Compulsory Third Party Insurance Scheme



About this Item
SpeakersAyres Mr Stuart; Deputy-Speaker (Mr Thomas George); Daley Mr Michael; Kean Mr Matt; Amery Mr Richard
BusinessBusiness of the House



COMPULSORY THIRD PARTY INSURANCE SCHEME
Page: 17973
Motion Accorded Priority

Mr STUART AYRES (Penrith) [3.24 p.m.]: I move:
      That this House welcomes a fairer and cheaper Compulsory Third Party Insurance Scheme for New South Wales motorists.
The DEPUTY-SPEAKER (Mr Thomas George): Order! There is too much audible conversation in the Chamber. Members who wish to engage in private conversations should do so outside the Chamber.

Mr STUART AYRES: The people of New South Wales are looking to the Government to reform our broken compulsory third party [CTP] insurance scheme. As I said earlier, those on this side of the Chamber recognise the need to reform broken schemes that no long work appropriately. The New South Wales compulsory third party scheme clearly falls into that category; it needs to change. Since 1999 people injured in motor vehicle accidents have received less than 50¢ in every dollar spent on premiums. This level of inefficiency has resulted in the scheme being very expensive to operate, and that expense has been passed on through increased premiums. Since 2008 the price of premiums has increased by an average of more than 9 per cent per annum. That is completely unacceptable to householders across this State, most of whom are living on the margins and to whom every dollar is crucial. Indeed, the scheme's very name illustrates that people do not get a choice; vehicle owners cannot avoid it.

In New South Wales the price of a green slip is around $518 per annum compared with the price in the Northern Territory at $456, in Victoria—which operates a no-fault scheme—at $362, and in Tasmania at $319. Alternatively, we can look at the percentage of average weekly earnings that a green slip represents. In New South Wales it is 30 per cent—which is way too high—or 10 per cent more than average weekly earnings under the Victorian no-fault scheme. When people are injured we should not be too focused on determining fault; we should focus more on ensuring that they receive an appropriate amount of money to help them get back on their feet and recover. Too often the scheme takes too long to pay out this money—three to five years after an accident is the norm. This longevity of payout should be remedied because it leads to unpredictability and results in increased costs. It also allows insurance companies to generate larger profits.

The Government wants to ensure that the people of this State have a fairer and more equitable opportunity to be protected when driving a motor vehicle. As part of the reform process we will move to a no-fault scheme. This will ensure that injured people are eligible for benefits regardless of fault. They will also receive those benefits more quickly—including lost wages—which will allow them to focus on their recovery. It will also help to drive down the price of the compulsory third party scheme in this State. A more stable and predictable premium environment will be created, which will focus on those who have been injured rather than on the profits of insurance companies or others such as the legal fraternity that are taking a lot of the resources from the scheme. Our compulsory third party scheme needs to be less complex, more affordable and more accessible for everyone in New South Wales.

Everyone who drives a car will save as a result of this reform to our compulsory third party scheme. The people of this State want this scheme. The current system has caused us to fall behind the other States and is costing New South Wales residents an unnecessary amount of money. They want the scheme to be fixed so that they can understand it better, so that fewer lawyers are involved and so that people receive their money more quickly and thus get back on their feet faster. This reform is required in order to lower the cost of living for the people of New South Wales.

Mr MICHAEL DALEY (Maroubra) [3.29 p.m.]: When it comes to all types of insurance, particularly green slips and personal injury insurance, the motorists of New South Wales have a simple expectation: first, that they pay no more than they deserve to pay; and, secondly, that if they are injured in a motor vehicle crash the scheme that covers them will look after them for as long as they reasonably require it. That is the crux of the issue. The motion moved by the member for Penrith mentions the notions of fairness and affordability. The question is: fairness for whom? Another question is: cheaper for whom? If we consider how these changes to the scheme have evolved, the answers to those questions about the scheme being fair and cheap for motorists is no.

