Mr DAVID SHOEBRIDGE ( 18:01 ): On behalf of The Greens I indicate that we support the Motor Accident Injuries Bill 2017. Some people might find The Greens support for this bill surprising, given the strong opposition The Greens have had to the two previous efforts by the Government to reform the compulsory third party [CTP] insurance scheme. Before dealing with what distinguishes this bill and what has been a good reform process undertaken by the Government compared to previous reform processes, I will briefly indicate the main features of the bill. The bill effectively has a two-tiered system. The first proposes a no fault general access scheme that operates for six months for anybody injured in a motor accident. Unless the injury was intentional, anybody injured in a motor accident under this scheme, regardless of whether they were at fault or not and regardless of whether they were effectively blameless is covered.
In regional New South Wales there have been many occasions when people could not access the current scheme. For example, they may have veered off road to avoid an animal that has come onto the road. Unlike under the present scheme, this new scheme will give those at fault motorists cover for the first time. It will provide them with cover for up to six months of income replacement and up to six months of medical expenses. If somebody is catastrophically injured on New South Wales roads we already have a universal access no fault scheme called the lifetime care and support scheme. So, on any view of this bill, it significantly expanded the benefits that are currently available to at fault drivers.
The bill also puts in place two thresholds for access to common law damages. The first threshold is based upon minor injury. If somebody has what is classified as a “minor injury” under the scheme—and I will deal with that in more detail later in my contribution—then, whether they are at fault or whether the injury is the fault of somebody else, they are limited to the statutory scheme. The hope is that the soft tissue injuries, the muscular injuries, the strains and the like that are sustained in the great majority of accidents will be readily dealt with in that statutory scheme. Prompt access to medical treatment, prompt access to income replacement and not having to go through an expensive legal route to obtain it should mean that the overwhelming majority of those cases can be resolved in the statutory scheme within the six-month timeframe.
Anyone who has an injury that is greater than a minor injury and who can prove that the injury was the result or the fault of another person will have access to common law benefits. They will have access to claim their loss of earnings for their expected earnings up to the Commonwealth pension age—currently up the age of 66 or 67 years of age, and no doubt by the time that Mr Deputy President Green and I retire it will be 174 years of age. As with the current scheme, if an individual can prove that their injury was caused by the fault of somebody else, or it was a blameless accident as defined in the bill, then they will get not only income loss but also, if they are able to prove that they have a whole person impairment assessment of greater than 10 per cent, access to what is called non-economic loss, which is general damages; damages for the physical injury they have suffered to their person or the severe psychological injury they have suffered as a result of the motor accident.
Those benefits are exactly the same as they are under the current scheme. Everybody who has an injury that is greater than a minor injury and can prove negligence will also have access to lifetime medical support. For The Greens that access to lifetime medical support—which guarantees that someone is covered if they need an operation in five, 10 or 20 years time or has access to physiotherapy and ongoing treatment for the rest of their life while they need it as a result of injury—is one of the important bulwarks of the scheme that The Greens strongly support. So there are the six-month statutory benefits regardless of fault and then two entry points into common law damages if someone can prove fault.
If someone can prove fault and they have more than a minor injury, but 10 per cent whole person impairment or less, then they have lifetime medical benefits and they have income loss until they retire. If someone can prove fault and can prove greater than 10 per cent whole person impairment then, as with the current scheme, they get lifetime medical expenses—although in this scheme it will be paid out over the course of their life as they need it as opposed to a lump sum. They will also get non-economic loss for their general damages and they will also have their economic loss up until the retirement period. The Greens believe that this is a nuanced scheme that gets the balance right between a broad statutory protection regardless of fault that is immediately accessible when people most need it—that is, straight after the accident—and retains those necessary common law benefits.
Why do we need reform? Anybody who has paid for a green slip, particularly in Sydney over the past 12 months, will know the first reason we need reform—green slips in Sydney now cost on average more than $700 a pop. For many people in Sydney that is simply unaffordable. They are not quite as much in the regions, but they are still at a very high level. Because of the very poor public transport available in much of Sydney, having a car is basically essential—and for many families having to pay $700 for a green slip puts that out of reach. So we need to do something on that. This bill will put significant downward pressure on premiums. It is estimated that it will cut green slip premiums by at least $100.
