- Proportion of benefits (efficiency) – injured people receive only 45% of CTP premiums
- Timeliness – In NSW, most payments are made 3-5 years after the accident
- Fraud and exaggeration – up to 10% of all insurance claims could include some fraud
- Affordability – average green slip premiums in 2015 were 33% of average weekly earnings, and less affordable every year since 2008.
It discusses four main options for reform and explains how each one addresses these four priorities. The four options for reform are broadly this: fault-based but with changes, not fault-based, or a hybrid of the two. Researchers looked to other states and territories in Australia for examples of each type.
The current NSW CTP scheme is common law fault-based and considers each claim individually. It’s spending considerable time and money on locating fault and paying a negotiated lump sum, years after the accident.
Option 1 – Retain the current common law, fault-based scheme but improve processes
- Create mandatory deadlines to reduce late claims and resolve claims
- Introduce compulsory mediation
- Make lost earning payments periodically rather than in a lump sum
- Allow the regulator to better support claimants and address over-servicing and fraud
- Put tighter caps on legal expenses
- Increase regulatory powers to address insurer premiums and profits.
Option 2 – Retain the current common law, fault-based scheme but adjust benefit levels as well as processes
This option is similar to Option 1 but with adjustments to benefits, which are currently much higher in NSW than many other states and territories. Benefits to be adjusted include payments for non-economic loss, economic loss, payment for care and legal fees. This option would also introduce a medical excess, so the injured person has to pay a standard excess before being able to claim benefits.
Option 2 broadly offers only slight improvements under each of the criteria, but this also depends on the levels set for thresholds and caps.
Option 3 – Move to a hybrid no-fault, defined benefits scheme with common law benefits retained in parallel
- Pay medical, treatment and rehabilitation costs to anyone, whether at fault or not, but consider fault before paying for lost income or pain and suffering
- Increase the threshold for the Accident Notification Form and keep common law for claims over that threshold
- Pay no-fault benefits for people catastrophically injured so they get immediate benefits but retain common law for less severe injuries.
Option 4 – Move to a fully no-fault, defined benefits scheme with caps, thresholds and no common law
This option removes fault and makes payments set by law, instead of negotiated lump sums. While more people could access benefits in a no-fault scheme, this would be offset by a reduction in legal disputes about fault, contributory negligence or benefits and costs would be capped.
Premiums in no-fault schemes are usually more stable because costs are more predictable and insurers do not need to build future costs into current premiums. However, this system does lack the flexibility to take individual cases into account.
Option 4 offers significant improvements in efficiency, timeliness, affordability and less incentive for fraud. There is a national trend towards no-fault schemes and official sources, including the Productivity Commission, say no-fault systems have superior results.
It is worth asking which option best addresses all four reform priorities. Is fault the most acceptable way to decide who gets benefits or is it better to ensure everyone who is injured is covered? How do we find a balance between keeping CTP prices lower and being able to help more injured people? Finally, is it better to receive regular payments straight after the accident or have to wait years for a negotiated lump sum?