Archive year 2013

There are many issues with reforms to the current NSW green slip scheme, particularly affecting affordability, efficiency and sustainability.

The NSW Government recognised that it needed to deal with those issues and instructed the Motor Accidents Authority (MAA) to develop a compulsory third party (CTP) pricing strategy.

The MAA responded with a plan for major reform of the scheme.  The plan is set out in “Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme”, dated February 2013.

The document sets out the principles for reform of the scheme. It does not provide detail on how the reforms will be implemented nor does it provide a timetable for implementation.

Current Scheme

1.  The Current Scheme.

The current scheme is primarily fault based, making it complex and adversarial.  The scheme is characterised by disputes over liability, extent of fault, severity of injury and the amount of compensation.  The disputes result in high legal, medical and administrative costs, court action and delayed compensation.

Premiums are high, particularly relative to other states and affordability is decreasing.

Scheme inefficiencies, increasing claims frequency and uncertainty, the delay in settling claims and poor investment returns makes setting premiums difficult.  Allowances for risk and future uncertainty often result in higher profits for insurers than is anticipated when premiums are set and submitted to the MAA. Flexibility to differentiate different risk groups on the basis of price is limited.

Without reform, it is likely that premiums will continue to increase.  Pressure on premiums was the driver for the review and is a major focus for the reforms.

Reformed Scheme

2.  The Reformed Scheme.

The proposed reforms will change the fundamental nature of the scheme.

The new scheme will not be fault based.  Injured parties will be entitled to defined benefits, regardless of fault.  Common law will still be available to injured parties with greater than 10% whole person impairment and for those with catastrophic injuries the Lifetime Care & Support Scheme will not be affected.

The theory is that by removing the fault based nature of the scheme, disputes over liability and fault will be greatly reduced.  Compensation will be prescribed and capped, again reducing the number and cost of disputes.  The claims process should be simpler and claims should be paid much earlier. Dispute resolution mechanisms, a Code of Conduct for insurers and lawyers and safeguards for claimants will be implemented to further aid the process.  Again, the theory is that pressure on premiums should decrease if expenses are lower and the risk and uncertainty factored into premiums by insurers is reduced.

No fault schemes

In support of the theory, the MAA cites the experience in other states as showing that no fault schemes are more efficient and effective.

More people will be entitled to compensation under a no fault scheme.  It is also likely that more injured people who are entitled to claim but do not bother, or give up, will pursue their claims.

Premium regulation and increased competition between the insurers is also part of the reform plan.

The MAA will be seeking to increase its powers in the regulation of premiums, but says it will offer simplification and more flexibility in the setting of premiums.  It will also look to streamline the purchase process.

The new scheme will change the claims process so that injured parties claim against their own insurer, rather than the insurer of another vehicle.  This will allow insurers to differentiate green slips on the basis of service, in addition to price.

Some downsides have been identified.

Because the scheme is no longer fault based, more people will be entitled to claim.

If compensation is capped, it is likely that the capped level will not fully compensate some injured parties.  When compensation is capped at inadequate levels, injured parties may be forced to rely on other personal insurance policies.

Next steps

3.  What is Next?

The plan is open for public comment until 5 April 2013.

Consultation with stakeholders is underway.

A timetable for implementation is to be determined.

We will provide updates and commentary as the detail of the reform unfolds.

The Motor Accidents Authority has released a paper on proposed Reforms to the NSW Compulsory Third Party Green Slip Insurance Scheme.

The proposed reforms are far reaching and include the claims process, compensation and setting of premiums.

A copy of the paper is no longer available .

A consultation period is in place until 5 April 2013.

The timetable for implementation of CTP reform is yet to be determined.

The NSW Government has released a booklet setting out changes to the Road Rules to come into effect from 1 November 2012.

A copy of the Road Rules booklet is available on the RMS website.

The changes generally simplify or clarify existing rules.

Main changes

Most notable road rules are the following:

1. Use of mobile phones whilst your vehicle is not parked.

• You can use a mobile phone for calls or to use the audio playing function if the phone is secured in a fixed mounting or, if not in a mounting use of the phone will not require you to touch or manipulate the phone in any way.

• You must not hold a mobile phone in your hand and all other functions such as messaging and emailing are prohibited.

