Australia: A Moment with Michael Gill
Last Updated: 28 February 2012

Michael Gill is a DLA Piper consultant, having been a partner for almost 40 years. He is one of Australia's leading insurance lawyers. Michael has previously held the roles of chairman of the firm and managing partner of the Sydney office. In 1980 he was elected the youngest ever president of the New South Wales Law Society, at age 33, and in 1985 was elected president of the Law Council of Australia. Michael has been instrumental in significant initiatives such as LawCover, the Solicitors Mutual Indemnity Fund and the New South Wales Motor Accidents Authority. He is currently the president of the International Insurance Law Association, and the independent chair of the Code Compliance Committee established under the General Insurance Code of Practice. He shared his thoughts on the industry with Kerry Hogan-Ross.

After 38 years as a partner in the Insurance Team at DLA Piper and its predecessors you are now a part-time consultant. You must have some spare time on your hands - are you enjoying playing with your grandchildren, fishing and going to the movies perhaps?

I continue to enjoy almost every aspect of what I do, including playing with the grandchildren. Fishing is no part of it but more movies would be appreciated. Travel remains important, especially overseas. It took me 12 years to work out why I did law and the reason that I came up with was that I had this passion for travel and visiting other places, but more importantly learning as much as I can about other people and cultures.

That may be so, but you are still very busy. What's on your work agenda these days?

The split is between the law (including DLA Piper), insurance and the not-for-profit sector.

For the firm it's three days a week on average, which is mainly spent in the area of risk and professional indemnity, helping Tony Holland (DLA Piper Managing Partner, Australia) in his role as a director of the Large Law Firm Group, as well as working with Michelle Milnes (DLA Piper Community Investment Manager) in the Community Investment area and Nicolas Patrick (DLA Piper Head of Corporate Responsibility, International) in the Pro Bono area.

Part of my excitement for 2012 is that I now have an opportunity to spend a couple of weeks with Action Aid in Cambodia on a particular legal project for them. I'm also involved with the Shinta Mani Foundation, which is based in Siem Reap. In my local community, I am deputy chairman of the Board of the James Milson Village, which is a beautiful nursing home and retirement village in Kirribilli, close to where I live.

And you are still on the Code Compliance Committee?

Yes, I've been the Independent Chair of the Code Compliance Committee for the General Insurance Industry for 17 years. 2012 may be very interesting - we think we will see a large number of complaints about the handling of claims arising out of the Queensland floods. We've not experienced that previously.

You were elected President of the International Insurance Law Association (AIDA) in May last year. Have you combined your knowledge of insurance and your love of travel?

Yes, my presidency of AIDA takes a fair bit of time, but it means I have a great opportunity to work with lawyers and insurers from all around the world. We have two Presidential Council meetings a year and in 2012 they will be in Istanbul in May and London in September. I should mention that the acronym, AIDA is based on its French name, the Association Internationale de Droit des Assurances.

Tell us a bit more about AIDA and its purpose.

AIDA is the peak body worldwide not just for insurance lawyers, but for all with an interest in insurance law. It was set up about 50 years ago. The very wise people who set it up saw the harmonisation of insurance law as being absolutely critical for the future. That view was formed in the context of the emerging European community at the time. The globalisation of major sectors of world activity, not the least of them being insurance, demonstrates the importance of harmonisation of law regionally, and ultimately globally. The Australian Insurance Law Association (AILA) is our national chapter of AIDA. It is one of the best in the world.

What insights have you gained into the global nature of insurance and what challenges the industry faces?

I believe that we are appreciating, increasingly, just how interdependent all things are on this earth. There is no greater example than climate change and the impact it is having on the lives of all of us, as well as the way in which our lives are having an impact on the environment and climate.

The insurance industry, no matter what part of the world it operates in, is now recognising that the risks that it is trying to understand, measure, manage and rate are very often risks that are not just particular to individual countries but, more frequently, are risks that have an international flavour to them.

