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Premiums, Profitability and Claims to 2010

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.

 Average Premium – June Quarter
Sydney Metro Passenger Vehicles
All NSW Vehicles
  % Change
   % Change
2003 $339.99 $328.00
2004
$343.00  1.2% $332.00 1.2%
2005
$324.00  -5.5% $320.00 -3.6%
2006
$314.00  -3.1% $309.00 -3.4%
2007
$322.00  2.5% $318.00 2.9%
2008
$329.00  2.2% $324.00 1.9%
2009 $389.00  18.2% $372.00 14.8%
2010 $428.00  10.0% $404.00 8.6%
 
2003/2010 26.3% 23.2%

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 Margin in Insurer Filings Year Ending 30 June
Average Estimate of Discounted Profit and Loss as % of Premium Year Ending 30 September
2000 7.7% 30.0%
2001
7.9% 28.7%
2002
8.2% 31.0%
2003
8.2% 24.3%
2004
8.5% 27.0%
2005
8.7% 21.3%
2006
8.7% 18.0%
2007 6.0% 12.3%
2008 7.7% 5.0%
2009 8.1% -1.3%
 
Average 8.0% 19.6%

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 Year Ending 30 September
2000 16,844
2001
15,502
2002
14,055
2003
12,885
2004
12,290
2005
11,757
2006
11,167
2007 10,729
2008 10,220
2009 11,732
 
Average 12,718

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

Review of NSW Registration Label Requirements

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.

RTA Abolished – Transport for NSW Created

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.

Demerit Points – Scheme Changes January 2011

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.

Representation for Motorbike Riders

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.

Insurer Market Share 2010

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.

June 2007 June 2008 June 2009 June 2010 Change 2009 to 2010
AAMI 15.1% 14.7% 12.5% 10.1% -19.2%
Allianz 15.7% 15.6% 14.4% 13.4% -6.9%
CIC Allianz 7.8% 6.8% 6.2% 4.9% -21.0%
GIO 8.3% 8.1% 8.8% 10.7% +21.6%
NRMA 35.6% 35.8% 37.3% 36.7% -1.6%
QBE 10.6% 12.2% 13.6% 17.5% +28.7%
Zurich 6.9% 6.8% 7.2% 6.7% -6.9%

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.

At-Fault Driver Cover Update – Issues Continue

In our News article of 1 April and in our analysis of at-fault driver cover, we identified issues with the payment of at fault driver cover benefits for accidents occurring after 1 April 2010.

As at 15 October 2010, those issues remain for some insurers.

This site was the first to identify and articulate the issues.

The facts

Here are the facts.

Prior to 1 April 2010, the driver at fault in an accident was not covered under the CTP greenslip scheme unless the driver was catastrophically injured.

  1. Five of the seven greenslip insurers offer an additional feature with greenslips, generally referred to as at fault driver cover.
  2. At fault driver cover means that insurers pay the at fault driver specified benefits for specified injuries which that driver may sustain in an accident.  Benefits vary, but are typically around $50.000.00.
  3. Each insurer provides a policy document setting out the terms on which at fault driver cover benefits will be paid.
  4. Effective from 1 April 2010, the State Government amended the Motor Accidents Compensation Act 1999 so that injured at fault drivers became entitled to compensation up to a maximum of $5,000.00. The legislation to amend the scheme was introduced in May 2009.
  5. As at 1 April 2010 the insurer’s policy documents stated that no at fault driver cover benefits were payable if the injured at fault driver also received or was entitled to receive compensation under the Act.
  6. Therefore, on the basis of policy wording, no at fault driver cover benefits were payable from 1 April 2010, yet insurers continued to market the benefits of those policies.

Current situation

As at 15 October 2010:

  1. NRMA and QBE have updated policy terms so that at fault driver cover benefits are payable.

  2. GIO has stated publicly and on its website that it does not intend to apply the terms of the policy document so as to exclude at fault drivers from accessing benefits and that policy terms will be amended to ensure this is clear.

  3. On the basis of the Allianz policy document, benefits are not payable because the injured at fault driver is entitled to the compensation under the Act.

  4. On the basis of the Zurich policy document, benefits will not be paid if the injured at fault driver receives compensation under the Act.

We will continue to monitor the position and will update this site as necessary.

Greenslip Prices For Cars – Changes From 1 July 2010

Greenslip average prices for cars in NSW are on the move from 1 July 2010!

We have surveyed greenslip prices for class 1 vehicles (motor cars) in the Sydney Metropolitan and Country areas as at 30 June 2010 and 1 July 2010.

Average price changes

The results, showing the average change in price between those two dates are set out in the table below.

 Average Change in Price Average Change in Price
Age of Owner
& Youngest Driver
Sydney Metropolitan Country NSW
25 2.1% 2.2%
35 3.0% 2.8%
45 3.0% 2.7%
55 3.4% 3.3%
65 3.4% 3.3%

The largest price increase found in the survey was 10.9% and the largest decrease found was 12.7%.

The survey also found that the benefits of shopping around to compare prices increase with age.  The average saving for a 25 year old owner was found to be $35.42 whereas the survey found that the average saving for a 65 year old owner is $218.32.

Average savings

The average savings established by the survey are set out in the table below.

