Submission By The Australian Breastfeeding Association (Formerly Nursing Mothers') To The Senate Economics References Committee Inquiry
May 2002
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The Australian Breastfeeding Association (formerly Nursing Mothers') is one of Australia's largest women's organisations, but has been hard hit by the escalating cost of public liability and professional indemnity insurance, and the reduced availability of coverage for community events.
Our organisation's professional indemnity insurance for our volunteer breastfeeding counsellors has tripled, while the cost of public liability insurance for the 90,000 community events we run each year has doubled in the last 18 months.
Our 1400 volunteer breastfeeding counsellors provide many services to the community and to new mothers including a free breastfeeding helpline, community education for schools, and mother to mother support through our 376 local groups across Australia.
Escalating insurance costs have had a crippling effort on our volunteers' capacity to provide services - instead of putting our energies into helping mothers and babies breastfeed, our volunteers have a major fund-raising task just to pay the insurance bill.
While long-term solutions to the insurance problem are desirable, community organisations such as ours have a very limited capacity to immediately fund such cost increases. Without action to provide financial relief from escalating insurance costs, it is likely that a considerable part of Australia's 'social capital' could be irreparably damaged, at great long-term cost to the government and the community as a whole.
We recommend that all Australian governments act to provide immediate financial relief for community organisations by establishing, at least temporarily, a public underwriting pool with public subsidy.
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The Australian Breastfeeding Association (formerly Nursing Mothers') is one of Australia's largest women's organisations, but has been hard hit by the escalating cost of public liability and professional indemnity insurance, and the reduced availability of coverage for community events.
In the last two years professional indemnity premiums for our volunteer counsellors has tripled. Insurance including public liability, which cost the Association just over $30,000 in 1999-2000 now drains over $60,000 annually. We cannot even get cover for some activities.
Instead of putting our energies into helping mothers and babies breastfeed, our volunteers have a major fund-raising task just to pay the insurance bill.
Even then we are in a Catch 22 - the more fundraising events we run to pay for insurance, the more insurance we have to pay to cover the fundraising. For more details of ABA and our insurance see Attachment A.
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Failure to act on the insurance crisis may destroy the community-building activities of organisations such as the Australian Breastfeeding Association.
Our 1400 volunteer breastfeeding counsellors provide many services to the community and to new mothers.
- Through our 7 day, 24 hour breastfeeding helpline, we provide women with information and support that they need to make informed choices about infant feeding and managing breastfeeding problems. We have around a quarter of a million counselling contacts a year.
- Trained volunteer breastfeeding counsellors provide mother-to-mother support at the local level to new mothers, and those with concerns about infant feeding.
- Our 367 local groups regularly visit schools, preschools, and hospitals to educate the community about the importance of human milk and appropriate management of breastfeeding problems.
Our breastfeeding counsellors adhere to a strict code of ethics and do not give medical advice. We often find mothers need an onsite crèche to participate fully in our training activities and breastfeeding discussion meetings.
Overall, we run around 90,000 community education activities and events a year, either in mothers' homes or in public places. Such activities may involve new mothers, crèches, schools and preschools, hospitals, health professionals, community health workers and/or many other government or non-government organisations.
All these activities require insurance coverage if we are to provide our volunteers and members appropriate protection against risk.
The public health benefits of breastfeeding are well known. Artificial formula feeding substantially increases the risk of gastrointestinal illness, respiratory illness and infection, eczema, and necrotizing enterocolitis, with increasing scientific evidence of its links with chronic or serious illnesses or conditions such as childhood diabetes, urinary tract infection, certain types of cancers, diseases of the digestive system such as coeliac disease and Crohn's disease, liver disease and cot death. Breastfeeding is known to promote cognitive development and higher IQ, central nervous system development and visual acuity, and speech and jaw development. Breastfeeding helps protect mothers against breast cancer and other cancers of the reproductive organs, and osteoporosis.1
Treating such preventable illnesses through Medicare payments, the Pharmaceutical Benefits Scheme and the public hospital system has been shown by research2 to represent a major public and community health cost. Without the voluntary efforts of our members, community educators and breastfeeding counsellors, costs to the government and the community would rise significantly.
The Australian Breastfeeding Association works closely with governments and public health authorities, in line with international health recommendations that maternity services foster breastfeeding support groups and refer new mothers to them.
However, it can only do so if the financial viability of the organisation is not undermined by massively escalating insurance costs.
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The present insurance difficulties for non-profit organisations like the Australian Breastfeeding Association apparently arise from several factors, a number of which are external to Australia, and/or the non-profit sector. These include:
- The economic and interest rate cycle
- The September 11 terrorist attack
- The collapse of HIH insurance
- Increased compensation payouts
- Past underpricing of insurance
- Insurers' risk assessment practices
The magnitude of price increases for public liability insurance has been larger in Australia than in other countries3 apparently because HIH was the dominant writer of public liability insurance.
