the following year, because there are three years that we are talking about in terms of premium increases?

This government is saying, 'We're going to oppose an amendment which says that they should be fair and reasonable premium increases because it's a vague concept, and when we get to that, let's talk about that.' Those are the actual words which exist at the moment, which have governed premium increases in this state for decades, or for many years, and yet they say now it is going to be a vague concept, it is hard to interpret, yet they are the same words that have existed in legislation for many years in relation to premium increases.

So, I again put the question to the minister: will he provide to this chamber, before the bill passes, the range of premium increases that will apply for all classes for next year?

The Hon. K.J. MAHER: I do not have that information with me. The average over the three years will be 3 per cent.

The Hon. R.I. LUCAS: That is just an appalling response. The minister now says the average over three years is going to be 3 per cent. Is the minister saying that the average for each year will be 3 per cent for three years, but he will not say what the range of increases will be across the various classes because he refuses to give that information? I hope other members will appreciate or understand the arrogance of the minister and the government in relation to this particular issue. We are being asked to accept a pig in a poke. We have no idea what we are being asked to accept in terms of the range of price increases.

Who knows how the government has calculated this particular average of 3 per cent? Is it weighted according to the number of vehicles within each particular class that they have calculated this 3 per cent? The class of vehicles which has the most consumers in it might have a bigger increase, but they have not provided an appropriate weighting in terms of calculating the 3 per cent average number. There are any number of ways to interpret the bizarre response that the minister has just given to the supposed average of 3 per cent premium increase.

One of the other key functions of this independent regulator is to determine the minimum terms and conditions of CTP insurance policies. Can the minister indicate whether the minimum terms and conditions of CTP insurance policies for the first three years have been written into the contracts with the private sector insurers?

The Hon. K.J. MAHER: As I have said, it is a 3 per cent average over the next three years. What we are doing here today, whether the Hon. Rob Lucas holds up this bill or not, that is not going to change what the figures are going to be. What it will mean, though, is that there is no independent regulator overseeing this. It will be a public servant.

The Hon. R.I. LUCAS: My last question was not in relation to premiums.

Members interjecting:

The CHAIR: Order!

The Hon. K.J. Maher interjecting:

The Hon. R.I. LUCAS: You were talking to the Hon. Tung Ngo. Do I have to repeat the questions all the time? You do not listen to them.

The Hon. K.J. Maher interjecting:

The Hon. R.I. LUCAS: Well, it was a different question. It had nothing to do with premiums. Do we have to keep repeating questions for this minister because he cannot comprehend a simple question that is put to him? Let me repeat what I said again, and I will use the words very slowly: one of the other key functions of this independent regulator is to determine the minimum terms and conditions of CTP insurance policies. My question to the minister was: have the minimum terms and conditions of CTP insurance policies for the first three years been written into the contracts for the four private sector insurers to cover the initial three-year period?

The Hon. K.J. MAHER: I am advised that the terms and conditions in section 12 of the transitional provisions, policy insurance under part 4, in force immediately before the commencement of this section, will continue in force. The terms and conditions will continue in force but the regulator, if so minded, could change those terms and conditions within those three years and set the minimum terms and conditions within those three years and will be able to have that function afterwards. That applies, I am advised, whether or not this will be a public servant, rather than an independent regulator.

The Hon. R.I. LUCAS: Can I clarify the minimum terms and conditions. Have they been written into the contracts with the four private sector insurers?

The Hon. K.J. MAHER: I am advised that the four new entrants will be required to continue the minimum terms as they currently apply but they can be looked at by the regulator during those three years.

The Hon. R.I. LUCAS: So is the provision within the contract a contractual requirement which says there are existing minimum terms and conditions which are the ones which currently apply, but the contractual agreement with the private sector insurers is that they have agreed to meet those minimum terms and conditions that apply, and any other changes to minimum terms and conditions that either the independent regulator or the third party premiums committee (or whatever it is called) currently might change in the three-year period?

The Hon. K.J. MAHER: That is correct.

The Hon. R.I. LUCAS: Similarly, one of the other functions of the CTP regulator is to make rules to which approved insurers must comply and guidelines for approved insurers. It is specifically distinguished from minimum terms and conditions of CTP insurance policies, its rules and guidelines. Again, have the insurers been contractually bound to an existing set of rules and guidelines?

The Hon. K.J. MAHER: I am informed that, yes, there are rules and guidelines that will be in force come 1 July and contracts with those four providers, and the regulator will publish them after this comes into force.

The Hon. R.I. LUCAS: Yes, but my question was: have the four insurers been contractually bound by way of their contracts to comply with the existing rules and guidelines, and can those rules and guidelines, for example, be changed by the independent regulator—

The Hon. K.J. Maher: Which existing rules and guidelines?

The Hon. R.I. LUCAS: The function clause 5(1)(f).

The Hon. K.J. MAHER: I think I might be able to clarify: the rules and guidelines come into operation on 1 July under the contracts and they will be obliged to meet those rules and guidelines.

The Hon. R.I. LUCAS: What the minister is clarifying is that, in relation to rules and guidelines, they do not currently exist. They will either be formulated by the independent regulator or they will be formulated by the third party premiums committee.

The Hon. K.J. MAHER: These will be new rules and guidelines that will come into force on 1 July.

The Hon. R.I. LUCAS: Yes, but is the minister indicating that they do not exist and they will be formulated by the independent regulator?

The Hon. K.J. MAHER: I am advised that they were written into contracts which were signed with the four new entrants in December.