Age of Owner
& Youngest Driver
Average Saving by Comparing Prices
25 $35.42
35 $177.07
45 $173.75
55 $218.32
65 $218.32

The trends shown in the tables are based on a sample of greenslip prices as at 30 June 2010 and 1 July 2010.  Greenslip prices change over time and in every case need to be checked on the basis of specific vehicle and owner details.

New Greenslip Price Classifications for Motorbikes Commencing 1 July 2010 – Winners & Losers

Classification of motorbikes for determining CTP greenslip prices in NSW is changing from 1 July 2010.  The new classifications will result in significant greenslip price changes for many owners, some up and some down.

Engine capacity

For greenslip purposes, motorbikes are classified on the basis of engine capacity.  The classifications are designated by the Motor Accident Authority of NSW for use by greenslip insurers.  Greenslip insurers apply those classifications, along with consideration of other factors such as location, claims history, driving record and rider age, to determine greenslip prices.

Until 30 June 2010 three classifications apply:

i) Under 100cc
ii) 101cc to 300cc
iii) Over 300cc

From 1 July 2010, five new classifications will apply:

i) Under 225cc
ii) 226cc to 725cc
iii) 726cc to 1,125cc
iv) 1,126cc to 1,325cc
v) Over 1,325cc

How they work

The change in classifications is designed to allow more levels of price differentiation for risk based on engine capacity and claims experience.  Clearly, one classification for all motorbikes above 300cc is too wide.

The new classifications do not include consideration of other risk characteristics such as the type of motorbike or pillion capacity.

The new classifications result in a major realignment of prices.  Some motorbike owners will benefit from sizeable decreases in greenslip prices, whilst others will be required to pay significantly more.

We have surveyed prices as at 30 June 2010 and 1 July 2010 for a range of motorbikes in the Sydney Metropolitan and Country areas.  The results, showing the average change in price between those two dates are set out in the table below.

 Average Change in Price Average Change in Price
Capacity Sydney Metropolitan Country NSW
125cc -9.9% -3.9%
250cc 88.9% 107.3%
400cc -27.3% -29.6%
650cc -27.3% -29.6%
800cc 5.2% 1.9%
1,100cc 4.4% 1.2%
1,200cc  34.9%  24.6%
1,500cc  19.8%  13.0%
2,000cc  19.8%  13.0%

Hardest hit will be motorbikes at the bottom of the 226cc to 725cc classification, such as 250cc motorbikes.  250cc motorbikes were previously classified with 101cc to 300cc motorbikes.  For a 250cc motorbike the survey shows an average increase in price of 88.9% in the Sydney Metropolitan area and 107.3% in Country areas.

The survey shows that prices have increased in the three classifications for motorbikes above 726cc.  The average increase in price for an 800cc motorbike is 5.2% in the Sydney Metropolitan area and 1.9% in Country areas.  The average increase in price for a 2,000cc motorbike is 19.8% in the Sydney Metropolitan area and 13.0% in Country areas.

Motorbikes in the 1,126cc to 1,325cc classification have shown a higher average increase in price than other large capacity motorbikes.  For a 1,200cc motorbike the survey shows an average increase in price of 34.9% in the Sydney Metropolitan area and 24.6% in Country areas.

Biggest winners

The biggest winners are motorbikes in the upper range of the 226cc to 725cc classification, such as 400cc and 650cc motorbikes.  Those motorbikes were previously classified with all motorbikes over 300cc.  For both 400cc and 650cc motorbikes the survey shows an average decrease in price of 27.3% in the Sydney Metropolitan area and 29.6% in Country areas.

Some small capacity motorbikes under 225cc will also benefit.  For a 125cc motorbike (such as a scooter) the survey shows an average decrease in price of 9.9% in the Sydney Metropolitan area and 3.9% in Country areas.

Interestingly, the survey also shows that for an older rider with good claims and driving records, the benefit of shopping around to compare prices will in some cases save several hundred dollars, whereas for a young rider with bad claims and driving records, the benefit of shopping around will generally be less than $20.00.

The trends shown in the table are based on a sample of greenslip prices as at 30 June 2010 and 1 July 2010.  Greenslip prices change over time and in every case need to be checked on the basis of specific motorbike and owner details.

Comment at our Blog. Tell us how the changes will affect you. What is your opinion on the new classifications?

NSW Government Press Release on CTP Green Slip Scheme Reform, Commencing 1 April 2010

In our news article of 10 March 2010 we released news from the press release of reforms to the CTP greenslip scheme.

The first reform provides that hospital treatment, transport by ambulance and other treatments for at fault drivers is funded by the CTP greenslip scheme.

The second reform, effective for accidents occurring from 1 April 2010, provides that at fault drivers will also be entitled to compensation through lodgement of an Accident Notification Form (ANF).  Subject to the provisions, at fault drivers will become entitled to claim up to $5,000.00 for treatment expenses and for lost earnings by lodging an ANF.

Press release

The NSW Government has today issued a Press Release announcing the second reform.

Interestingly, the release does not deal with the issue we raised in our news article. That is, the impact on At Fault Driver Cover Policies offered as an additional benefit by some of the insurers. There has been no change to this point.  We will monitor the position.

Detailed analysis of the legislation changes and the impact on the CTP greenslip scheme is available on this site.