There appears to be a worrying lack of consensus on the main causes of current difficulties and consequent lack of agreement on policy priorities.
The public policy debate also appears to be dominated by blaming and buck passing by governments, with little representation of, or responsiveness to the situation facing consumers, that is, community organisations.
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We agree that governments must comprehensively identify and address the underlying problems in the insurance industry in order to ensure appropriate long-term solutions.
However, we are concerned there is not enough attention to providing immediate relief for community organisations from the financial difficulties created by the crisis. There appears to be an unwarranted lack of government urgency in finding solutions to the immediate threat the crisis presents to the financial viability of community organisations and volunteer activity.
The main practical response by governments to the impact of increased premiums and reduced coverage has been the suggestion of group purchasing to achieve cost savings from bulk purchasing of public liability insurance. However, the expected cost reductions4 are likely to be well below what is necessary given the doubling or tripling of insurance costs, such as that faced by our organisation.
- We note that in contrast, governments have acted with much greater sense of urgency to assist commercial activities. For example, governments around Australia have been willing to apply taxpayer funding and guarantees to arrangements for medical indemnity, the airline industry, HIH policyholders and home warranty insurance.
Whether or not the current policy emphasis on group buying, risk pooling arrangements, or tort law reform is successful in reducing claims, payouts, and insurance costs, the reality is that the impact of such measures in lowering premiums and increasing insurance availability for non profit groups in the next 12 months will be minimal. The difficulty for the non-profit sector is that many organisations cannot wait that long for a solution, and have limited avenues for fundraising to meet the financial deficit.
The situation is such that even if a long-term solution is found, many valuable non-profit activities and organisations may be destroyed and never recover from the short term problems.
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A further issue for the Australian Breastfeeding Association is that public attention has focussed on insuring high profile or specific annual 'events', such as Anzac Day, or community festivals, rather than the day-to-day activities of non-profit or charitable organisations and groups. Such an 'events' focus misses the point that for example, the Australian Breastfeeding Association runs around 250 'community events' a day throughout Australia.
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As well as the reduced willingness of insurers and reinsurers to assess and accept public liability risks since the September 11 terrorist attack and, in Australia, since the HIH collapse, there has been the suggestion of a decline in the willingness of insurance companies to adequately assess appropriate premiums for non-profit associations. For example, the Local Government and Shires Association of New South Wales has suggested that:
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The reduction in competition [from the demise of HIH] has allowed the industry to re-price public liability insurance at what they would claim to be sustainable levels. At the same time it has allowed them to be more selective about the risks they insure. It would certainly appear that certain categories of insurance have now been prohibitively priced. This is not just a matter of moving out of high risk areas of business, there are also indications that insurance companies are taking the opportunity to improve the quality of their customer base by shedding low value customers. This is akin to the banks chasing off low value customers through increased fees and charges.5
This view appears consistent with our experience. The threefold rise in our professional indemnity costs and doubling of public liability insurance premiums does not seem to reflect a realistic actuarial assessment of the actual risk associated with the ABA's activities. Rather, it seems that we are simply a low risk, small customer that does not contribute significantly to insurance company profitability.
If this problem is widespread, one way to ensure companies take greater care when pricing risks may be to specifically require insurers to take into account a non-profit organisation's risk management practices and claims history as part of insurers' general duty of 'utmost good faith' by amending insurance contract laws.
In summary, there needs to be prompt action by governments to ensure that appropriate cover for public liability insurance is available to community groups at a price which they can afford within current budgets if Australia's valuable social capital is to be protected from possibly irreversible harm.
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There are a number of things that governments might do to reduce premium costs or make insurance coverage more easily available for non-profit activities. These include restricting claims, regulating premium levels, or increasing the availability of insurance.
Regardless of the underlying causes of the precarious financial state of the insurance industry, it is reasonable to expect that the sharp contraction in the supply of insurance due to HIH and the S11 disaster must be dealt with at least temporarily by government intervention to increase the availability of insurance until insurance markets return to normal.
- In the US, the Congressional Budget Office has suggested for example, a scheme for short-term public underwriting of public liability insurance until the functioning of the private market and its willingness to accept risk has been restored.6 This might provide an appropriate model for Australian governments in dealing with public liability insurance for community groups.
The option that seems most likely to work effectively in the near future for ABA and similar organisations seems to be for governments to establish public underwriting pools (with government subsidy) for particular types of insurance and for particular types of policyholders.
- For example, a public liability insurance underwriting pool for community groups could be established
- involving local, State and Commonwealth governments;
- run by either the insurance industry or by governments;
- as a temporary or a more permanent scheme.
