The O’Farrell Government is currently proposing to reform the NSW Compulsory Third Party Green Slip Insurance Scheme (CTP Scheme). This is the scheme that compensates people for injury and loss when they are hurt in a car or motorcycle accident.
The Government has produced a consultation paper detailing the principles underpinning their proposed changes. This is available here.
The Greens do not support the proposed changes to the CTP Scheme. There are two reasons for this, first the changes will not address the underlying causes of cost increases in the scheme and, second they will deliver substantial cuts to benefits received by many injured road users in NSW.
It is not clear how the Government’s options for reform have been developed, but they appear to be based on a very selective view of the operation of other CTP models for such insurance in Australia. At the core of the reform is a change from fault-based compensation that fully compensates those injured on the roads due to another’s negligence to a far more limited set of “defined benefits” being provided to a wider group of people on a no-fault basis.
Based on our analysis of the Government’s own data, the most significant determinant of the cost of a CTP premium is not whether the scheme is fault or no-fault based, but rather whether or not the scheme is publicly or privately underwritten and managed.
Nationally the average cost of CTP premiums as a percentage of average weekly earnings (AWE) is 25% of AWE for schemes that are publicly underwritten and managed compared to 32% of AWE for schemes that are privately managed. This fact is simply, and inexplicably, ignored in the government’s discussion paper.
It would come as no surprise to any motorist in NSW who has recently purchased a CTP green slip to hear that NSW has a costly privately run and rivately underwritten CTP scheme. The privately run scheme inevitably means higher costs for the private insurers in managing claims, meeting prudential standards and, importantly, gouging billions of dollars in profit from the scheme.
If the government was serious about reducing premiums it would closely consider government management and underwriting of the scheme such as occurs in WA, Tasmania, Victoria and the NT and deliver the inevitable savings from such a scheme directly to motorists.
One of the most obvious benefits of this approach would be to return the average 20% of premiums currently gouged by private insurers as profits back to the motorists either as reductions in green slip prices or as additional statutory no-fault benefits.
We produced a detailed submission in response to the proposed changes. You can download this here: Reforms to the NSW CTP Scheme.
A complete list of submissions prepared by this office is on the website here: http://davidshoebridge.org.au/submissions/