The Hon. R.I. LUCAS: Mr Chairman, that was my first question, and the minister said, 'Which rules and guidelines are you talking about?' They are new ones which will apply after 1 July. But now you are saying they were written into the contracts back in December or January.

The Hon. K.J. MAHER: They do not apply yet, though. They are written into the contracts and apply when the scheme comes in.

The Hon. R.I. LUCAS: But there are rules and guidelines which exist at the moment because they have been written into their contracts.

The Hon. K.J. MAHER: Yes, but they do not apply yet. There are rules and guidelines that were written into contracts in December. They obviously do not apply yet because this scheme has not come into operation and they will come into operation on 1 July.

The Hon. R.I. LUCAS: That at least makes more sense than the earlier responses in relation to rules and guidelines, because the rules and guidelines cover things such as dispute resolution and the provision of information to consumers and a variety of things which clearly—whether or not this legislation passes—would be critical to the reasonable operation of private sector insurers in any insurance marketplace. If they did not exist then there would be some issues. Can the government and will the government make available the rules and guidelines and the minimum terms and conditions that these private sector insurers have agreed to be contractually bound by?

The Hon. K.J. MAHER: I am advised that they will be published in the regulator after 1 July. In due course, when the regulator determines to publish them, they will be published. The intention is that they will be published, yes.

The Hon. R.I. LUCAS: These are not decisions for the independent regulator because the government has already written them into the contract. That is, whatever the original minimum terms and conditions are going to be and whatever the original rules and guidelines are, the independent regulator does not exist, so the government's advisers are the ones who have drafted these and have written them into the contracts which have been signed so it is really a government decision as to whether they would release them or not. Why would the government not release the minimum terms and conditions and the rules and guidelines that are going to apply to private sector insurers now? I mean, they exist.

The Hon. K.J. MAHER: I am advised that the government thinks it is important that it is the regulator, whether that be the bureaucrat without this scheme or the independent regulator with this scheme, that publishes the guidelines under their own procedures and under their own website.

The Hon. R.I. LUCAS: I respectfully disagree with that as a course of action, but that is a decision for the government. Can the minister therefore indicate when the government intends, if the legislation was to be passed this week, the independent regulator to be established?

The Hon. K.J. MAHER: I am advised as soon as the recruitment process can be finalised, and certainly before 1 July.

The Hon. R.I. LUCAS: Given that we are only talking about two months, the government is saying that it is going to advertise and appoint an independent regulator and have them start work prior to 1 July; is that the government's plan?

The Hon. K.J. MAHER: I am advised the government has advertised and short-listed for an independent regulator and, should this bill pass, it will be a very quick process to make that selection.

The Hon. R.I. LUCAS: In relation to the setting of premiums and bills, government officers made comments to the Hon. Mr Parnell, which he put on the public record, and the minister in his reply today at clause 1 made some references to it as well. Can the minister further explain this notion of what the differences in the bills would be? He indicated that the bills for next year have to go out within weeks—I think next month—and, given that the premiums have already been set at this average of 3 per cent (although what the range is we do not know), and that those decisions have been taken, have been written into the contracts, what is it within the bill that will be impacted by whether or not there is legislation?

The Hon. K.J. MAHER: It was something I mentioned earlier, but I will go through it in a bit more detail. The registration renewal form will contain new scheme information in the lead-up to 1 July 2016 (and obviously thereafter once the new scheme has commenced). Those updated forms will be sent out to motorists in May. If the CTP regulation bill is not passed prior to early May, those registration renewal forms will contain information which may be subsequently outdated and incorrect.

The sort of information that it will include, and I think the crux of the question, will be things like: facilitate the novation of motorists' policies from the MAC to approved insurers; and, if the bill is passed, novation of insurance policies is not required as the bill in its transitional provisions (clause 15 of part 3) provides for the transfer of policies (so that will be a difference in the bill that goes out). The registration form also contains information designed to enable motorists to undertake a selection of insurer processes as permitted by section 99A(2) of the Motor Vehicles Act. That process will be amended if and when the bill is passed. So, a number of things will be different on the bill, depending on whether or not we pass this.

The Hon. R.I. LUCAS: For the reasons I outlined on Tuesday (and I think it is now clear from the early questioning on clause 1), if we continue with the debate in committee today, it is quite clear in my view that the parliament will be better informed if detailed questioning of officers directly by the Statutory Authorities Review Committee could be concluded at the Monday meeting of the Statutory Authorities Review Committee and for that committee to report, as it has been asked to report.

Certainly, nothing that the minister has indicated here shows that the government is not going to be able to proceed with its introduction of the private sector operation of the CTP insurance market. It is clear that the premiums, whatever they happen to be (and we do not know, other than some average figure) are already locked into the contracts. This regulator is not going to have any role whatsoever to play in relation to that.

It is also clear that the minimum terms and conditions have already been decided by the government and written into the contract. It is also clear that the rules and guidelines, as the minister has made clear, have already been written into the contract, and so the independent regulator, at least in the initial stages, is not going to have any impact in those areas.

For all those reasons, my view remains the same as last Tuesday. I believe the parliament should be informed about the rules and guidelines that are going to apply, should know what the minimum terms and conditions are, and should know exactly what the premiums are that the government has agreed to for all of the premium classes of vehicles in South Australia. For all those reasons, I move:

That progress be reported.

The committee divided on the motion:

Ayes 7

Noes 10

Majority 3

Motion thus negatived.