We needed to do something to get rid of superprofits. Since the current statutory scheme was instituted some 20 years ago, the insurance industry has taken approximately one dollar in every five, or 20 per cent, of all premiums and put it into their pockets as profit. That is just unconscionable. It is a failure of regulation to date that has allowed to happen, because every year we have insurers putting their filings and estimates in for premiums. Every year they say, “We think this will give us 8 per cent in terms of profits,” but then when it plays out and they actually get their claims history after three, four or five years for that particular premium year—every time, except for one year when I think they did get slightly under 8 per cent—they have profits that go well beyond 8 per cent.
As the claims history plays out, in the second year the companies say, “We think our profits are now 12 per cent.” In the third year they will be 14 per cent and in the fourth year they will be 15 per cent. It appears that every time that happens the regulator is surprised. That represents a comprehensive regulatory failure. Hopefully, by reducing the long-tail nature of this scheme, we will reduce the amount of capital that insurers need to hold, more claims will be dealt with in the first 12 months, and there will be a substantial reduction in insurance superprofits. The scheme has experienced a number of specific pressures over the past three years, many of which were extraordinarily predictable. We have seen the claims experience in comparable jurisdictions like the United Kingdom where claims harvesting has been happening for about five years. Offshore firms are going through areas of London and elsewhere identifying potential clients, gathering their details and selling them to law firms, which contact them to draw claims out of the community. That is now happening in New South Wales.
Overseas firms are effectively farming claims from within this State. They are gathering potential clients and selling their details to law firms, which can then run often small and not very meritorious claims that provide an exaggerated profit. In some parts of Sydney we are also seeing significant evidence of fraudulent claims. Undoubtedly, a handful of the people involved—it is a very small number—and some very questionable members of the medical profession are submitting claims that are difficult to defeat. It is extremely difficult to prove fraud, but it is putting significant pressure on the scheme. I am talking about the 11.00 p.m. rear-end accident involving a car with five occupants in which every occupant complains of whiplash or psychological injury, which involves five separate claims that each settles for $45,000, inclusive of legal costs.
The lawyers take the bulk of the settlement, leaving the claimants with only a small amount. Who loses in that scenario? All of the other motorists who are contributing to the compulsory third party scheme lose. We must get rid of those small claims. Hopefully, the definition of “minor injury” in this bill will go a significant way in achieving that. I am not suggesting that we should prevent people who have a legitimate minor injury from making a claim. However, we must remove the cost incentive to make claims that will result in lawyers and their clients pocketing a windfall. With the passage of this bill, if someone is genuinely injured they will have their medical expenses paid as they are incurred, not as a lump sum, and they will receive income replacement when required. Why is this good reform and how does it reflect on the Government’s previous reforms? When the Hon. Greg Pearce was Minister for Finance he introduced a particularly appalling proposal that would have prevented all access to common law benefits, moved everyone into a statutory scheme, and terminated benefits after five years regardless of the merit of the claim.
The Hon. Shayne Mallard: That upset the lawyers.
Mr DAVID SHOEBRIDGE: It did not upset only the lawyers; it also upset anyone with a sense of fairness. The proposal was based on a whole person impairment threshold. If an injury did not result in more than 10 per cent whole person impairment then the claimant would be put in a statutory scheme providing a maximum of five years of benefits. Case after case was highlighted in that reform process, primarily by the legal profession because the lawyers knew what the effect would be. Ordinary members of the public did not understand the implications of a whole person impairment threshold. However, members of the legal profession did, and they cited the case of a bricklayer with an injury at one level of his spine. That might constitute a 9 per cent whole person impairment, but the bricklayer’s career would be over because for him that would be a significant spinal injury. Under the Hon. Greg Pearce’s proposal, that person would have been in a scheme that would provide a maximum of five years of benefits. After five years, he would have been on his own.
I ask members to consider the nurse who has rolled her ankle while carrying a heavy load at work and as a result has an ankle fusion. That sort of injury is often assessed as a 4 per cent, 5 per cent or 6 per cent whole person impairment. Under the proposed scheme, that nurse would have received a maximum of five years of benefits and then she would have been thrown to the dogs. The concert pianist who loses a finger is the classic example used in debates about whole person impairment. That person is probably assessed as having 1 per cent or 2 per cent whole person impairment, but their career is ruined. It was no wonder that a majority of members in this Chamber—regardless of whether it was members of The Greens, the Labor Party, the Shooters, Fishers and Farmers Party or the Christian Democratic Party—would not support the proposal. It was downright unfair.
