Insurer profits in the NSW CTP scheme have been a contentious matter for many years. Their long-term average profit is 19%, more than double the profit submitted each year to State Insurance Regulatory Authority (SIRA).
New rules now put a cap of 10% on CTP insurer profits. Any excess profits will be used to reduce the Motor Accidents Operational Fund levy paid by motorists.
Why limit insurer profits?
The Motor Accident Injuries Act beginning 1 December 2017 set out to keep premiums affordable by making sure insurers did not make too much profit and limiting benefits for minor injuries. Until then, NSW motorists were paying some of the highest premiums in the country.
SIRA says, based on current premiums, every 1% of excess insurer profit returns more than $15 million to NSW vehicle owners through lower prices.
Reduce the MAF levy
Motorists currently pay a Fund Levy with each green slip. This includes the MAF levy, which pays for public hospital, ambulance services and the administration costs of the scheme.
The new rules set a benchmark profit margin of 8%, an excess profit threshold of 10% and an excess loss threshold of 3%. Any profits above 10% will go towards reducing the Motor Accidents Operational (MAF) Fund levy. Of course, any profits below 3% increase it.
Reducing the levy paid by motorists will push the price of green slips down further.
An innovation sweetener
Insurers who can demonstrate innovations that improve the NSW scheme can maintain an extra 3% of profit. These innovations must, for example, improve claimant experiences, reduce deaths or injuries in motor accidents, save claimants time or money or provide more efficient claims services.
SIRA argues the extra 3% offers an incentive to improve injury prevention and recovery.
It is only a year since our news item: Government attempts to limit CTP insurer profits.