Interview with Jon Faine, ABC 774

06 January 2012

Please listen or read my interview with Jon Faine this morning (6/1)

Interview with Jon Faine on 774 ABC Mornings

Subject/s:  Christmas storm damage insurance public meeting, Heinz closure

JON FAINE: A Federal Minister who has made himself available for comments on other matters this morning is Bill Shorten, the Minister for Employment and Workplace Relations and for Financial Services and Superannuation. Good morning, Mr Shorten.

BILL SHORTEN: Good morning.

JON FAINE: Now, last night you were in attendance at a public forum.  Is that correct?

BILL SHORTEN: That’s right. At the Keilor Downs Centre with State Member of Parliament, Natalie Hutchins, who’s the Member for Keilor, about hailstorm damage, hearing from all the people who had such a terrible Christmas Day.

JON FAINE: How many claims do you think have already been made, as far as you know?

BILL SHORTEN: Thirty thousand.

JON FAINE: So the system is obviously under a great deal of pressure.  Is this becoming more common as we’re seeing – well, perhaps it’s just a
perception thing but more and more we’re seeing these sorts of mass insurance claims being reported.

BILL SHORTEN: Well, I think the insurers are in a better position to tell you how common it’s becoming but when you have a hailstorm in a city, a catastrophic hailstorm that this was.  This wasn’t just heavy rain and little tiny specks of hail.  This was major damage to thousands of cars and houses. The SES did a great job.

JON FAINE: But when our Federal Minister for Financial Services gets involved, it’s obviously becoming quite a pressing matter.

BILL SHORTEN: Well, I saw during the bushfires when I worked on reconstruction and that was, of course, far worse than this because of the loss of life but I saw the insurance aspect during the bushfires.  I also got involved in the Queensland floods as the Insurance Minister when there were complaints about the definition of flood, meaning some people in the same street were getting different responses on whether or not the flood damage would be paid for from different insurance companies and I saw the anger that caused.

I live in the western suburbs of Melbourne so I figured it was – when invited by the State Member for the affected area I thought I should go out because the sooner you deal with issues, the easier it is for people to just get on.

JON FAINE: How was the mood at the forum last night in Keilor Downs?

BILL SHORTEN: There was some frustration.  The meeting was organised at relatively short notice.  Natalie Hutchins and I formed the view you’re better off having the meeting than waiting another week.  There were three hundred people there.  The people who are happy with their insurers probably tend not to come to these meetings but it was good.  The Insurance Council of Australia and a representative number of insurance companies actually attended the meeting.

There were some insurance related issues cropping up. The waiting time for assessors. There was some debate about the workmanship of some of the subcontractors being used.  There were questions about motor vehicles.  There is a policy question here for the State Government, which they need to help the people in the west on, which is when a car gets damaged, it can be written off and undriveable or it can be technically written off.

In other words, the panels cost too much to fix, more than the value of the car, but the car can actually drive so it’s cosmetic damage which is expensive to repair.  There’s a problem that once the car is written off, VicRoads deems it written off for all purposes.  Now, these people who live in Taylors Lakes and Keilor Downs and Kealba and St Albans, they need their cars to get to work so we do need some flexibility out of VicRoads because what’s happening is the hailstorm victims whose cars got smashed up but are still driveable are being revictimised again by VicRoads.

JON FAINE: And they’re going without the use of their cars?

BILL SHORTEN: Well, that’s it.  People need their cars to get to work.  What happens when you’ve got a car which is deemed to have been written off is you can get third party insurance but you can’t get the car insured again.  The reality is for a lot of mortgage - mortgage holders and families in the north western suburbs of Melbourne is they still need their car.  So we need some flexibility from VicRoads.

This is probably an inflammatory thing to say but if this hailstorm had hit Hawthorn or Toorak, I suspect the Liberals would be moving a bit quicker with VicRoads than they are in Keilor.

JON FAINE: And I suppose people need their cars to attend public forums on insurance claims too?

BILL SHORTEN: Well, they do, but most importantly they need to get to work.

JON FAINE: We’ll just move sideways through another matter, still in Victoria.  Today’s the last day for one of our well known food manufacturers, Heinz, in northern Victoria who are closing their Girgarre plant.  Although we could see it coming, it’s a pretty sad day for people in the area.  What could have been done to stop this happening?

