Management plan to help SGIC overcome 'WA Inc' losses

29/6/93

Premier Richard Court today announced a financial management strategy to enable the State Government Insurance Commission to overcome 'WA Inc' losses of $450 million incurred during the previous Labor administration.

The Premier said the strategy included a reduction in the basic premium for a family car, a cap on claims payments and a levy of $50 a vehicle from August 1, to restore the SGIC to a sound financial footing.

Pensioner-owned vehicles would be exempted from the levy.

The introduction of the levy coincides with a reduction in the basic premium for a family car achieved through the elimination of cross-subsidies between different classes of vehicle.

The net result of the moves would mean that the cost for a family car would rise by $42.80 to $242 a year.

The Premier said the cap on claims payments could lead to further reductions in third party premiums.

"It is a tragedy that ordinary Western Australians are now having to pay the price for Labor's disastrous decade of irresponsibility," Mr Court said.

"The SGIC has been saddled with massive losses from commercial and property investments off-loaded on to it by the Labor Government.

"Without the levy, the SGIC would have been forced to sell assets at fire-sale values and ultimately would not have been able to meet claims without an injection of Government funds.

"We could not allow that to happen."

Mr Court said the Government had also agreed to an SGIC proposal to limit general damages claims for pain and suffering by applying a $15,000 threshold and $200,000 cap on claims arising from accidents occurring from July 1.

Awards of up to $40,000 would be reduced by $15,000.  The reduction would be scaled-down for awards between $40,000 and $55,000.  There would be no reduction to awards over $55,000.

An upper limit of $200,000 would be set for claims for pain and suffering.  Claims for past and future economic loss and medical expenses would not be affected.

It was estimated the move would reduce claims payments for accidents by at least 25 per cent in the next financial year and save about $50 million.

Mr Court said the Third Party Insurance Fund was presently $300 million in the red after having a $84.8 million surplus in 1988.

"The Lawrence Government was so desperate to cover up the scandal of 'WA Inc' that last year it cost the SGIC more than $20 million by refusing Commission pleas for an increase in premiums," Mr Court said.

"The pleas were rejected by Dr Lawrence on purely political grounds so the Labor Government would look a little better in the run-up to the election.

"It was a monstrously irresponsible decision for which average families will now have to bear the cost.