How do we come up with a new way of rationing scarce funds while ensuring that all minor injuries do not go down the expensive common law route, suck up a huge amount of legal fees and premiums, and potentially make the scheme uneconomic? How do we winnow out those cases and at the same time ensure fair access for those who have a minor injury and protect those who have a bona fide injury that is potentially career threatening or ending? That is the real challenge that everyone was considering. I give the Minister credit for seriously engaging with that issue. How could he ration limited funds while protecting small legitimate claims and arrive at a fair outcome? How could he ensure that the bricklayer, the nurse, the piano player and others do not suffer a life-destroying injury for which they are not fairly compensated?
Reverend the Hon. Fred Nile: The Minister did a lot of hard work.
Mr DAVID SHOEBRIDGE: The Minister undoubtedly engaged in that issue. However, he was helped by some extremely creative ideas offered by the legal profession. I acknowledge in particular a submission from the Australian Lawyers Alliance, and specifically Roshana May and Andrew Stone, who were critical creative thinkers in this process. They examined how comparable jurisdictions dealt with this issue. The French model provides that if something can be identified on a scan or an x-ray, or someone has had surgery then the injured person falls within the scheme. If that cannot be done, the injured person will not have full access to benefits. When the Minister considered that as a potential rationing mechanism, his office, the bureaucrats, the lawyers and others gathered to draft the definitions. That is how the stakeholders came up with the definition of “minor injury” in the scheme.
Part 1 division 1.2 clause 1.6, which contains the definitions, may not be perfect. There may be people who have what is defined as a minor injury whose incapacity extends beyond six months, and they may lose some benefits. I believe we must accept that. Of course, a class of additional people that has been injured through their own fault will now get benefits for the first time. There may be a small class of losers, but undoubtedly there will be a very large class of winners. That will include all vehicle owners whose premiums will be significantly reduced and who will enjoy the equity benefit to which I referred earlier. The bill states:
Meaning of “minor injury“
(1)For the purposes of this Act, a minor injury is any one or more of the following:
(a)a soft tissue injury…
The bill further states:
(2)A soft tissue injury is … an injury to tissue that connects, supports or surrounds other structures or organs of the body (such as muscles, tendons, ligaments, menisci, cartilage, fascia fibrous tissues, fat, blood vessels and synovial membranes), but not an injury to nerves or a complete or partial rupture of tendons, ligaments, menisci or cartilage.
In other words, if someone suffers a disc prolapse, if they bugger up the cartilage in their knee, if they break a bone, or if they rip or tear a menisci or a tendon, they have suffered something more than a minor injury and they will have access to the common law benefits if they can prove fault. If they have suffered a soft tissue injury—that is, significant bruising, whiplash and the like—they are defined as having a minor injury and they do not have access to lifetime medical expenses and common law benefits. However, they will have access to what soft tissue injuries need; that is, immediate access to medical assistance, support for six months and income replacement. That is the quid pro quo and the key rationing mechanism.
The nurse with the ankle fusion, the concert pianist who loses a finger and the bricklayer with the back injury to L4/L5 will satisfy the definition of minor injury. If those people can prove fault, they will have access to lifetime medical benefits and to ongoing income loss. Anybody who has a fracture of their bone or has required surgery or a sustained a ripped rotator cuff injury—all of those cases that were raised by the lawyers and other stakeholders in the last set of reforms, every single unfair case, will actually satisfy the definition of minor injury. The definition for psychological injuries is:
A minor psychological or psychiatric injury is a psychological or psychiatric injury that is not a recognised psychiatric illness.
With the new DSM-5, a much more refined way of assessing psychiatric and psychological injuries, pretty much every plausible psychological injury—if it can be proven—will satisfy the definition of minor injury. Are there challenges ahead? Absolutely there are significant challenges ahead. There are guidelines, there are regulations, there is a whole body of additional work that needs to wrap around this bill and it has to happen in pretty quick time to be in place by the end of this year. The Minister said that he is establishing a task force and as I understand it, there will be ministerial representatives on that task force, not just the bureaucrats and other stakeholders, but ministerial representatives, which will be essential to ensure that we get the guidelines right and that we get issues like legal fees organised in such a way that people still have access to justice.
The Government’s reform process can be contrasted to the previous failures on comprehensive third party [CTP] insurance and to the very damaging process that workers compensation went through. The way to deal with these types of reforms is to deal with stakeholders with dignity, listen to their submissions and come up with a scheme that really has done the next to impossible. You reform something as politically contentious as CTP and green slips. You have the lawyers on side, you have the insurers on side, and you have pretty much every political player in New South Wales on side. That is a pretty good test for a good reform. The Greens have no difficulty in giving our support to this bill.