BILL SHORTEN: Well, manufacturing is important.  I think the first thing that we need to do when we think about manufacturing is realise we can still make things here.  I don’t know all the ins and outs of the Heinz balance sheet in Girgarre.  I’ve seen some of the local community believe that the company’s acted precipitously, others, you know, close to the company say it just wasn’t viable.

I do believe it is possible to be a food manufacturer in Australia.  The Government’s put in concessions for research and development with supporting our automotive industry.  We’re making sure that as we move forward on action on climate change that we’re supporting our industry as well.  So I don’t think manufacturing is too hard in Australia.

It is certainly not what it was in the nineteen-sixties where thirty in every hundred Australians worked in manufacturing, but in a modern economy where we’re diversified, we still have a role for manufacturing.

JON FAINE: There was a community group that was trying to buy the factory and start its own production using existing staff and local produce.  Can the Government be of assistance in trying to make that sort of thing more likely to happen in future?

BILL SHORTEN: I’ve been involved when – when Electrolux sold Chef in Brunswick and shut it down and moved all manufacturing to South Australia, or not all the jobs but there was a reduced number of jobs. We were concerned, I was concerned that at that time that Electrolux was acting precipitously and prematurely and that you could still have a contract up and manufacture in Melbourne.

When I went through the process though of trying to interest venture capitalist and investment banks, you know, the private sector’s got to stand behind these deals.  The Government can’t subsidise things.  I found when I went to the private sector though that there wasn’t a lot of interest in backing manufacturing.

So I think we need a bit of a change of attitude in some of our investors.  A deal’s still got to be a good deal.  Like if you’re going to invest peoples’ money, it doesn’t matter if it’s superannuation or shareholders’ money, you’ve got to get a return, but I think we could have a little more boldness from some of our investment community in looking at what constitutes a viable manufacturing business.

But, ultimately, though it has to be sustainable.  I think groups such as the one we saw though should get a better hearing from banks and investors than I think traditionally has been the inclination of the financial industry.

JON FAINE: Mr Shorten, if you don’t mind, I’m going to throw a question to you that’s come in on our text message number.  Jenny asks, please ask Bill Shorten when the Government is going to make insurance compulsory on all real estate and paid with rates.  Do you know what Jenny means by that?

BILL SHORTEN: Well, I think I know some of what she means.  Some people don’t carry contents insurance.  Some people who own their own homes don’t carry home insurance.  Some people don’t carry aspects of insurance, such as fire insurance.  So, I don’t think we are going to – we’re not going to make insurance compulsory but what we – because sometimes people don’t insure things for reasons they don’t have the money or that the property they’re valuing they don’t assess to be worth the cost of the insurance.

Personally, I carry insurance, home and contents insurance. Having seen the impact of the bushfires, having seen the impact of the floods and now most recently last night seen the impact of hailstorm, I think it is prudential if you’ve invested money in your house or your car to carry insurance.  But I can – if you have a weekender up the bush, you’re probably not going to necessarily, and it’s not worth a lot, you’re not going to – you might resent being asked to pay insurance.

The level of insurance is quite high in Australia so I think insurance is a price – what the Government can do though to encourage people is take for instance flood insurance.  Before this Government got involved over the last twelve months, for the last forty years there’s been a debate about when is a flood a flood.  Does it come from the storm, does it come from the river.  My view is if water’s crossing the threshold of your house, you’ve got a flood.

We managed to get the insurance industry to agree to changes.  We’re putting new regulations into Parliament.  We think by having – we’ll have a one page key facts statement, you’ll know what you’re covered for.  We think that by demystifying insurance and improving the market for products, even despite natural disasters forcing premiums up, by having good products and clearly defined policies in black and white, which you don’t need a PhD to read the fine print, you improve peoples’ confidence in insurance.

JON FAINE: Well, though, you’ve certainly made yourself available for a generous amount of time and I want to thank you for that, Bill Shorten.

BILL SHORTEN: Good morning, [inaudible].

JONFAINE: Good morning,Bill.  Bill Shorten, Minister for Employment and Workplace Relations and for Financial Services and Superannuation in the Federal Government there.

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