Quite apart from something as enormous as the environment, we are also living with the worldwide uncertainties of the Eurozone and the impact that failure in that zone may have on the worldwide economy. Of course any failures of that sort have enormous significance for the insurance industry, which underwrites banks and all sorts of other organisations that can suffer enormous loss in the event of a serious economic downturn, wherever in the world it happens.

Is AIDA active in the Asia Pacific region?

There are many active AIDA national chapters in our area, apart from AILA. One of my principal objectives as president of AIDA is the formation of additional national chapters in the Asia Pacific region. We don't have as many chapters as they have in Europe or South America, for example. Since I became president we've worked to resuscitate our chapters in Hong Kong and Taiwan. With great assistance from Singapore, we are planning new chapters in Malaysia and India. We are having discussions Thailand and Vietnam. With the aid of Hong Kong we've had our first insurance law conference in the Peoples Republic of China, and are planning a National Chapter there.

There is a huge amount of change going on in those countries. This must present opportunities and challenges to the insurance industry.

As those countries' economies grow, expand and trend in the direction of first-world status, they are becoming the technological, electronics and manufacturing powerhouses for much of the world. Not only will there be a growth in the number of businesses requiring good insurers to assist them with the management of their risk, we'll also see the emergence of an ever-growing middle class with all of the wealth and risk that brings with it and the need for insurance in those sectors as well. Indeed, the biggest of those countries are likely to take views about insurance, its regulation and arrangement that may well lead to the biggest changes the industry has ever seen.

In the last 12 to 18 months, the world of insurance has focused on our region in a way we've never seen before. Our natural disasters were just enormous: a tsunami and nuclear disaster in Japan, a devastating earthquake with consequential liquefaction problems in New Zealand, unbelievable flooding in Queensland and the worst recorded flooding in Thailand.

Munich Re's research found that 80% of all economic losses from natural disasters this year came from this region.

Absolutely. You end up with a financial risk to the world's insurance industry, which really puts Asia Pacific right up there with the worst of the events that have occurred in North America or Europe. For a long time our part of the world was seen to be a comparatively benign area for catastrophes, by world insurance standards. That is no longer the case.

And you believe AIDA is well placed to assist the insurance industry in those countries?

Yes. Whatever role AIDA can play in assisting the regulators, the industry and the insurers in those countries with the creation of and the operation of a really good system of insurance law in its various manifestations, then that will be to the benefit of those countries and the world as a whole. It's not just about harmonisation, it's also about good law and good law is something that all areas of human endeavour should have available to them.

Many would think such a comment to be boring to the point of self-serving. Be that as it may, it happens to be correct. Unfortunately, with the many great and urgent challenges faced by the various segments of the economy, good law rarely gets to the top of the agenda of any senior executive.

What challenges does this bring for the industry and for lawyers?

Let me give you three examples. The first one is the ongoing provision of reinsurance for our region.

Secondly, the recent experience of business interruption claims demands a total re-think of that risk type, how it's insured and how it's rated.

Thirdly, part of the response to the devastating floods in Queensland has been the total relocation of some householders. Hopefully this is just the beginning of a realisation that too much development has been permitted in inappropriate areas and, for the medium to long term, relocation is the best option for all concerned. Christchurch is another example of this.

This all reinforces the old but sometimes forgotten message that at its worst, risk is not something that can be totally managed by the private sector. When we think about catastrophic worldwide risk, we must acknowledge the need for partnership between government (governments when appropriate) and the private sector. Each must play its appropriate role. At its worst, global risk is something humanity cannot manage. We can't stop the worst of natural catastrophes. All we can do is be smart about keeping ourselves and our assets out of harm's way and to be fair and equitable about assisting people to restore their lives. All of that requires very good public policy and sensible cooperation between all stakeholders.

Of course, an example arises from the debate that has occurred in this country so many times about flood definitions and compulsory insurance. They are the micro issues that really underscore this need for a sensible relationship between the public and the private sector. There is no sense at all in representatives of either sector throwing silly aggressive comments at one another. They both have important roles.