• If you want to use the GPS function on your phone, you can only do so if the phone is secured in a commercially designed and manufactured fixed mounting and if it is positioned so as not to distract or obscure your view.  This also applies to any other type of GPS device.

• Learner and P1 drivers are not allowed to use any function of a phone.

2. Signalling at roundabouts.

• You are required to give sufficient warning of your intention before you enter a roundabout.

• When leaving a roundabout, you are required to signal a left turn just before you exit.

3. Carrying animals on motorbikes.

• You are not allowed to carry an animal on a motorbike between you and the handlebars.

• Animals are not yet required to wear crash helmets!!!

The Motor Accidents Authority (MAA) is preparing a Compulsory Third Party (CTP) Pricing Strategy to be released late in 2012.

A copy of the Terms of Reference for the Pricing Strategy, approved by the NSW Minister for Finance and Services, is no longer available.

It is envisaged that the strategy will determine the future direction of the scheme. Terms of Reference focus on lower premiums, lower costs and optimum benefits within an affordable model. The MAA says “preparation of the strategy will address key issues to ensure the Green Slip Scheme remains equitable, affordable and sustainable into the future”.

Terms of Reference

Specifically the Terms of Reference include examination of:

1. Improvements to premium regulation for equitable but not excessive insurer profit margins.
2. Improvements to insurer supervision and market acquisition practices to ensure premiums are sufficient but not excessive.
3. Optimising the basis of premium setting for different vehicle classes, having regard to risk and affordability.
4. Opportunities to promote price competition.
5. Ensuring the MCIS Levy is applied fairly and that services funded by it are delivered efficiently.
6. Process improvements to improve claims management and dispute resolution.
7. Transparency of legal fees and other scheme costs to optimise benefits received by injured people.
8. Simplification of the claims process.
9. Strategies to leverage better medical cost pricing and practices.

Detailed analysis

Focus areas for detailed analysis, identified by the MAA, are:

1. Market design
2. Premium regulation
3. Government expenditure
4. Benefits design
5. Claims management processes.

The pricing strategy will be developed through research, consideration of earlier reviews and consultation with stakeholders and the public.

Suggestions can no longer be submitted.

A NSW Upper House Committee is currently enquiring into the injury insurance scheme, profitability and claims, and the role of The Motor Accident Authority in NSW.

As a result of the enquiry, there has been press about the difference between profits the insurers are estimating for the purpose of setting premiums and profits the insurers are actually making.  There has also been a focus on the number of claims.

Premiums, profitability and claims

Information on Premiums, Profitability and Claims to 2010 is set out below.

Premiums listed in the table exclude GST.
Premiums are from MAA Annual Reports, Scheme Performance Reports.

Profit margins and profit and loss

Weighted Average Profit Margins are from MAA Annual Reports, Scheme Performance Reports for 2004-2005 & 2009-2010.  2010 data for Estimate of Discounted Profit and Loss is not reported.

Average Estimates of discounted Profit & Loss are from MAA Annual Report, Scheme Performance Report for 2009-2010.

Number of claims

Estimated Ultimate Number of Claims are from MAA Annual Reports, Scheme Performance Reports for 2004-2005 & 2009-2010.  Reported 2010 data is not for a full year and is therefore not included

The NSW Government has approved a review of registration label requirements in NSW for light vehicles (with a GVM up to 4.5 tonnes).

The review, which is being undertaken by the Better Regulation Office and the Roads and Traffic Authority (RTA), will examine the ongoing need for registration labels and will provide recommendations for reform.

An Issues Paper was made available.

Submissions to the review are required by 7 October 2011 and a final report and recommendations are expected to be presented to the NSW Government by the end of 2011.

Facts from Issues Paper

Some interesting facts from the Issues Paper:

• In the 2010/11 financial year, approximately 6.1 million vehicles were recorded by the RTA as registered in NSW. 97% of those vehicles are light vehicles with a GVM up to 4.5 tonnes, the subject of the review.
• Registration label for light vehicles abolished in Western Australia from 1 January 2010 and in South Australia from 1 July 2011.
• 13,000 registration label offence penalty notices were issued in NSW in the 2010/11 financial year, according to the State Debt Recovery Office. The penalty notice fine amount is currently $88.00 for a light vehicle.
• Approximately 46% of NSW registration renewals are processed online or by phone, according to the RTA. That figure is expected to grow to 50% by 2015.
• There are currently 77 automatic number plate recognition cameras used by NSW Police which can detect if a vehicle is unregistered.
• Since August 2010, vehicles caught committing an offence by an RTA enforcement camera, such as a speed or red light camera, are also checked for valid registration and CTP greenslip.