The CHAIR: I make the point that in the future, the Hon. Mr Ridgway, if you are paired out you should not be in the chamber, no excuses. Welcome the guests, but you should not be in the chamber.

The Hon. K.J. MAHER: As a point of clarification in relation to an earlier question, I think it is worth pointing out some advice I have received in relation to premium increases. I am informed that the premium increases are referenced to class 1 and that will be increasing by 2.91 per cent. All other premium classes are referenced to this class and increasing on average around 3 per cent.

The Hon. R.I. LUCAS: Is that for the financial year 2016-17 and for each of the two subsequent financial years?

The Hon. K.J. MAHER: I can inform the honourable member that that is for the first year of operation of the scheme.

The Hon. R.I. LUCAS: What is the similar information in relation to 2017-18 and 2018-19?

The Hon. K.J. MAHER: I do not have the exact figures with me, but I can inform the honourable member that it will be similar.

The Hon. R.I. LUCAS: Again, I express my concerns that the parliament is not being fully informed of what the premium increases are. In relation to clause 1, before we move on to the other clauses, can the government update the committee in relation to the progress of the privatisation of CTP, that is, in relation to the four operators? Can the minister indicate what the arrangements in relation to existing customers will be? That is, everyone in South Australia is currently a customer of the Motor Accident Commission; what does the government have in mind in relation to how the existing customer base will be divided between the private sector insurers?

The Hon. K.J. MAHER: I am advised that they will initially be randomly allocated to match the market share of those new entrants and evenly spread according to different premium classes.

The Hon. R.I. LUCAS: Has that random allocation of customers already been conducted by government officers, given that there is no independent regulator and there will not be an independent regulator prior to 1 July? A person might be appointed by then, but he or she will not have been able to do this sort of work. Have government officers already done that work?

The Hon. K.J. MAHER: I am advised that the design work for that process is occurring and, that process will be carried out prior to 1 July.

The Hon. R.I. LUCAS: When will individual customers be told that they are no longer being represented by the Motor Accident Commission and QBE or which of the four insurers they have been allocated to?

The Hon. K.J. MAHER: I am advised that after 1 July, once people receive their registration certificate it will be on there who they are allocated to.

The Hon. R.I. LUCAS: Can the minister clarify when individual customers will receive their invoice or bill for the 2016-17 year? I think the minister was advising other members that this was all to be done in May. When will individual customers actually receive their invoice and the notification of what their premium will be for next year as well as who is representing them? If they have an accident to whom do they go?

The Hon. K.J. MAHER: My advice is that the insurers will not become the insurers until 1 July. So it will be after people receive the information, after 1 July, that the name of the insurer they have been allocated to will be on there.

The Hon. R.I. LUCAS: I do not intend to delay the debate, but it seems to make sense that, if the work has been done, customers should be advised who their private sector insurer is going to be prior to 1 July. I would have thought individual consumers should have been advised prior to the operation of the private sector insurer in the market rather than at some time after the 1 July. Let us assume they have an accident on 1 July, they are not aware of where they might actually go. It would seem to make sense to have actually advised them prior to the commencement of the new scheme.

The Hon. K.J. MAHER: I think it will be of benefit to the honourable member that the helpline number that people currently use will still be used. When ringing that, people will get to the right place.

The Hon. R.I. LUCAS: So the minister is indicating that as of 1 July, even if the customer has not received the paper notification of who they have been allocated to, the helpline will know? When K. Maher rings up, having crashed his government car, the helpline will know that he has been allocated to QBE and he should now contact QBE? The helpline will know the individual allocation of every customer in South Australia as from 1 July?

The Hon. K.J. MAHER: I can advise that is correct.

The Hon. R.I. LUCAS: In relation to the operation of the CTP, the regulator itself, the minister has indicated that an individual person, the regulator, is going to be appointed. Clearly, the government must have a budget cost for the operation of the CTP regulator for financial year 2016-17; it would have had to have been approved. Can the minister indicate what the budget cost for the CTP regulator is for the financial year 2016-17?

The Hon. K.J. MAHER: That is not detail I have here today, or can be advised of today. However, when I have that figure I am sure it can be provided to the honourable member.

The Hon. R.I. LUCAS: Is the minister indicating that he just does not have it here or that the government has not determined it? I find it hard to believe that Treasury would not have already approved it as part of the appropriation for 2016-17. Is the minister indicating that there is a number but he just does not have it?

The Hon. K.J. MAHER: I thank the honourable member for his question; I know he will be intimately knowledgeable of these matters as a former treasurer of this state. The budget for the 2016-17 financial year has not yet been approved, but when it is I am sure we can provide the honourable member with details about this very specific question and part of the 2016-17 budget.

The Hon. R.I. LUCAS: That is a cute response but, given that I have been a former treasurer, it would not be dependent on a 2016-17 budget. As part of the process of privatisation of the CTP, there would have had to have been approval for what the operation of a CTP regulator would be. If Treasury had not outlined that, then it would have been negligent in terms of the whole privatisation of the CTP scheme. So it would not be dependent on a decision that has been taken for the 2016-17 budget; it would have been part of the approval process for the privatisation of compulsory third party.

I would hope the minister will take on notice and, at some stage, assuming the bill is passed today, at least advise this house and members as to what the budgeted costs of the CTP regulator will be. It will certainly be an issue that some members of the Statutory Authorities Review Committee will seek from the officers who have been involved when they take evidence next Monday.