What observations would you make about Australian insurance law generally? What do we have to learn from other places and what they might learn from us?

During my years in practice, Australia has been incredibly good at reforming laws that are relevant to the insurance industry. Let me give a few examples.

The Law Reform Commission work in the 1970s and 1980s, which gave rise to the Insurance Contracts Act and the Insurance (Agents and Brokers) Act, was absolutely first class and even today in many areas it represents very useful examples of solutions that other jurisdictions can make use of. We don't say that what works for Australia should be axiomatically taken up in every other nation in the world, but there is learning experience from Australia that is very valuable. That's to be seen in the work of the Law Commission in England, Wales and Scotland on one of its current references on insurance contracts law, where Professor Rob Merkin has looked very closely at what we do here.

One example of how much others have to learn is that the former CEO of Aon, Dennis Mahoney made a speech in London in November 2011. He covered a broad range of issues and concluded by saying that the one area he wishes that the industry could solve was in determining whether an insurance broker is the agent of the insured or the insurer! When I read those comments from Dennis, I thought to myself how wise were we all those years ago introducing the Insurance (Agents and Brokers) Act.

In the regulatory area, I think the Australian regulators, the industry and the politicians learnt a lot from the collapse of HIH. I think that the regulatory regime we now have in place can be fairly criticised for being too heavy handed in some areas. For example, I think the role of Product Disclosure Statements has been a costly mistake. But having said that, I think the overall regime that emerged following the collapse of HIH presented for the Australian industry and for its policy holders a far more transparent industry, one in which the community could have more confidence. This is very different to the situation in many other parts of the world. Our legal and regulatory regime enables shareholders, regulators, policy holders and intermediaries to know a lot about insurers without being overly intrusive into areas of commercial confidentiality. I think it's essentially a good balance, one that other jurisdictions could look at.

The third area that I'll touch on that I think we undersell in many ways is how brilliantly Australia has done over the last 30 years with the resolution of disputes. This isn't all good news for the lawyers, and so be it, but if we went back 30 years, most insurance coverage disputes had to find their way through the courts if they didn't settle.

About 20 years ago the general insurance industry, under very wise leadership, set up what is now the Dispute Resolution System within the Financial Ombudsman Service. Just about every dispute under an insurance policy is resolved within this system. It's a marvellous system for the consumers and small businesses. Not surprisingly, you hear some complaints about it. But then again we do hear the occasional complaint about courts and lawyers! However, the Dispute Resolution System has delivered an outcome for policy holders that I think is as good as any I have seen anywhere else in the world. Financial and insurance ombudsmen from many countries visit or make enquiries about how our system operates.

In the early 1980s we saw the advent of mediation, which ultimately, at least in New South Wales, became a compulsory part of our court life and probably the most prominent type of alternative dispute resolution in our jurisdiction. We didn't embrace arbitration in the same way that so many other countries have as the only alternative to a costly and time-consuming court system.

The litigation process is still a core part of what insurers do, defending their insureds or recovering a paid out loss via subrogation. How do you rate Australia's legal systems?

I think we've done well in civil liability reform. It's not perfect but it's better than what existed 10 to 20 years ago. The big challenge today is harmonisation between jurisdictions and injury types, especially for bodily injury. We may not be able to achieve complete harmonisation, but there is scope for progress. The rest of the world continues to talk about reforms but seems incapable (particularly in Europe and North America) of moving towards sensible and significant reform.

One big impact on the insurance industry and those that insure is the emergence of litigation funding companies. I am seeing more and more evidence overseas of the emergence of their role. Australia has started to think about their regulation. Other countries are still simply musing about the fact that the old rules of champerty and maintenance should still be in place and that these sorts of things shouldn't be allowed to happen.

I think in a country like Australia, we do recognise the importance of access to justice. We just don't pay lip service to it. It's much more than simply reciting three paragraphs of Magna Carta. We need to think about how the average person can seriously find justice within a legal system and a set of rules that are coming to be ever more complex and even challenge the understanding of lawyers and others who live with them every day of the week.

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