The NSW government has revealed its plans to eliminate the "super profits" enjoyed by the four insurance giants licensed to sell green slips in the state.
More News Videos
Reforms set to leave motorists 'worse off'
Most injured NSW motorists are at risk of losing compensation under government plans to reform the green slip insurance scheme.
At present, NRMA, QBE, Allianz, (Allianz and CIC-Allianz) and Suncorp (AAMI and GIO) are pocketing 19¢ in each green slip dollar as profit – more than double what they predict when setting their prices.
Minister for Better Regulation and Innovation Victor Dominello, in the midst of reforming the Compulsory Third Party insurance scheme, released a discussion paper on Friday saying he wants a fairer and more affordable system.
"Our reforms will provide government with greater powers to regulate these profits so that more money goes to injured road users," he said.
"The changes will also see a significant reduction in premiums for motorists."
A super profit is the difference between what the insurers estimate their profits will be while setting prices, and their actual profits.
Bigger profits are leading to motorists paying higher green slip premiums.
![The government is promising a significant reduction in premiums for motorists.](/web/20161106074205im_/http://www.smh.com.au/content/dam/images/1/2/7/g/d/1/image.related.articleLeadwide.620x349.gsgyvr.png/1478164226229.jpg)
In every green slip dollar, only 45¢ goes to the injured road user; 19¢ is taken as the insurer's profit, 15¢ covers the insurer's expenses; and 18¢ goes towards legal and investigative expenses.
The government, the insurance industry and lawyers agree the CTP scheme is broken, but are at loggerheads over how to fix it.
![Insurers warn that without any changes, premiums could rise by 20 per cent this year.](/web/20161106074205im_/http://www.smh.com.au/content/dam/images/g/o/5/u/u/0/image.related.articleLeadwide.620x349.gsgyvr.png/1478164226229.jpg)
The Australian Lawyers Alliance, which represents personal injury lawyers and is set to lose a lot of business under the proposed reforms, claims injured people will lose their common law rights to sue insurance companies and ultimately receive less money.
The discussion paper says a more appropriate profit margin on filed profits in the new scheme would be 8 per cent.
![NSW Minister for Innovation and Better Regulation Victor Dominello is working on CTP reforms.](/web/20161106074205im_/http://www.smh.com.au/content/dam/images/g/p/s/k/9/b/image.related.articleLeadNarrow.300x0.gsgyvr.png/1478164226229.jpg)
It says this could be done by introducing a "clawback" (or profit normalisation) mechanism when moving to a new scheme, more powers for the regulator to cap and control prices, and more transparent premium review processes.
Essentially, the government proposes a hybrid no-fault scheme that will introduce defined benefits for low-severity injuries, retain common law for the most seriously injured and – for the first time – extend protection to at-fault road users.
Mr Dominello has asked the State Insurance Regulatory Authority Board to join forces with the government's Data Analytics Centre to better monitor trends.
"This focus on more timely data will mean insurers can be held to account for many of their performance indicators within months, rather than years," the paper reads.
"In particular, it will mean that the emergence of super profits will be identified earlier, allowing SIRA to respond and require insurers to revise their assumptions to eliminate any super profit."
Anthony Day, Suncorp's chief executive of insurance, said the company supported the CTP reforms that reduce premiums for motorists, curtail fraud and provide adequate returns for insurers in a sustainable way.
"The NSW CTP scheme needs to focus on getting people better, rather than drawn-out legal proceedings for minor injuries," he said.
"Positive reform provides more certainty and ensures that more of every dollar in premiums will go to helping people get back on their feet, rather than waiting for a lump sum."
Insurers warn that without any changes, premiums could rise 20 per cent this year. At present, the average Sydney motorist is paying $637.
Andrew Stone of the Australian Lawyers Alliance said the discussion paper was another example of "more talk" about a problem that's existed for years.
"The other major disappointment is that the government still seems determined to persevere with cutting benefits for innocent accident victims," he said.
"The government just does not seem prepared to acknowledge that its grand plans to reform CTP are being funded by cutting the financial support of innocent accident victims who find themselves without a job and with ongoing medical bills. Fair reform would protect innocent accident victims."
On Friday, the government will also announce the appointment of Dr Graeme Innes, former disability discrimination commissioner, to the SIRA board.
"Dr Innes has a wealth of experience both as a lawyer and disability advocate," said Mr Dominello.
"He understands the challenges faced by those who are injured and will advocate for a scheme that protects injured road users and ensures they have optimal outcomes."