Benefits

The main benefits identified in the Issues Paper are:

• Cost (of producing labels)
• Convenience (having to replace labels)
• Environment (printing and disposal of waste)

Risks

The main risks identified in the Issues Paper are:

• Effectiveness of law enforcement
• Increase in the number of vehicle operators failing to renew registration and ctp greenslips.

The Roads and Traffic Authority (RTA) and three other state government bodies are to be abolished and a new authority, Transport for NSW is to be created.

In a press release issued on Friday, 15 July 2011, Duncan Gay (Minister for Roads and Minister for Ports) along with Gladys Berejiklian (Minister for Transport) announced that the RTA, NSW Maritime, the Transport Construction Authority and the Country Rail Infrastructure Authority will be abolished and their functions transferred into Transport for NSW, the new authority.

Transport for NSW

The press release says that “Transport for NSW will be responsible for the co-ordinated delivery of transport services across all modes, and a renewed focus on the customer”.

Transport for NSW will be responsible for operations, procurement, planning and policy for all modes of transport in NSW.

The new authority will be made up of six divisions, Customer Experience, Planning & Programs, Transport Services, Transport Projects, Freight and Regional Development plus Policy and Regulation.

The government is trying to create a more co-ordinated and efficient structure for planning and delivery of all modes of transport in NSW.

Responsibility for road construction and maintenance, oversight of harbours and waterways, licence tests, licences and registration for both land based vehicles and marine craft will come under another new body called NSW Roads and Maritime Services. NSW Roads and Maritime Services will be an operating entity providing services to and under the control of Transport for NSW.

The Motor Accidents Authority will not be affected by the new structure.

There have been changes to the demerit point threshold for unrestricted drivers and demerit points have been reduced or removed for some offences.

13 Demerit points

From 31 January 2011, if you are an unrestricted licence holder, you can accumulate 13 demerit points before you lose your licence.  Prior to that date the threshold was 12 points.  The threshold for professional drivers has increased to 14 points.  Professional drivers are those who drive for a living, such as taxi drivers and truck drivers.

For offences occurring on or after 31 December 2010, points for 22 offences have been reduced or removed.

More information and a list of the offences for which demerit points have been reduced or removed is available on this site.

In a December 2010 Media Release, Minister for Finance Michael Daly announced several initiatives affecting motorbike riders.

New appointments

Firstly was the appointment of Rob Colligan to the Motor Accidents Advisory Council.  As Chairman of the Motorcycle Council of NSW, Mr Colligan has been appointed to represent the views of motorbike riders.  The Motor Accidents Advisory Council is an advisory group appointed by the minister to provide advice and recommendations to the Motor Accidents Authority.

Secondly, the Minister confirmed the appointment of Ernst & Young to undertake an independent actuarial review of motorbike greenslip pricing.  We will monitor the outcome of the review.

The Minister advised that a member of the Motorcycle Council will also be appointed to the working group considering the feasibility and options to adopt testing procedures and ratings for motorbike clothing.

Finally, the Minister announced that the MAA is funding production of rider safety videos to be produced by the Motorcycle Council.

A copy of the Media Release is available on this site.

There have been significant changes to greenslip insurer market share, shown in the latest analysis published by the Motor Accident Authority (MAA).

Written premiums

Insurer market share on the basis of written premiums over the last four years is set out in the table below (Motor Accident Authority Annual Report 2009-2010, page 57). The table also shows changes to market share between June 2009 and June 2010.

NRMA remains the dominant insurer with 36.7% of the market, down fractionally (1.6%) on the previous year.

Of the seven insurers offering CTP greenslips in NSW, two increased market share and five lost market share.

The winners for the year were GIO, increasing market share by 21.6% and QBE, increasing market share by 28.7%.

AAMI, Allianz, CIC Allianz, NRMA and Zurich all lost market share. CIC Allianz market share was down by 21.0% and AAMI market share was down by 19.2%.

The total premium pool for the year ending 30 June 2010 was $1.5 billion.