The final question for me in relation to clause 1 is in relation to the operation of the CTP regulator. The minister indicated that decisions about staffing were still to be taken; I think he indicated that in his initial response. I am assuming there must be some general agreement by the government on what the size of the regulator's staff initially will be. That is, not just he or she as the regulator, but other staff. Can the minister indicate what the initial staffing approval is for the independent regulator?

The Hon. K.J. MAHER: My advice is that is still a matter under consideration and evolving as the regulator's office and the details of it are put together.

Clause passed.

Clause 2.

The Hon. R.I. LUCAS: Can the minister indicate to the house, if the legislation is passed today, exactly what day does the government intend this act will come into operation?

The Hon. K.J. MAHER: I am advised as soon as practicably possible, but certainly prior to 1 July.

The Hon. R.I. LUCAS: Will it not need to have been proclaimed much prior to 1 July if you are going to go ahead and appoint the independent regulator? You have indicated that you have advertised, and a variety of other things have been done. Is it the government's advice that this legislation will have to be proclaimed before you could go ahead and appoint the regulator and make those sorts of decisions?

The Hon. K.J. MAHER: I am advised—and I think this answers the question—that if this bill is not passed, the person recruited to regulate this scheme will become a public servant. If this bill is passed, they will be an independent regulator and not a public servant.

The Hon. R.I. LUCAS: I thank the minister for that answer, but my question really was: is the minister saying by way of that that this legislation does not have to be proclaimed prior to the appointment of the regulator? That is, the government can appoint a regulator without this legislation being proclaimed. Is that what the minister is trying to say in his previous answer?

The Hon. K.J. MAHER: Yes, I am pretty sure I understand the question. Once this bill is proclaimed, the person recruited will be the independent regulator. If this bill does not pass and is not proclaimed, the person will be recruited as a public servant.

The Hon. R.I. LUCAS: You can appoint the regulator without proclaiming this legislation?

The Hon. K.J. MAHER: We can appoint someone to carry out the functions of a regulator, but without this legislation they will be a public servant and subject to all the things that that means. But with this legislation, they will be an independent regulator.

The Hon. R.I. LUCAS: For those reasons, I would have thought therefore that if it is passed today, the government should be saying it is going to proclaim it well prior to 1 July because if you want to appoint a regulator you need to have proclaimed the legislation prior to appointing a regulator.

The ACTING CHAIR (Hon. J.A. Darley): I call the minister. Could I ask that members around the chamber keep their voices down because it does interfere with me, and others, hearing the minister and the Hon. Mr Lucas. The minister.

The Hon. K.J. MAHER: I think we are almost accidentally in furious agreement with each other on this point, that as soon as we possibly can this will be proclaimed, should the bill pass today, to allow for the person to be appointed as the independent regulator.

Clause passed.

Clause 3 passed.

Clause 4.

The Hon. R.I. LUCAS: I have just a quick question in relation to this. With the other regulator that we are familiar with in South Australia, the Essential Services Commission, governments of the day have appointed a number of commissioners with equal power which is shared and they have a CEO. This bill seems to indicate that that is not possible, or envisaged; that is, it just says, 'The CTP Regulator is established…is a body corporate with perpetual succession.'

Can I just clarify whether the government believes this legislation allows for the appointment of the equivalent of commissioners; that is, other people with similar functions, in the Essential Services Commission, or must it always be just a single person who holds the function of the regulator and is the body corporate with perpetual succession?

The Hon. K.J. MAHER: I am just receiving some further advice. It is certainly the intention that it will be one person, but that does not answer all of your question so I will, in just a moment, further answer that. It is the intention that it be one person, and I am informed that it can only be one person under division 2, clause 8—Constitution of CTP Regulator. Subclause (1) provides:

(1) The CTP Regulator will be constituted of the Chief Executive Officer (CEO) of the Regulator.

So, it is not just the intention, but the act, yes, specifically says it will be one person.

Clause passed.

Clause 5.

The Hon. R.I. LUCAS: Before moving my amendment, there are a couple of issues I want to clarify; a number of them I have already clarified in questioning on clause 1. The answers to the questions I put in clause 1 make it quite clear that for the first three years the regulator's ongoing functions after 2019 will not be applied in relation to critical areas, in particular in relation to premium increases, which has been clear.

We are also advised that the minimum terms and conditions of the policies have already been locked into contracts. We have also been told that the rules and guidelines have also been locked into contracts. So, our contention remains the same; that is, by and large for the first year or so the CTP regulator is going to be doing very little. It will commence its work for the 2019 premium price review sometime, we are told, I think the minister said, late 2017 or early 2018, so potentially 18 months before the operation of the new premium increases for July 2019.

For the first 12 to 18 months it is essentially going to be just settling into their premises, establishing their office, employing staff, putting in IT systems, doing general monitoring, etc. I ask the minister: is it possible for the government to approve additional private sector insurers in the first three-year period? If the answer to that is yes, what is the process for that and does the independent regulator have a role in that process?

The Hon. K.J. MAHER: I am advised that this bill, under schedule 1 part 5 subsections (1) and (2), during the transition period an application for approval as an insurer under this part may only be made on the invitation of the minister. A further entrant could apply but only on the invitation of the minister. I am further advised that the scheme is fully subscribed at the moment, so that envisages the possibility that, if an insurer drops out, that market share needs to be replaced at the invitation of the minister.

The Hon. R.I. LUCAS: The minister is saying that for the three-year period that we are talking about, that is the transition period, isn't it?

The Hon. K.J. MAHER: Yes.

