Microeconomic policy issue, normative and positive statement

Essay by inocheatingUniversity, Bachelor'sC-, August 2004

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Microeconomic policy issue

A clear point has been made in the article that professional indemnity insurance premiums are raising dramatically. The Western Australia government is aiming at reducing insurance premiums by the introduction of proportionate liability.

The WA government has influenced the outcome of insurance premiums policy made by the insurance companies to ensure that premiums are best and reasonable for these insurers. If the premiums were only controlled at the hands of these insurance companies, it would bring a public liability crisis to these insurers. If this happens, it will not be good news to the economy, as that it will be affecting the income distribution of normal households. But the government has stepped up for insurers helping them in their best interest to reduce the premiums.

On the other hand, the Queensland government has introduced a different method of reducing insurance premiums. Instead of reform the law, it gave a 500,000 dollars threshold for proportionate liability.

There are two types of statements in this article, which are positive statement and normative statement. One example of positive statement is " In all claims where defendants are found to be at fault, they will be liable for only the proportion of harm they caused rather than be potentially liable for the plaintiff's entire loss." A normative statement can be demonstrated by "People who are found to be 10 percent negligent in relation to economic loss should only be responsible for 10 percent of the damage."