Insurance News: ‘Staggering 600%’: employers back reform to curb soaring D&O premiums
Peak employer body Ai Group has today pushed for stronger class action laws to address the soaring cost of directors’ and officers’ (D&O) insurance, which in some extreme cases has increased by 600% based on Marsh estimates.
It urged an ongoing parliamentary inquiry into litigation funding and the regulation of the class action system to take up its list of 10 measures to ease the burden on the COVID-hit business community.
The measures include the introduction of a national licensing regime for litigation funders, outlawing opt-out arrangements in class actions, and the banning of contingency fees in all Australian jurisdictions.
“The economy has suffered a fast and deep decline in economic growth and a steep rise in unemployment and underemployment due to the COVID-19 pandemic, and there are very real risks in making it even harder to do business in Australia,” CEO Innes Willox said.
“Those opposing reforms to class action and litigation funding laws often dress up their arguments with liberal references to access to justice, in order to take the focus off the excessive profits that they are earning from class actions.
“Implementing carefully considered changes to class action laws to achieve a fairer outcome for plaintiffs and businesses, will not impede access to justice. The current laws are only operating in the interests of litigation funders and the law firms they are partnering with.”
He says the current setup has allowed for a “flood of cash from unregulated overseas litigation funding firms” to launch lawsuits against businesses without necessarily benefitting plaintiffs.
Citing a recent Australian Law Reform Commission report, in cases where litigation funders were involved the median return to plaintiffs was only 51% of the amount awarded, he said. When there is no litigation funding, plaintiffs received a median 85% of compensation.
The calls for reforms from the major peak body followed a similar push from the insurance industry, which has warned urgent action is needed to return the D&O market to a sustainable state.
At yesterday’s hearing, the Insurance Council of Australia told the Parliamentary Joint Committee on Corporations and Financial Services premiums rose at least 75% last year and an average of 88% in 2018.
“Fewer insurers are now willing to provide this cover,” Senior Policy Manager Tom Lunn said. “Those insurers who are willing to provide cover are increasing their premiums. They are also reducing coverage limits.”
In its submission to the inquiry, Marsh says ASX200 companies saw an average premium increase of 118% last year, with extreme cases at a “staggering” 600%.
Blog Submission: Peter Sellwood
PALTD InsureRight – Insurance & Risk Management
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