The Hon. R.I. LUCAS: Yes, so for the three-year period no private sector insurer can apply to compete. The four insurers have been guaranteed that we will not let any additional competition into the marketplace for three years as part of your contract, and the only reason we might would be if one of you goes broke and we have to replace you. The minister would then be responsible for inviting somebody.

The Hon. K.J. MAHER: I can inform the honourable member that I am advised that is the intention of the scheme.

The Hon. R.I. LUCAS: I hope it is more than the intention that that is what the legislation we are being asked to approve actually does. Is that the minister's advice? Other than it is the intention, that is what this legislation will actually achieve: no-one can actually compete.

The Hon. K.J. MAHER: I am advised that the answer to that is yes.

The Hon. R.I. LUCAS: Given that the four private sector insurers have been guaranteed, in essence, no additional competition for at least a three-year period, have the private sector insurers paid a lump sum payment up-front to the government as part of the privatisation?

The Hon. K.J. MAHER: I am advised that on 1 July those insurers are contractually obliged to pay the government for the first three years.

The Hon. R.I. LUCAS: Will the government be revealing either before 1 July (I assume it might possibly because there will be a budget released before 1 July), and will the government be outlining in the budget, what amounts the private sector insurers have paid to be able to compete in the marketplace—

The Hon. K.J. Maher interjecting:

The Hon. R.I. LUCAS: Well, I am not sure; it is up to the government either individually or collectively. But I am assuming that at some stage the government will have to advise how much it has actually received for saying, 'You can compete, but we won't allow any other competition for three years.'

The Hon. K.J. MAHER: I am advised that in December the Treasurer made public that it was approximately $260 million.

The Hon. R.I. LUCAS: That was an aggregate figure, obviously, on behalf of the four, and that $260 million will not be paid until 1 July to the state.

The Hon. K.J. MAHER: I am advised that is correct.

The Hon. R.I. LUCAS: In relation to post the transition period, after 2019, what is the process for another insurer wanting to participate in the market? What role does the independent regulator have post 2019 when another insurer might say, 'We want to compete in the marketplace against the four existing insurers'?

The Hon. K.J. MAHER: Under clause 5(1)(g) the regulator is the one, after 2019, who would make an assessment of the application from an insurer for approval or withdrawal under this scheme, and the terms and conditions of an undertaking, agreement or contract entered into would make such recommendations to the minister.

The Hon. R.I. LUCAS: I acknowledge clause 5(1)(g), which provides:

to make recommendations to the Minister in relation to…the assessment of an application from an insurer…

But it would appear that makes it clear that is only a recommendation to the minister, that potentially the independent regulator might approve the operation of another competitor but the minister has the reserve power to say no.

The Hon. K.J. MAHER: I am advised that under section 101 of the Motor Vehicles Act it is currently the minister who has the power to approve new entrants into this insurance scheme—and that will remain the case. It will be the minister's power under section 101 of the Motor Vehicles Act to have the final say in approving new entrants.

The Hon. R.I. LUCAS: I thank the minister. What the minister is saying is that under 5(1)(g), whilst the independent regulator in the future might assess an application, and in essence endorse or make a recommendation that that private sector insurer should be able to compete, ultimately the decision rests with the minister and he or she can say no. I asked most of my questions on clause 5 at clause 1, so I am now happy to now move the amendment standing in my name. I therefore move:

Amendment No 1 [Lucas–1]—

Page 5, line 36 to page 6, line 3 [clause 5(3)]—Delete subclause (3) and substitute:

(3) In determining premium amounts, the Regulator—

(a) may not fix differential premiums except on the basis of 1 or more of the following:

(i) vehicle type;

(ii) vehicle use;

(iii) garaging location;

(iv) entitlement under the GST law to an input tax credit in respect of compulsory third party insurance premiums; and

(b) must be satisfied that the premiums are fair and reasonable in the circumstances.

As I outlined on Tuesday, given that we are not better informed by the finalisation of the Statutory Authorities Review Committee review of this bill, this is the only amendment I am in a position to move, given that the bill is being discussed today.

I again highlight that, post the Statutory Authorities Review Committee's report, it may well be that the committee highlights, from its viewpoint, other areas of deficiency in the legislation which we might have believed should be moved and at least tested on the floor of the Legislative Council to potentially improve the operation of the bill. Given the decision of the parliament, which I obviously accept as always, even though ours was a minority view we will just have to move on this amendment and the others will await, potentially, our recommendation from the Statutory Authorities Review Committee.

This is a simple amendment and is essentially to continue the existing arrangements. Many members of this chamber have argued that premiums ought to be fair and reasonable, not just in this area but for other government charges, whether it be water rates, sewerage charges or a whole variety of other charges. Certainly, a majority of members in this chamber at various times have argued very strongly that there should be notions of fairness and reasonableness in those determinations. All this amendment is seeking on this occasion is to continue the existing arrangements. It is not as if this is some bizarre new alien concept to be introduced into premium setting in South Australia.

For many years, the existing arrangements have required that, in determining premiums, one of the issues that has to be considered is that they are fair and reasonable. The notion that this is a vague concept, unable to be determined, is completely contrary to the legal advice the various law bodies gave in evidence to the Statutory Authorities Review Committee. They indicated, and I think the minister acknowledged and sought unsuccessfully to rebut, that there is a lot of precedent in relation to the words 'fair and reasonable' in terms of judicial interpretation. It has existed in this legislation for many years.

It is the Liberal Party's view, given that this is being forced to a vote today, that the existing arrangements should be able to be continued. That view is reinforced by the evidence we took from the independent regulator from New South Wales. We have put questions on notice to the independent regulator but have not yet had the advantage of receiving the responses.

