TERRITORY INSURANCE OFFICE AMENDMENT BILL 2006 Second Reading Speech

Northern Territory Second Reading Speeches

TERRITORY INSURANCE OFFICE AMENDMENT BILL 2006

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

Mr STIRLING (Treasurer): Mr Acting Speaker, I move the bill be now read a second time.

The Territory’s Motor Accident Compensation or MACA Scheme is a statutory monopoly operated for the benefit of motorists and with the self-funding not profit-based focus. The scheme is currently administered by the Territory Insurance Office. However, the relationship between TIO and the MACA Scheme is not clearly defined in the legislation although, historically, the scheme has been run as a not-for-profit arm of TIO’s business.

As part of the reform of its governance arrangements in recent years, TIO has developed a service level agreement describing the nature of the services that it provides to the MACA Scheme and the basis of the allocation of costs to that scheme. Further, in 2005, TIO segregated the assets of the MACA Scheme from those of TIO so that the MACA Scheme assets can now be separately identified. This has provided greater transparency in the information available to government on the MACA Scheme, and has also meant that an appropriate investment strategy for the MACA Scheme assets, which are separate to and different from the investment strategy for TIO, can be developed.

While there are benefits to both TIO and the MACA Scheme from operating the MACA Scheme in conjunction with TIO, the entities are fundamentally different in their objectives and operations. TIO is a commercial insurer and finance company operating in competitive markets with the objective of making a profit, while the MACA Scheme is for the benefit of motorists with a self-funding but not profit-based focus. Housing these disparate operations within the one entity is not an optimum structure for the management of funds or for their oversight by government. The measures being introduced in this bill represent the next step in addressing this problem.

Firstly, the bill sets out that the assets and liabilities of the MACA Scheme must be held in a separate fund. The assets and liabilities will still be under the same legal ownership as TIO’s commercial assets, but they will be quarantined in separate accounts and will be separately reported in financial statements. This will provide transparency in the dealings of the MACA Scheme fund. One consequence of this change is that there will need to be a separate legislative guarantee of the liabilities of the MACA Scheme. The liabilities of the MACA Scheme are implicitly guaranteed by government at present through government’s guarantee of TIO’s commercial liabilities. In more formally separating the scheme from TIO, this bill provides for an explicit government guarantee of the liabilities of the MACA Scheme.

The bill will also establish a number of improvements to the corporate governance arrangements applying to the MACA Scheme. TIO will be required to prepare two statements of corporate intent – one for its commercial business and a separate one for the MACA Scheme which reflects its community-based self-funding requirements. At the same time, the bill will align the provisions for preparing TIO’s statement of corporate intent for its commercial business with those of the Government Owned Corporations Act. TIO has already adopted such a framework under an informal agreement, and this amendment will formalise that arrangement. This will mean that I, in my capacity as the responsible minister, will have to formally agree to the statements of corporate intent for TIO’s commercial business and for the MACA Scheme. In the case of TIO’s commercial business, SCI, the bill requires that a version excluding commercially confidential material be tabled in parliament much like the Power and Water Corporation’s tabled SCI.

There are a number of potential conflicts of interest between TIO and the MACA Scheme relating to matters such as the allocation of costs. In order to ensure that any potential conflicts of interest are managed in an open and transparent manner, the bill introduces two significant amendments. Firstly, TIO will be required to prepare a conflict of interest policy that sets out the range of possible conflicts that could arise and the processes that will be adopted to manage them. This document will be subject to the Treasurer’s approval.

The second reform will be the appointment of a special board member as advocate of the MACA scheme. This board member will only vote on matters relating to the MACA scheme, and the board could not consider such matters unless that board member or an alternate is present.

The bill provides that, in the case of a conflict between TIO and the MACA scheme, resolutions of the board will only be valid if supported by the MACA scheme board member.

TIO has been consulted on all matters with regard to this bill and embraces the scope of the changes. To the benefit of all Territory motorists, the reforms embodied in the legislation will promote greater transparency and accountability in the operation and administration of the MACA scheme. I commend the bill to the House.

Debate adjourned.

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