TERRITORY INSURANCE OFFICE AMENDMENT BILL 2000 Second Reading Speech

Northern Territory Second Reading Speeches

TERRITORY INSURANCE OFFICE AMENDMENT BILL 2000

(This an uncorrected proof of the daily report. It is made available under the condition that it is recognised as such.)

Mr PALMER (Leader of Government Business): Mr Speaker, on behalf of the Minister for Territory Insurance, I move that the bill be now read a second time.

The purpose of this bill is to amend two minor provisions of the Territory Insurance Office Act that restrict competition. These amendments are consistent with the Territory’s commitment under the national competition policy. In April 1995, the Commonwealth, states and territories signed three intergovernmental agreements which comprised the national competition policy reform package. Compliance with agreed NCP reforms is a prerequisite for a series of competition payments to the Territory from the Commonwealth, estimated at over $7m per annum from 2001-02.

As part of the NCP agreements, the Territory committed to an examination of legislation that restricts competition. This examination requires that each restriction on competition be assessed to determine if it is in the net public interest.

One act identified for such a review was the Territory Insurance Office Act. The guiding principle underpinning each review is that legislation should not restrict competition unless it can be demonstrated that: (1) the benefits to the community as a whole outweigh the costs of the restriction; and (2) the objectives of the legislation can only be achieved by restricting competition. The Territory Insurance Office Act was reviewed against these principles jointly by Northern Territory Treasury and TIO. This review identified restrictions on competition arising from sections 5(a), 5(c) and 30, of the act.

Section 5(a) establishes TIO as the insurer of the assets and prospective liabilities of the Territory and statutory corporations. This creates a barrier to entry to part of the insurance market, limiting the choice of insurer for government agencies. Section 5(c) restricts competition by establishing TIO as the monopoly administrator of the Motor Accidents Compensation Act, MACA scheme, or any similar scheme.

Section 30 provides the Territory government guarantee for TIO’s deposits and contracts of insurance, but for which TIO is not charged a guarantee fee.

In response to the NCP review, the government is amending sections 5(a) and 5(c). This will remove the legislative restrictions on competition but will not have an adverse impact on TIO’s operations or customers. Section 5(a) is to be amended by changing the words, ‘the insurer’ to ‘an insurer’. As most government agencies self-insure and statutory corporations, with the Treasurer’s approval, can arrange insurance with companies other than TIO, this change will simply reflect the current situation.

Section 5(c) is to be amended to remove the restriction and the competition from the legislation. The amendment will ensure that TIO can continue to administer a motor accidents compensation scheme if required by another act or by an agreement with another party, but will not have exclusive powers to do so. This amendment will also facilitate changing the administrator of MACA, should the government consider this appropriate in the future.

In passing, it’s worth noting that a separate national competition policy review of the Motor Accidents Compensation Act is under way. An independent consultant has been appointed to undertake the review of the Act under the oversight and the inter-department steering committee and is to report to government shortly.

In relation to section 30 of the Territory Insurance Office Act, the government is committed to providing a guarantee on deposits and insurance policies with TIO. However in doing so, TIO may receive a competitive advantage over its private sector competitors. The value of this benefit is in the process of being estimated. Implementation of a guarantee fee will be considered separately by the government and would not require legislative amendment.
In conclusion the amendments contained in this bill are minor and are not expected to impact on TIO’s operations. However, the amendments are necessary to meet the Territory’s national competition policy legislation review commitments in relation to the Territory Insurance Office Act and I commend the bill to the House.

Debate adjourned.

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