Given that this was being forced to a vote today, we have done a quick search of the legislation and guidelines that apply to New South Wales (and this has not come directly from the New South Wales regulator, other than that he did say, 'Yes, we do have a notion of affordability', and we found that, whilst it is not outlined in the actual legislation, the legislation includes guidelines that apply to premium setting for the independent regulator, and in those guidelines the new South Wales regulator is required to consider affordability, that is, that these premiums are affordable.

I think that all members will accept that the notion of affordability is very similar, very akin, to the existing notion for premium setting in South Australia of fairness and reasonableness. We will be able to explore this on Monday with the various officers as to whether they have a particular view in relation to affordability as opposed to fairness and reasonableness, if they were required to have a choice of either/or, or whether they saw a difference or a distinction. We will not be in a position to explore that, given that the legislation is being rushed through this afternoon.

All we are in a position to do, in essence, is put the simplest argument; that is, the independent regulator should be asked to consider the issue of the premiums being fair and reasonable. The simple argument for that is, as I said, summarised by the fact that it has existed for many years here and the New South Wales independent regulator has to abide by a similar guideline—that is, of affordability. I think the issues are pretty clear, certainly for those of us who support premiums being fair and reasonable, and I would hope that the majority of members would at least support this amendment to the government's legislation.

The Hon. K.J. MAHER: I thank the honourable member for his reasons for this amendment. Whilst I readily acknowledge that putting words like 'fair and reasonable' into bills where there are costs associated to consumers has a certain superficial attraction, I think we would want to be really careful about doing that. While I am sure the honourable member's intention is to make it fair and reasonable in terms of the costs for consumers and potentially to keep the costs down, the legal advice is that this phrase is legally vague in the context of section 129 of the Motor Vehicles Act and would be so here.

I would hate for us to put this in here and then be in the position that the very clever teams of lawyers that insurers have look at this phrase 'fair and reasonable' and use it to construe a court case to challenge premiums to go up. I am sure that the Hon. Rob Lucas' intention is to be on the side of the consumer, and that is why I say that it has a superficial attractiveness to it. I would hate for us to pass this and, because of potential legal uncertainties, it lead to a legal challenge that is pushed by insurers using this phrase with their teams of lawyers to mount a court case for a rise in insurance premiums.

The Hon. M.C. PARNELL: I have not weighed into the committee debate because I was waiting until the Hon. Rob Lucas moved his amendment. I will put my thoughts on the record now. I have to say that at first blush my inclination was to support the amendment because, when I looked at it through the eyes of a consumer, I could see what the honourable member was trying to achieve; that is, as motorists we want premiums to be fair and reasonable. We do not want them to be excessive. We do not want them to be unfair and unreasonable. That was my starting position.

I have to say that I was not overly convinced by the government's arguments as expressed in the minister's contribution on clause 1, which, to paraphrase, was that unless the list of considerations is exhaustive you are best not to put anything in and that just putting in 'fair and reasonable' and not putting in other things might be problematic. I was not overly convinced by that.

Then I looked at it from the perspective the minister has just outlined; that is, when you put words into legislation they mean something to all parties. I was looking at it from the point of a view of a disgruntled motorist being able to go to court and say, 'The regulator has overreached. The regulator has imposed on me a premium that is unfair and unreasonable.' I accept that the government is saying that they can build in tests of fairness, reasonableness and affordability into other guidelines and documents. Their concern was putting it into the legislation because obviously it is a higher order document.

Whilst my administrative law is a bit rusty, and whether it is a writ of mandamus or prohibition or one of those things we learnt about in law school where someone can go to court and claim that a decision-maker has not followed the legislation, if it is a situation, as the minister has just explained, that it could be the insurance companies actually challenging the premiums set by the regulator—not to say the premium is too high, but to say the opposite, that actually the premium is too low—the result of that would be that motorists end up paying more. Our premiums are going to be higher. I think that would be a very unfortunate state of affairs.

The test that the Greens have put to this is, first of all, is the amendment necessary? The government has said that it is not because it can achieve these objectives in other ways. The question then becomes: if it is not necessary, does it do harm? It is at that point that I am getting a bit stuck, because if the answer to that question is, yes, it does do harm or it can do harm, then I am not inclined to support it.

A subsidiary issue would be, as the Hon. Rob Lucas has pointed out, 'These words have been in there for ages,' but then we have had a monopoly government-controlled insurer for ages, which was unlikely to ever go to court and challenge itself. Once you have these other companies in there, they are driven by no other objective than making a profit. That is the entire reason that they exist. They are not part of the Public Service. They have no obligation other than to their shareholders and to maximise their profit.

I will say it again: we do not support the privatisation. We did not support it when they did it to public transport and artificial competitive tendering. They have introduced it in a whole lot of areas, a lot of services and utilities. We do not like it. I am concerned about the Liberal amendment if we pass it. Whilst it seems innocuous—we are just including fairness and reasonableness and if you do not like that you must be a supporter of unfair and unreasonable—I do not think it is as simple as that.

I think if what the minister has said is at all a risk, then we will have these private companies going to court to have a second bite at the cherry. They will have their negotiations with the regulator. In a second bite at the cherry they will go to court. The temptation with court cases is, 'Let's split the difference; let's settle it,' 'lawyers' picnic,' all that sort of stuff. My inclination, given that as the minister said, this could be a tool used by companies to in fact raise premiums and increase the cost of living for all South Australians, the Greens are not inclined to support the amendment now.

