Australia Insurance Information
CIA link to demographic/economic data on Australia
General Australia Insurance Information (P&C)
Legislation:
The Australian insurance industry is principally governed by federal law.
Principal supervisory authorities –
Major forms of Compulsory Insurance:
- Third-party automobile Death & Bodily Injury Liability.
- Professional Indemnity for certain professions (accountants, lawyers, insurance brokers, etc.)
- Workers’ Compensation – in Australia, there are 11 workers’ compensation systems. Over time, each of the 8 Australian States/ Territories has developed their own workers’ compensation laws. There are also 3 Commonwealth schemes.
- Medicare – most Australian residents pay a Medicare levy of 1.5% of taxable income for access to universal health care. Top-Up Private Medical Insurance (PMI) is allowed & available.
Non-Admitted Insurance:
Not prohibited except for compulsory coverages – There is a small additional tax payable.
Policy Wordings & Rates / Tariffs Controlled:
· Third Party Automobile Bodily Injury;
· Registered rates for compulsory coverages;
· Australia is not considered a tariff market (tariffs are illegal in Australia);
· No specific restrictions on property forms;
· Forms are comparable to UK and US contracts (altered for local conditions).
Policy Language:
· English.
Types of Insurance Restricted to Government Institutions:
· Automobile Third-Party Bodily Injury Liability
Policy Currency
· Australian Dollar (A$). U.S. Dollars can be used for certain lines (e.g., Liability).
Currency Restrictions / Exchange Controls:
- There are no exchange controls which might hamper business being placed with non-admitted insurers abroad.
Policy Period:
· Mostly annual but project coverages can have a longer duration. Long Term Agreements (LTAs) are available but not common.
Cancellation Provisions:
· Property: varies by contract;
· Liability: varies by contract;
· Engineering: varies by contract
Premium Tax, etc. paid by Insured:
· See Updates & Additional information at the end of this report.
Insurance Companies:
Brokers:
· Brokers and agents are represented in the market.
Brokerage Commissions:
· Industrial Special Risk forms: fire, profits, burglary, money - 15%;
· Automobile: 7.5%;
· Liability: 15%;
· Engineering: 15%.
Broker of Record Letters:
· Known as Letters of Appointment, these are fairly usual.
Reinsurance:
· There are no restrictions. 100% is exportable but local reinsurers must be authorized under the Insurance Act of 1973. There is a 3% tax on reinsurance ceded offshore.
Local Natural Hazards:
· Brush fires, windstorms, cyclones, floods, earthquake, hail.
Property Insurance
· Fire:
Standard fire perils include - fire, lightning, aircraft, explosion, earthquake, storm/ tempest, burst water pipe, riot / civil commotion, malicious damage, windstorm / hurricane, vehicle impact, weight of snow / avalanche. Flood is available for additional premium.
· All Risk:
Available.
· Coinsurance:
90% common with business property insurance.
· Blanket Insurance:
Available.
· Business Interruption:
UK and US forms available.
· Replacement Cost:
Available and widely used by business.
· Discount for fire protection equipment / systems:
No fixed scale but considered in rate making.
Boiler & Machinery / Machinery Breakdown / Engineering
· Wordings:
UK, US and European forms used - mainly UK and European.
Terrorism
General / Public Liability
· Available Wordings:
Broad coverage covering public, product and on occasion professional indemnity
· Comments:
Most policies are written on an occurrence basis. Note: Liability from the use of motor vehicles is excluded.
Professional Indemnity (Errors & Omissions)
· Most policies are written on a claims made basis.
Directors & Officers Liability
· Most policies are written on a claims made basis.
Automobile / Motor
· Compulsory Limits:
Bodily Injury unlimited. Property Damage is not compulsory.
Workers’ Compensation
November 19, 2009 – National Harmonisation of Safety Legislation. The national harmonisation of safety laws in Australia is one of the most talked about issues in worker's compensation at the moment. At this stage it continues to look like implementation across states will occur by end of December 2011.
· Governed by separate Acts for each Territory / State. Benefits vary widely. The Federal Government operates a separate scheme for Federal Employees. All employees are insured. Extra-Territorial Benefits can apply depending on Territory / State “of hire”.
Marine
· Available Wordings:
Locally issued contracts follow London Institute Clauses.
Crime
· Available Coverages:
Most forms of comprehensive coverage are available (i.e., Burglary, Fraud, Dishonesty, Money & Computer).