- As noted earlier, professional indemnity insurance is also an issue for our Association because of the need to provide cover for our volunteer breastfeeding counsellors including those working on the breastfeeding helpline.
A model for public involvement in public liability insurance for non-profit organisations is ComCover, which provides insurance for Commonwealth government agencies.7 It is worth noting that government project grants to community organisations may require them to have public liability insurance, in effect transferring the cost of public liability risk from the governments to community groups even though they are effectively acting as government 'agents' in providing the contracted services.
We appreciate that there need to be appropriate incentives for responsibility and care by those providing services. Adherence to a Code of Ethics, rigorous training, and written guidelines for volunteers working within the Association represent ways which we reduce and manage risks.
However, the important role played by volunteer activity in building our social fabric must also be recognised. If the financial costs and risks to individual volunteers and organisations of community activities are too high, such volunteer services will simply not be provided, and the costs will fall on government.
Likewise, we acknowledge that the industry must act responsibly on behalf of shareholders in the setting of premiums and management of insurance business, but consider that pricing cannot be left entirely to negotiation between market providers and community organisations in the current exceptional circumstances.
- If the problem of unfair pricing is widespread, one way to ensure companies take greater care when pricing risks may be to specifically require insurers to take into account a non-profit organisation's risk management practices and claims history as part of insurers' general duty of 'utmost good faith' by amending insurance contract laws.
It is also apparent that the appropriate solution to the problem in the Australian context must involve all levels of government - Commonwealth, State and local.
- Precedents for underwriting arrangements involving Commonwealth-State cooperation and public guarantees include the Joint Coal Board arrangements established in NSW from January 2002.8
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We ask that you support proposals for Australian governments to immediately act to protect the viability of community activities and events run by non-profit organisations such as the Australian Breastfeeding Association. This includes,
- practical options to provide immediate financial relief to community organisations hit by rising insurance costs, such as Australian State and Commonwealth governments establishing a public liability underwriting pool for non-profit or community organisations, guaranteed or underwritten by Commonwealth, State and/or local governments.
- This could be managed by either the insurance industry or governments.
- It could be either a permanent arrangement or a temporary arrangement with a set date for ending government underwriting.
- amending insurance legislation to require companies to fully assess the actuarial risk associated with cover for non-profit organisations.
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The Australian Breastfeeding Association and Insurance
ABA pays for four types of insurance: business insurance, product insurance, professional indemnity insurance, and public liability insurance.
Table 1: ABA insurance premium costs
| Professional indemnity | Product and public liability | Business insurance | Total |
|---|
| 1999-00 | $4,340 | $12,300 | $15,400 | $32,040 |
| 2000-01 | $8,230 | $13,600 | $15,400 | $37,230 |
| 2001-02 | $14,713 | $44,992 | | $59,705 |
Essentially this shows that,
- ABA professional indemnity insurance premiums have tripled
- ABA insurance costs have doubled overall, mainly due to product and public liability insurance
Also, extra premiums are now required for fundraising events such as Playschool concerts ($800) per concert). Fundraising events with stalls and amusements require extra premiums as well ($800) because they are considered 'bigger than normal' and it is difficult to establish what is regarded as normal.
The standards of facilities and supervision required by insurance companies if we run a crèche make the costs of running a crèche prohibitive.
There are no current claims against the Association. The Association has been in existence since 1964. The only previous claim against the Association was in 1985. The Association was sued for damages resulting from an incident involving a piece of equipment owned by one of our local groups. The excess cost to the Association was met by a massive fundraising appeal.
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Notes
- We can provide references on request
- We can provide references on request
- Kehl, D., "Liability Insurance Premium Increases: Causes and Possible Government Responses', Commonwealth Parliament, Department of the Parliamentary Library, Current Issues Brief No 10 2001-02 (http://www.aph.gov.au/library/pubs/CIB/2001-02/02cib10.htm).
- For example, around 15 per cent has been suggested as potential savings from group purchasing. It has been suggested that savings of 30-40 per cent or perhaps more might be achieved through pooling with self insurance of risks. ALGA, 'Submission to Ministerial Meeting on Public Liability Insurance Issues', March 2002 (http://www.alga.com.au/latest_news2.htm).
- Local Government and Shires Associations of NSW, 'Local Government and the Affordability and Accessibility of Public Liability Insurance' March 2002, p. 6 (http://www.alga.com.au/latest_news2.htm).
- Congressional Budget Office, 'Federal Reinsurance for Terrorism Risks', October 2001, http://www.cbo.gov/showdoc.cfm?index=3087&sequence=0.
- Kehl, D., op cit.
- Kehl, D., op cit.
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