Standing Committee on Law And Justice

Debate resumed from 23 September 2008Debate resumed from 23 September 2008

The Hon. CHRISTINE ROBERTSON [2.52 p.m.]: I am pleased to commence debate on the thirty-sixth report of the Standing Committee on Law and Justice entitled "Review of the Exercise of the Functions of the Motor Accidents Authority and the Motor Accidents Council—Ninth Report". The report was tabled with the Clerk of the Legislative Council on 1 September 2008. Firstly, I thank my fellow committee members for their assistance in producing this bipartisan report. The report's 16 recommendations were adopted unanimously, as was the report itself.

The Standing Committee on Law and Justice was nominated by the Legislative Council to conduct the ongoing review of the Motor Accidents Authority [MAA] and the Motor Accidents Council [MAC] required by section 210 of the Motor Accidents Compensation Act 1999. Provision for parliamentary oversight of the Motor Accidents Authority and the Motor Accidents Council was introduced as part of the 1999 reforms to the New South Wales Motor Accidents Scheme. This is the ninth time the committee has conducted this review. In its seventh report the committee foreshadowed its intention to focus on particular aspects of the Motor Accidents Authority's functions in future reviews. In that report the committee acknowledged that seven years after the introduction of the 1999 reforms the operation of the scheme had largely stabilised and that, while there remained scope for improvement in the administration of the scheme, further changes to the scheme were likely to be incremental rather than substantial. Our eighth report focused on the first of two services, comprising the Motor Accidents Assessment Service [MAAS] and the Medical Assessment Service [MAS].

The ninth review focused on the second of the two services, the Claims Assessment and Resolution Service [CARS]. In addition to examining CARS the committee considered a number of other matters raised in evidence and also returned to several matters addressed in the recommendations from our eighth review. This ninth review was conducted concurrently with the committee's first review of the Lifetime Care and Support Authority [LTCSA] and the Lifetime Care and Support Advisory Council [LTCSAC]. The review was the subject of its own report tabled in October 2008. The committee received submissions from a number of stakeholders and heard evidence from representatives of the MAA and MAC, along with the Law Society of New South Wales, the New South Wales Bar Association and the Insurance Council of Australia. In addition, substantial evidence was obtained from the MAA and other participants through a process of written questions and answers both prior to and following the hearing.

The Motor Accidents Compensation Scheme is now in its tenth year and has had time to mature. It has undergone significant consolidation and reform over that period and at present is undergoing further reform intended to deliver greater improvements in efficiency and effectiveness. The scheme is seen by its key stakeholders to be operating effectively. Those stakeholders also attest to professional and productive relationships with the MAA and MAC. Equally, the committee's role in reviewing the MAA and MAC has evolved over the course of our nine reviews and the committee itself has contributed to the effective functioning of the authority and the scheme. At this time the committee considers the scheme has reached a level of maturation such that an annual review is no longer necessary. Instead we consider a biennial review taking into account two MAA annual reports at a time will be sufficient. The Legislative Council passed an amendment to the Act at the end of last year in relation to this particular recommendation.

As in previous reviews, the committee has concluded that the scheme continues to function in an appropriate manner. The MAA indicated to us that its task in developing health outcome measures of scheme performance is continuing. The committee has reiterated its support for this work, appreciating that it is complex and challenging. Similarly, we have encouraged the MAA in its task of developing new performance logic with the assistance of NSW Treasury as part of the authority's forthcoming results and services plan. The Lifetime Care and Support Scheme commenced operation during the reporting period covered by this review. It is too early to judge the impact of the commencement of that scheme on the Motor Accidents Compensation Scheme. The committee will continue to watch its impact with interest as it unfolds. As I have already noted, the Lifetime Care and Support Scheme is the subject of a separate annual review process by this committee.

The committee examined a number of issues in relation to the Motor Accidents Assessment Service and the Medical Assessment Service. The MAAS comprises two services, MAS and CARS, and was established in 1999 to resolve medical claims disputes as they arise in the course of compulsory third party claims. The Medical Assessment Service provides an independent forum for assessing disputes between insurers and injured people concerning an injured person's medical treatment and impairment, and is aimed at early resolution of medical disputes. The committee noted the increasing efficiency and effectiveness of the MAS evident during this year's review, achieved to a large extent through the implementation of the first phase of the MAAS reform agenda. The committee looks forward to observing further gains as the second phase of reform is rolled out. We also acknowledge the significant work and leadership of the Motor Accidents Authority in implementing these reforms.

