Submission to CTP reform
25 May 2016
Motor vehicle injuries are often serious and can have a significant impact on the emotional, social and financial aspects of a person’s life. For this reason, compulsory personal injury motor vehicle insurance is an essential element of our modern society as it provides support and benefits to those who have sustained injuries as a result of a motor vehicle accident. As the scheme is compulsory, it is imperative that it is designed in a way that appropriately balances support for injured people and affordability for all motorists. Unfortunately, the current New South Wales (NSW) Compulsory Third Party (CTP) scheme is not working effectively to meet these needs.
Processes are slow and the use of fault rather than need as a mechanism to access benefits, means the scheme does not provide adequate support to all who are injured.
In our experience, the current scheme complexity is contributing to the increase in the level of legal representation, particularly for minor injuries. The Green Slip premium has risen as a result of the increase in the number of claims being lodged in recent years. Major reform is required to address the scheme’s current limitations and to create a fair, accessible and affordable scheme that meets the needs and expectations of the NSW community.
IAG supports the move towards a first party scheme with the components of option 3 in the Government’s Options Paper, which are:
- Defined benefits for all.
- Common law access for the seriously injured who did not cause the accident.
The option 3 reform that we recommend with reference to the analysis undertaken by Finity directly meets the government’s objectives by:
- Efficiency – increasing the proportion of benefits provided to the most seriously injured from 47% to 64%1.
- Timeliness – reducing the time taken to resolve most claims from 3-5 years to 2 years2.
- Fraud – reducing incentives for fraud and claims exaggeration by capping benefits and taking preventive measures.
- Affordability – reducing the average Green Slip premium by $1503.
Option 3 promotes simplicity, easier access, transparency of benefits and prioritises a return to health, participation in employment and the community generally. This option also provides flexibility to accommodate technological advances currently emerging in the transport industry
such as more automated vehicles and telematics analysis.
Although option 4 provides similar advantages, it does not provide for access to common law benefits for those who are not at fault. IAG considers that this lack of access to common law benefits for the most seriously injured people may not recognise that an individual’s recovery from injury is a unique experience and that every injured person requires different levels of support and financial aid in the long term.
It is time to shift our approach from retrospective to pre-emptive. Instead of enacting legislative change in reaction to emerging trends, we have the opportunity to proactively reform and improve the scheme to accommodate and mitigate future developments. This is key to providing adequate and consistent support for people injured in motor vehicle accidents now, and in the future.
1 Letter from Finity to the Insurance Council of Australia (5 May 2016), Assessment of NSW CTP Reform Options
2 Letter from Finity to the Insurance Council of Australia (5 May 2016), Assessment of NSW CTP Reform Options
3 Letter from Finity to the Insurance Council of Australia (5 May 2016), Assessment of NSW CTP Reform Options