As with any other market, the insurance market fluctuates with demand and supply. When demand for insurance product is high, it's a 'hard market' and when there is an over-supply, it's a 'soft market'. Premiums go up during a 'hard market' and come down during a 'soft market'.

In about 2001 the market for insurance product rose following the demise of insurers, HIH and FAI. At the same time, insurers were suffering financially from a series of poor decisions over previous years. Consequently, premiums increased. The insurance industry persuaded the government that these increases were due to a litigation explosion and lobbied successfully for legislation limiting compensation payouts.

The Law Council commissioned an independent enquiry into suggestions of a litigation explosion and found no basis for this assertion. With legislation now passed, premiums remain high (because the market is still hard) and insurance profits are at an all-time high because payments have been legislated away.

The ordinary Australian has paid for these profits and the litigation myth has now been debunked.

To download a copy of the report, click here