In due course we want to see more detail from the O'Farrell Government about these reforms. We are concerned that the so-called reforms will reduce cover to motorists and at the same time gradually increase the cost of premiums. The Government has already increased the cost of green slips by 10 per cent, or $50 a year, on the average policy—which has demonstrated how close it is to insurance companies. Earlier this month it was reported initially by the Sydney Morning Herald that green slip prices were to be allowed to rise by $50 despite falling administration costs for insurance companies. Indeed, the Minister for Finance, Greg Pearce, said:
      … administration costs, including legal fees "are running away in this scheme, and that's why they've got to increase the premiums".
That flies in the face of the figures from the Motor Accidents Authority. The authority's latest annual report shows that legal and investigative costs, far from increasing as indicated by the Minister, have fallen from $239.9 million in 2007-08 to $229 million in 2011-12. The article stated:
      Mr Pearce said the scheme was inefficient and less than 50¢ in every dollar paid in premiums went to those who were injured.

      But as the president of the Law Society of NSW, John Dobson, pointed out, the benefits paid out equalled 64 per cent of premiums …
So the Law Society and the Motor Accidents Authority—the body that administers the scheme—are saying that the Minister is wrong. Figures from the Motor Accidents Authority further report that, of the $6.26 billion in total payments from 2007-08 to 2011-12, $5.1 billion—or 81 per cent—covered direct compensation payments to claimants. That was reported in the Sydney Morning Herald on 4 February. The article further stated:
      A further $1.16 billion (19 per cent) went towards non-compensation costs involved in settling claims such as investigations and legal costs which include payments to lawyers.
Here is the crux. The member for Penrith had the hide to talk about affordability. The article in the Sydney Morning Herald on 4 February stated:
      The estimated profit margin for 2010 and 2011 is 12 per cent. The average profitability has increased from 7.1 per cent at June 2011 to 10.9 per cent at June 2012.
Under the O'Farrell Government, in one year the biggest winners from the compulsory third party insurance scheme have been not the motorists but the insurance companies. What did the sympathetic Minister, the one who ruined WorkCover, say about that rise? He said, "Regrettably, we can't retrospectively apply these changes." So the Government made a blue and gave insurance companies more than they should have received, and motorists are paying more than they should under the scheme but they can suck it up. That is life under the O'Farrell Government. The director of the New South Wales branch of the Australian Lawyers Alliance, Andrew Stone, said, "Currently, those injured through the fault of another in a motor vehicle accident are fully covered for lost wages."

The Opposition is concerned about his claim that under the new scheme 90 per cent of accident victims will be pushed out of the compensation system altogether within two years of their accident, leaving them reliant on Centrelink benefits. The crux of these so-called reforms by the Minister, approved by the Premier and Cabinet, resemble what has happened with WorkCover when the rights and benefits of injured people were placed at the bottom, certainly far below the interests of insurance companies. We do not trust the Government to introduce a scheme that is fairer for people injured in motor vehicle accidents.

Mr MATT KEAN (Hornsby) [3.34 p.m.]: The contribution of the member for Maroubra was simply more shrill hysteria, which is what the Government has come to expect from him. During question time today we heard the member for Maroubra described as the "member for middle management". His enthusiasm for defending the profits of insurance companies and the broken scheme, which he presided over when he was Minister, has led me to change his name to the "member for QBE". Under the existing scheme, of which Labor was the architect, he presided over windfall profits to insurance companies. We can take more from what members opposite did not say about the scheme than what they did say.
    Labor members did not say anything about improving efficiency—efficiency in a system where only 50 per cent of the premiums paid go to injured people. We heard nothing about that from the member who when Minister presided over the scheme. We heard nothing from Labor about how to make this scheme more affordable. New South Wales scheme costs are 62 per cent higher than the scheme in Tasmania and 42 per cent higher than the Victorian scheme. Under the scheme, prices have increased by 70 per cent since 2008, which is when the member for Maroubra became the Minister for Finance. We have heard nothing from members opposite about reducing red tape—red tape in a scheme where over 50 per cent of claims take more than three years to process. If people have a car accident today, it comes down to the toss of a coin as to whether they will get compensation within three years. That is a disgrace, and that is what these reforms seek to address.
      Labor does not care about efficient government, small government, reducing red tape and lower taxes. The member for Maroubra continues to highlight his addiction to red tape and higher taxes. That is what this motion is seeking to address: reducing the costs imposed on the taxpayers of New South Wales, getting better outcomes and making the scheme more accessible. These changes will open up the scheme to 7,000 more claims a year than under Labor's scheme. Allowing more people to access the system is not taking away their rights; it is enhancing people's rights. Currently, the scheme is too bureaucratic. It is too costly, it is inaccessible, and it is unfair. The changes proposed by the Government will go to the heart of addressing all those issues. We are about getting better outcomes for the taxpayers in this State. We are about protecting vulnerable people who are injured and need to be protected by this system.

