The New South Wales State Government has put Compulsory Third Party (CTP) ‘green slip’ insurance under the microscope in a bid to arrest the spiralling cost of the scheme to motorists.
As in all other Australian states and territories, a vehicle being operated on public roads in NSW must have CTP insurance in addition to the vehicle’s registration.
But unlike some other states, the scheme in NSW is run by ‘private’ insurers, with no State Government-run insurer to offer the compulsory insurance.
This scheme is designed to promote competition among CTP providers, but drivers in NSW may rightly feel that competition appears lacking, with CTP 'green slip' premiums having risen 70 percent since 2008.
TMR examined CTP insurance in 2013, finding owners in NSW and the Australian Capital Territory paid double in some circumstances for combined registration and CTP compared to drivers in Western Australia.
And now a fresh review from the NSW State Insurance Regulatory Authority (SIRA) has found that things have barely changed, with WA still the cheapest (an average of $303) while NSW has overtaken the ACT to become Australia’s most expensive state to purchase CTP.
The new average CTP premium is $637 per year, while ACT owners pay $595 on average.
Despite record-high CTP premiums, the review found only 45 cents in the dollar is returned to injured road-users in NSW.
As for the remaining 55 cents…
The NSW scheme has been criticised as a ‘lawyer’s picnic’, with injury claims tied up for years in some cases in the state’s court system.
Therefore, any downward pressure on CTP premiums from the open-market scheme in NSW is being eroded by sky-high legal fees as insurers look to recover costs from 'at fault' parties.
In response, the NSW Government has released a discussion paper on CTP insurance outlining proposed changes under four new or revised economic models.
A popular option is the adoption of a ‘no fault’ scheme, similar to Victoria’s TAC system, in order to narrow the opportunity for lawyers to dispute claims in court.
Additionally, compensation levels could be capped and set values could be applied to certain injuries (the loss of one eye, for example).
A ‘no fault’ scheme with set parameters would, in theory, remove some of the risk for insurers who could set lower CTP premiums with greater confidence as costs would be more predictable. An earlier estimate on the scheme suggested savings of up to 15 percent for motorists.
However, some road-users are concerned that a ‘one size fits all’ scheme with set parameters for injuries may disadvantage those with unusual or severe injuries, and remove their right to dispute claims in court.
SIRA is inviting public submissions for CTP reform in NSW between now and April 22, 2016.
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