The Hon. R.L. BROKENSHIRE: We also have said many times that we do not agree with the privatisation of MAC and we have opposed it. We know now that we have to deal with this because of the way that it has been handled. Like the Greens on this occasion, when we actually probably have commonality—we do from time to time—this was of interest to us. The one thing that we are particularly concerned about is the fact that, after the three years of capping there is no doubt, if you look at the New South Wales model, whoever is in government at that time is going to have to deal with some fairly angry motorists, because we are going to see significant increases in premiums. The main thing is what the Hon. Mark Parnell talked about, that is, it is going into private sector hands and they do have an obligation to make a profit, keep their books in credit and look after their shareholders.

Prima facie, we thought that these were good amendments. The legal advice given, though, that we could have this used to counterproductively make it even more expensive for motorists, also concerns us. If we see smart lawyers, well paid by insurance companies, using this to manipulate the opposite in the courts, then that would be detrimental again to motorists. One option might have been if the government and the Hon. Rob Lucas, on behalf of the opposition, had tried to thrash out and agree with perhaps subclause (3)(a) and not subclause (3)(b). That may have been something that was worthwhile.

To that point therefore, whilst for the reasons that the minister has outlined, we now feel that we cannot support it because of the risks involved with respect to subclause (3)(b). I do ask the minister on behalf of my farming colleagues, the trucking industry and many of us who still do live, and will continue to live, in the country, where there are differential garage location charges, what assurances or what legal protection do motorists have regarding differential premiums and the vehicle type, the vehicle use, the garaging locations, the entitlements under the GST law to an input tax credit, etc.? Are they legally covered in all respects? I seek some clarification from the minister.

The Hon. K.J. MAHER: I thank the honourable member for his question and acknowledge the work that he does in this area and his genuine commitment to protecting the interests of those people whom he has outlined. In terms of some of those other ones, that is already in the bill. Clause 5(3) states:

In determining premium amounts, the Regulator may not fix differential premiums except on the basis of 1 or more of the following:

(a) vehicle type;

(b) vehicle use;

(c) garaging location;

(d) entitlement under the GST law to an input tax credit in respect of compulsory third party insurance premiums.

That is in the bill, as it currently stands, that we will vote on today. It is already there, that other part—

The Hon. R.L. BROKENSHIRE: I wanted that on the record so that it is there for future reference, confirmed. Therefore, based on deliberating the balance of this amendment, we will not be able to support the amendment.

The Hon. R.I. LUCAS: I think this is a bizarre interpretation. I have heard the Hon. Mr  Brokenshire and others who have opposed privatisation say that the concern they have is that there are going to be massive increases in premiums after the three-year period. There are any number of quotes from various people who have said that post the three-year period there are going to be massive increases in premiums. Yet now we are saying that we cannot put a protection in there because maybe it is not going to be that; there might be premium reductions, and there will be an argument against that from the insurers. That is the logic being used by the Greens and Family First in relation to this issue.

If I can, I will just quickly seek advice from parliamentary counsel in relation to this. It may well be that if that is the issue the simple addition of words to the effect of 'premiums are fair and reasonable to consumers', or 'to motor vehicle owners or operators'—whatever the appropriate phrase is so that the fairness and reasonable provision relates to the punters and not to the insurance companies—would meet what appears to be the interpretations that Family First and the Greens are putting.

That is, in some way, post the transition period, we are not going to be seeing massive increases in premiums; what we are going to see is reductions in premiums and punters actually benefiting, and the insurance companies are going to want to argue for an increase because it is not fair and reasonable to them as insurance companies as opposed to the punters.

As I said, if it is the mere addition of the words 'to consumers', or 'to motor vehicle owners and operators', whatever the appropriate phrase is (which I will get from parliamentary counsel), it may well be that I will seek to move my amendment in an amended form and we can then test the resolve of Family First and the Greens. That would appear to meet the concerns they have that 'fair and reasonable' might be interpreted in some bizarre way as being fair and reasonable to what some would argue are the greedy and rapacious insurance companies, as opposed to what was clearly intended here, the ordinary and long-suffering punters who have been protected for a long time with exactly the same phrase under the existing legislation. All that is being sought here is for it to apply under the new arrangement.

With the concurrence of the chamber I will quickly consult parliamentary counsel to find out what the appropriate words are to describe punters, and I will move it in a different form. I thank the committee for the indulgence. Given that we are rushing this through this afternoon, we will work on the run. Accordingly, I now move the amendment in an amended form:

Amendment No 1 [Lucas–1]—

Page 5, line 36 to page 6, line 3 [clause 5(3)]—Delete subclause (3) and substitute:

(3) In determining premium amounts, the Regulator—

(a) may not fix differential premiums except on the basis of 1 or more of the following:

(i) vehicle type;

(ii) vehicle use;

(iii) garaging location;

(iv) entitlement under the GST law to an input tax credit in respect of compulsory third party insurance premiums; and

(b) must be satisfied that the premiums are fair and reasonable to the registered owners of the motor vehicles.

In speaking briefly to that, as I said, I really do not think it is necessary. There has been this bizarre response from the government which has, essentially, said that post three years' time, contrary to all the concerns that have been expressed that there is going to be this massive increase in premiums because of private sector operators, the government seems to have convinced some members in the chamber that that potentially might not be the case.

What might happen is there will actually be this reduction in premiums, or there will not be this massive increase in premiums, and the greedy, rapacious private sector insurers will come along and argue: 'You are not being fair and reasonable to us as the greedy, rapacious private sector insurer. We want you to increase the premiums.'

