In 2002, we were told there was an 'insurance crisis' which brought about the removal of fair compensation for people injured by the negligence of others. We were told that the crisis had emerged because of 'Santa Clause' judges, greedy litigants and a culture of litigation in Australia.
In the wake of the knee-jerk, unprincipled 'reforms' which resulted, it is becoming clear that the people were duped into unnecessary changes, which have severely impacted upon the most vulnerable people in our society. This page looks at the myths and the facts about tort law reform, and considers some of the unsubstantiated claims which 'wagged the dog' in the great personal injury compensation debate.
Myth 1: Benefits for the injured have improved
Insurers claim that, as a result of restricting the right of injured people to sue for damages, benefits available to injured people have improved. In fact, benefits for injured people have substantially reduced, including payments by insurers of medical expenses. In 2005, Medicare Australia recovered a total of $12.9 million in medical expenses from compensation cases, compared to $24.6 million collected in 2001 – a reduction of almost $12 million.
Meanwhile, there is no evidence to suggest that the number of people being injured each year has substantially reduced. Read more
Myth 2: The 'insurance crisis' was driven by increased claims costs
Insurers substantially overstated the role of claims costs in the ‘insurance crisis’ which emerged in 2002.The simple truth is that the insurance crisis would not have emerged without a number of other factors occurring, including the September 11 bombings, an unusually high number of natural disasters and a shift in the global insurance cycle to a ‘seller’s market’. These factors affected the insurance industry on a global scale. The circumstances in Australia were exacerbated due to the aggressive pricing practices of HIH and other insurers, which irresponsibly battled for market share by offering unrealistically low premiums throughout the late 1990s, culminating in the collapse of HIH and precipitating the crisis.
Myth 3: Balance has now been restored to compensation laws
Insurers claim that the balance between individual rights and the community’s willingness to pay has now been restored. In fact, tort law changes have gone much further than legislators could have anticipated, stripping seriously injured people of their right to fair compensation and enabling insurers to earn record profits. Read more
Myth 4: A Fair Go For Injured People is about lawyers' self-interest
It is claimed that lawyers who claim tort laws are unfair are speaking out of self-interest. In fact, lawyers make these claims on behalf of the thousands of people injured each year in NSW by the carelessness of others, who are unable to get fair compensation because of restrictive, arbitrary thresholds. Reforms to personal injury payments have severely impacted upon some of the most vulnerable people in society. Lawyers are the first point of contact that injured people have with the legal system – a system which is supposed to protect their rights.
Lawyers speak to clients frequently about the hardships they are facing. For victims these hardships range from mental anguish and physical pain, to severe financial burdens caused by high treatment costs. The majority of those who are suffering have little recourse to recover the full extent of their losses.
Even when an injury is severe enough to overcome the threshold, under NSW’s workers compensation laws, injured people are required fore-go ongoing treatment expenses if they wish to take action against their negligent employer.
These people can go no further under this unfair system and it is their lawyer who must speak for them.
Myth 5: Judges played 'Santa'
It was popularly claimed by insurers and the media that judges had become overly generous in personal injury claims, handing out increasingly large awards for ‘minor injuries’.
These claims were substantially over-stated by insurers. While there were some instances in which mistakes were made in quantifying the level of damage suffered, the vast majority of decisions accurately reflected the losses suffered by those injured as a result of the negligence of the defendant.
Two prominent judges have now slammed this basis for tort law changes which have stripped the majority of injured people of their rights. NSW Chief Justice James Spigelman said, in a speech last year to the Commonwealth Lawyers Conference in London that judicial attitudes had begun to reflect the desire of the community for greater focus on personal responsibility. These comments were supported by ACT Supreme Court Justice Terry Connolly, who delivered a paper to the 15th Annual Insurance Law Congress in July 2006 identifying a several cases demonstrating a shift in judicial attitudes prior to the 2002 tort law changes.
Clearly, judicial attitudes had shifted toward an emphasis on personal responsibility well before reforms to compensations laws were contemplated.
Myth 6: Motor accident insurer premiums have been steadily falling
Insurers claim that CTP greenslip insurance has fallen steadily since the new restrictive motor accidents compensation scheme was introduced in 1999.
In fact, CTP greenslip insurance premiums fell from $440 in September 1999 to around $340 in September 2000. There has been no further significant reduction in CTP greenslip insurance over the course of the scheme (source: MAA Annual report 2004/05).
Meanwhile, insurers have claimed profits on CTP insurance in excess of 20% on average since 1999. When the scheme was established, it was considered that profits of between 6%-8% were reasonable.
This means that insurers are claiming profits of more than three times the level of profits considered reasonable for the last 6 years.
It is time insurers stopped pretending the system is fair and concede that the pendulum has swung too far.