Other Classes of Insurance readily available
· Aviation; Trade Credit; Contract Works; Corporate Travel
Updates & Additional Information:
February 12, 2010 – Revised Fire Services Levies.
| SCHEDULE OF FIRE SERVICE/SES LEVIES AND STAMP DUTIES |
| Effective from 12 February, 2010 |
| STATE |
DISTRICT |
FIRE SERVICE/SES LEVY |
STAMP DUTY |
| |
|
FIRE BUSINESS INTER. |
ISR |
H/HOLD |
CAR |
MOTOR |
|
| NSW |
ALL |
36% (previously 39%) |
36% (previously 39%) |
20% (Previously 21%) |
36% (previously 39%) |
1% |
General 9% Motor, Aviation, Disability, PI 5% Crop & Livestock 2.5% |
| VIC |
METRO |
46% (Previously 47%) |
46% (Previously 47%) |
18% (Previously 19%) |
46% (Previously 47%) |
|
10% |
| |
COUNTRY |
72% (previously 80%) |
72% (previously 80%) |
26% (previously 28%) |
72% (previously 80%) |
|
10% |
| QLD |
ALL |
NIL |
NIL |
NIL |
NIL |
|
Glass $0.10 Motor 5% PI 5% Other Classes 7.5% |
| SA |
ALL |
NIL |
NIL |
NIL |
NIL |
|
11% |
| WA |
ALL |
NIL |
NIL |
NIL |
NIL |
|
10% |
| ACT |
ALL |
NIL |
NIL |
NIL |
NIL |
|
10% |
| TAS |
ALL |
28% |
28% |
NIL |
28% |
|
8% Except General Liability Only which is excempt |
| NT |
ALL |
NIL |
NIL |
NIL |
NIL |
|
10% |
July 1, 2009 – The latest levies for general and life insurers were released by the Australian Prudential Regulation Authority.
The impact of Australian government taxes on business insurance premiums is - in some cases - pushing up the cost of premiums by more than 50%!
Brokers have provided information on how the taxes impact on their clients' premiums. Now NIBA is calling on its members to send copies to their clients, local politicians and business leaders.
Did you know?
Insurance is taxed as a “sin tax”, with levels equal to taxes on gambling and alcohol.
Victoria and NSW are the highest taxed states in Australia.
Victoria is actually the highest taxed place in the world when it comes to insurance.
Policyholders are paying a number of taxes including GST (Federal Goods & Services Tax (10%), State stamp duty (7.5-11%) and – in NSW, Victoria and Tasmania – a State fire services levy (up to 63%).
The fire services levy exists in NSW, Victoria, and Tasmania (all other states and territories have abolished it). What it means is insured homeowners and businesses pay a tax to pay for the state’s fire services. Uninsured people don’t pay, and they still get the use of the fire services.
High taxes add to the cost of insurance, and add to Australia’s problem with non-insurance and underinsurance.
Refinements to the Australian General Insurance Prudential Framework particularly as regards Direct Offshore Foreign Insurers
On 3rd May 2007, the Minister for Revenue and Assistant Treasurer announced the Australian Government’s approach to the regulation of Discretionary Mutual Funds (DMFs) and Direct Offshore Foreign Insurers (DOFIs).
The Minister’s announcement and its legislative amendments respond to the HIH Royal Commissioner’s Report on The Failure of HIH Insurance, released in 2003, which raised concerns regarding the lack of prudential regulation of DMFs and DOFIs. A review was commissioned by the Government to address these concerns and, in December 2005, the Treasury released a discussion paper on the subject.
Submissions were received from a wide cross-section of the insurance industry and the Minister’s announcement in May 2007 has now established the Government’s policy.
The announcement indicated that:
- the Insurance Act 1973 (the Insurance Act) would be amended to subject DOFIs to prudential regulation;
- Australian Prudential Regulatory Authority (APRA) www.apra.gov.au prudential framework would be explicitly modified to apply to different categories of insurer based on their risk profile; and
- while DMFs would not be regulated at this stage, they would be required to provide data to APRA under the Financial Sector (Collection of Data) Act 2001 (FSCODA).
The Minister’s announcement also indicated that limited exemptions would be provided for DOFIs. The Treasury is developing options for such exemptions and will issue a separate consultation paper on this topic.
The changes to the Insurance Act and FSCODA are described within the Financial Sector Legislation Amendment (Discretionary Mutual Funds and Direct Offshore Foreign Insurers) Bill 2007 (DMF & DOFI Bill), which was introduced to the Australian Parliament on 21st June 2007.
Changes to the Insurance Act are expected to be passed by Parliament in the second half of 2007 and are intended to take effect on 1st July 2008. Modifications to APRA’s prudential framework will generally be effective from 1st July 2008.
The changes to the Insurance Act will not change the position of foreign reinsurers which are not APRA authorised. These companies will be able to continue to accept business from APRA-authorised insurers without being required to be authorised by APRA under the Insurance Act. The prudential requirements for Lloyd’s underwriters will not change.
Additionally, APRA will emphasise that the total amount of premium an insurer may cede to reinsurers is not expected to exceed 60 per cent of gross written premium.
Whilst at present non-admitted insurance for non-statutory business is allowed in Australia these changes to the Regulatory system will alter this position. For example, local fronting will be a challenge depending upon the limited exemptions yet to be announced.
On 20th September 2007 the Australian Treasury published an Exemption Discussion Paper, Regulation of Direct Offshore Foreign Insurers, available at this link: Exemption Discussion Paper