      Mr RICHARD AMERY (Mount Druitt) [3.37 p.m.]: The motion moved by the member for Penrith flagged some changes by the Government to the compulsory third party personal injury scheme and highlighted some directions in which the Government intends to take its reform. The major one, on which the two Government speakers focused, was a comparison of the premiums paid by motorists in New South Wales with those in other States. Clearly the Government intends to reduce the premiums paid by motorists in New South Wales. I think many people in my electorate will say that they like any reform that reduces the cost of keeping their motor vehicle on the road.

      We must examine those issues to which the member for Maroubra referred when he said that we needed more detail. Today the Government gave us no detail about where it is heading. Obviously the Government is moving away from a fault scheme and will be implementing instead a no-fault scheme, with which I have no difficulty as it appears as though that would save some court and legal costs from the premium pool. We are reforming a scheme that not only has the highest premiums in Australia but also has the highest benefits paid to injured motorists and other persons. In reducing premiums and in cutting back the legal costs involved in the scheme we must ensure that we do not move too quickly. We must ensure also that the benefits paid to motorists who are injured in motor vehicle accidents in New South Wales are not severely affected—an issue that was not touched on by Government members.
        The member for Hornsby referred to the scheme as "inefficient" and as an "administrative nightmare". The third party personal injury insurance scheme was a government scheme until the election of the Greiner Government. The Greiner Government gave third party personal injury insurance to insurance companies. If insurance companies are milking the system, as has been implied, if their profits are too high, which has been suggested, and if their administration costs are too high, let us not point the finger at the Labor Party. The scheme was handed over from a government body, which at the time was said to be inefficient and which was a non-profit organisation—many said that it ran at a loss—to a for-profit private industry. We will be looking for more detail and we will welcome any reforms that will make the system better. Let us look after injured motorists and not have them affected too severely by these changes.
          Mr STUART AYRES (Penrith) [3.40 p.m.], in reply: I thank those members who contributed to debate on this motion—the member for Maroubra, the member for Hornsby and the member for Mount Druitt. I love getting history lessons from the member for Mount Druitt about which government was in office and at what stage. This Government has retained all the programs that were implemented in the time of the Labor Government. Essentially new governments should always improve and reform programs that are in place when necessary. Earlier the member for Maroubra referred to the profitability of this scheme and to the profits that exist amongst insurers. If governments are running complex schemes that people do not understand, that are not accessible, that are less affordable and that lock out up to 7,000 people a year, insurance companies will pay out less and get more money.

          We want to ensure that the compulsory third party [CTP] scheme that is operating in New South Wales is more affordable, more accessible and less complex and that more people will be able to participate in it. The member for Mount Druitt said earlier that the no-fault approach would result in fewer legal costs and the removal of one of the barriers to entry. If more people were able to engage in the scheme, insurance companies would have to pay out more money, which in turn reduces their profits. Taking into account some of the costs that exist in relation to compulsory third party green slips in other States, another component of the no-fault scheme is the opportunity for us to apply downward pressure and to lower the cost to households when it comes to funding compulsory third party green slips. We must continue to follow the reform process because, as we heard in debate today, these costs are unaffordable.
            Costs are increasing too quickly for people in New South Wales and the cost of green slips in New South Wales is much higher than it is in other States—a 9 per cent increase each year, or a 70 per cent increase since 2008. The scheme is expensive to operate, involves too much legality, reduces revenue and puts upward pressure on premium prices. Compulsory third party insurance costs are $362 in Victoria compared to $518 in New South Wales. The Minister for Finance and Services is doing an exceptional job in pushing through this good quality reform which will apply the downward pressure that is needed, make the scheme less complex and more affordable, and make it more accessible.

            Question—That the motion be agreed to—put and resolved in the affirmative.

            Motion agreed to.