As I said, I do not think this is necessary. It has not existed for the last few years, but we now have private sector operators, which is the point the Hon. Mr Parnell has made. If that is of concern to members, this redraft makes it quite clear that we are not talking about the sensitivities of what some might describe as the greedy, rapacious private sector insurers; we are talking about the interests of the punters in South Australia, the original South Australians who have to pay the premiums, the people who own the registered motor vehicles and pay the premiums.

I cannot imagine, in any circumstances, how Greens members in this chamber, or Family First members in this chamber, could not support something which protects the punters in relation to this, particularly as concerns have been expressed about the private sector operation in the CTP market. This covers off the bizarre interpretation that this might in some way protect the insurance companies and makes it quite clear that the intention of this particular amendment is to protect the ordinary punters in relation to this particular issue.

I would hope that not only would the Greens and Family First support it, but that even the minister, on behalf of working-class South Australians, would also have a change of mind and now support this protection for the ordinary punters in South Australia.

The Hon. K.J. MAHER: I thank the honourable member for his contribution and his endeavours to now speedily finish this bill. The government still has the same reservations about the legal vagueness that this creates and will not be supporting the amendment in the amended form.

The Hon. M.C. PARNELL: I also appreciate what the Hon. Rob Lucas is attempting to do. In the past, I have also, if I have seen what I think is an easy fix, gone to parliamentary counsel and asked whether we could do an amendment on the run to fix it up. I guess I am a little bit uncertain about whether, whilst at first blush it is saying that premiums do not need to be fair and reasonable to insurers, the greedy and rapacious, I think—they were not my words; they were the Hon. Rob Lucas's words—it does not need to be fair and reasonable to them but it does need to be to the registered owners of motor vehicles.

What is interesting, of course, is that under the honourable member's amendment, paragraph  (a) you have the four things that can be taken into account in fixing differential premiums, and then in (b) you have the fair and reasonable test. What I am uncertain about, from a legal perspective, is how those two things might work together. For example, with the garaging rules, it is an artificial line that is drawn through the suburbs: if you live in one street your premium is $100 more than if you live in the next street.

I am thinking, even though we have talked about insurance companies going to court, would it open the door for motorists to go to court? I am not sure whether I think that is a good idea or not. Normally, as a lawyer, I am happy for people to exercise their legal rights and to challenge unfair and unreasonable principles, but the churning feeling in my stomach would be that the whole system might end up in court, where people are arguing four-cylinder versus six-cylinder, sedan versus station wagon versus mini bus, and the location of one street in an outer suburb compared with the next street in an outer suburb.

I am not sure how these two sections would work together. I am still struggling to be able to support drafting on the run. Whilst I fully support what the honourable member is trying to do—he is basically saying that he only wants the fair and reasonable test to apply to the registered owners of motor vehicles and not to any of the other players—I am still quite uncertain about whether that is worth supporting. When faced with uncertainty and with the drafting of amendments on the run, and given that there will not be any ability for me to get any meaningful legal advice in the next hour or half hour, my inclination is not to support the amendment, even as moved in an amended form.

It is one of those things that this legislation has been on the books since, I think, October of last year. I know the honourable member will say that he has been forced into putting amendments before the council because the government is insisting on the bill going through this year. As I said before, I have told the government that we think this bill can go through. We want the independent regulator in place. Overwhelmingly, that is the purpose of this legislation, to get that in place. As I said, I was previously satisfied that the government could ensure a fair and reasonable test and an affordability test through guidelines and other mechanisms, so at this stage I am still not inclined to support the amendment, even as moved in an amended form.

The Hon. R.L. BROKENSHIRE: As the Hon. Mark Parnell has said, it puts us into somewhat of a dilemma that we are having to consider this now on the run. We have made it clear to my good colleagues on the right that we do not want to have the government bring in a regulator on contract, that we want to have a situation where we have a statutory independent regulator.

The way the whole structure is now, we feel if we do not have a statutory independent regulator now we will have a situation where the government will put in a contracted regulator, and that is something we simply cannot live with. We want to remove this from tinkering that the government can put in place when they have a contracted regulator.

We have considered this on the run. It is not good legislation to have to do this but we have made a commitment that we want to see this bill through tonight. We made that commitment. I have made that public. We have other important legislation to deal with as well which we are keen to do. We will not very proactively support on-the-run amendments but we do—

The Hon. S.G. Wade interjecting:

The Hon. R.L. BROKENSHIRE: No, but I am about to come to the point if you give me 30 seconds. We want to do what we can to support consumers and, therefore, we will be supporting the amended amendment.

Amendment as amended carried; clause as amended passed.

Clause 6 passed.

Clause 7.

The Hon. R.I. LUCAS: Can I suggest to the minister he might like to report progress because he could do the child protection bill? We are happy to do that, and then I am happy to come back and resolve the remaining questions I have. I have no further amendments. If the minister is prepared to do that, we can do the child protection bill. I only have a series of questions on about four other clauses, but I am mindful that people have been waiting all afternoon for what we think should have been the major priority. If he is prepared to report progress, we will support that, and I would undertake to do my remaining clauses. I have no further amendments that I am able to move at this stage.

The Hon. K.J. MAHER: To clarify this with the honourable member, is he prepared to give an undertaking to deal with the rest of this bill, or should we report progress now tonight?

The Hon. R.I. Lucas: Yes.

The Hon. K.J. MAHER: On that basis, I move that progress be reported.

Progress reported; committee to sit again.