Hih: Failure of Australia's Largest

HIH: Failure of Australia's Largest Insurer HIH Insurance Company HIH Insurance Company was the largest insurer in Australia until March 15, 2001 when it was put into liquidation representing "one of the biggest collapses in Australian corporate history." HIH Insurance Company provided workers' compensation; public and private liability and property, and industrial and commercial insurance. Quick organization of transfer of the retail business was taken care of by regulators.

While the year of 2001 progressed so did the loss estimates, which kept piling up "as a result of assets and extensive under-estimation of liabilities." HIH had been quoting insurance policies at a lowball figure but didn't put aside enough in the way of capital for covering future liabilities of the company. Management and due diligent failure are also cited as problems which only propelled the low quoting of policies by HIH.

Predicted is a bad effect on the discretionary spending in Australia for a long time to come as well as rising costs in insurance premiums. It appears that HIH was using an 'aggressive' acquisition strategy' even before the collapse and that in combination with 200 subsidiaries HIH created could not have been considered responsible business conduct.

The controversial acquiring of FAI Insurance in 1998 in which HIH paid $300 million, which was borrowed, to purchase FAI ended with poor market response as well as the fact being later revealed that FAI was only worth about $100 million, 1/3 of HIH's acquisition price. The cost for the taxpayers of Australia is estimated as being in excess of $1 billion and still won't take care of paying the costs of all of HIH's obligatory payments.

Stakeholders are left out in the cold it appears since it is stated is that "many of the company's two million policy holders and other creditors are expected to wait up to 10 years for disbursement of their funds and might only receive around 50 cents for each dollar they claim - though that figure won't' be firmed up until well into 2002." (ERisk.com Case Study Online) Many were affected by the collapse of HIH Insurance Company with stakeholders being the company employees, policyholders of the company, as well as the Australian taxpayer who will help shoulder this debt and finally those who are referred to as the "whistleblowers" or those that tipped off regulators that something was amiss.

There has been a strong campaign for protection for whistleblowers for both private and public sectors in Australia for the last ten years. Protection for whistleblowers serves public interest through exposure and elimination of waste, fraud and impropriety within a corporation or company. If those who would report such actions against a company were protected then collapses such as HIH's and other companies recently in the news might be altogether avoided or at the least minimized as to the impact, which they have.

Recommendations are for ethical and proper business dealings on the.