The committee received evidence that the claims handling guidelines place exacting requirements upon insurers, who contend that the level of detail required by the MAA needs to be weighed against potential costs to the scheme. The committee agreed that these issues need to be balanced by the MAA but considers that detailed guidelines are important for ensuring the integrity and consistency of the claims handling process. Concerns about inconsistencies in some MAA assessments of whole person impairment, explored in detail in our eighth report, were again raised during this review. The committee acknowledges that the MAA has made consistency in MAS assessments a priority and has implemented a quality assurance program and assessor training with this in mind.

Nevertheless we have reiterated the recommendation from our eighth review that the MAA undertake a review of whole person impairment assessments to establish the extent of inconsistencies and to identify, if necessary, additional quality control mechanisms to improve consistency. The committee noted that the MAA has taken action with respect to two other recommendations concerning the MAS in our previous review. We were pleased that the authority is reviewing its procedures to ensure the most appropriate systems are in place to prevent conflicts of interest on the part of MAS assessors. Similarly, the MAA is conducting a review of lengthy assessments and has undertaken to report back to us, in particular on the status of delays.

The Claims Assessment and Resolution Service, the focus of this year's review, is an independent dispute resolution service operating outside the court system. All disputed motor accident claims where the insurer and injured person cannot agree on compensation must be considered by CARS before they can proceed to court. In assessing a claim, CARS can determine liability or fault as well as the amount of compensation to be paid to the claimant. Assessments are made by legally qualified individual claims assessment experts who are appointed under the Motor Accidents Compensation Act 1999. The committee concluded that on the basis of the Motor Accident Authority's 2006-07 annual report, as well as detailed information provided in answers to questions on notice, in broad terms CARS is performing well. In particular, the data indicates that the revised claims handling guidelines have had an important and positive impact on the service's performance, most notably in that the guidelines facilitate the resolution of CARS matters via settlement prior to assessment as well as via assessment itself. This is consistent with the scheme's goals of early and fair dispute resolution, which in turn facilitates effective injury management.

In terms of broad perceptions about how CARS is working, the committee heard that the service is seen by legal and insurer stakeholders to be operating effectively. In particular, the Law Society of New South Wales and the Insurance Council of Australia consider that it is fulfilling its role as an independent, inexpensive and efficient early dispute resolution service very well. In respect of claimants' perceptions of the service, the committee was pleased to note that the MAA is taking feedback from claimants seriously and has identified the need for them to be more informed about the processes of CARS. We have recommended that the authority make its strategies in this area a priority and allocate resources accordingly, and that it evaluate the effectiveness of those strategies in due course.

Review participants raised a range of issues in respect of CARS. In response to concerns on the part of the New South Wales Bar Association about the increasing number of complex matters being considered by CARS, the committee recommended that the MAA, in tandem with the MAAS reference group, formally consider ways to achieve greater recognition of the circumstances where the complexity of a matter lodged with CARS is such that it could benefit from a different form of assessment.

In light of insurer concerns and preliminary data about the emergence of superimposed inflation in the CARS system, the committee welcomed the MAA's decision to conduct a new study to thoroughly investigate this issue. We consider that a comprehensive and well-designed study will better establish whether comparable assessments are increasing over time and, if so, the factors that might be at work. In turn, that will facilitate an informed discussion about the implications for the scheme and any appropriate action that might be required. Noting the MAA's collaboration with insurers on this issue to date, the committee recommended that, in undertaking the new study, the authority continue to work collaboratively with all relevant stakeholders.

The Insurance Council also made a number of suggestions to improve transparency within CARS. The committee noted in the evidence presented to it that a significant level of transparency was already in place within the service's systems, as well as impending changes that would help to address the concerns of the Insurance Council. In evidence the MAA undertook to consider publishing de-identified CARS decisions, reporting on additional data and establishing a mechanism for ongoing feedback from insurers. The committee also recommended that the MAA give further consideration to two other suggestions to improve transparency: first, to consider publishing CARS data on a quarterly basis; and, second, to consider distributing that information at meetings of the MAAS reference group.
The issue of legal costs, as provided for in the cost regulation, arose as a concern for participants during the committee's previous three reviews. In this ninth review the committee again noted the lengthy period over which dissatisfaction with the present cost regulation had been raised with it, and it is pleased that a review of the regulation, previously recommended by it, is now well underway. The committee considers it highly desirable that the new regulation be in place by 1 October 2008, in time for the commencement of the legislative tranche of the MAA's reform agenda, which is expected to have a significant bearing on the work of legal representatives participating in the CARS process. Accordingly, the committee encouraged the MAA to ensure that it kept to this timetable.

During the review the New South Wales Bar Association raised concerns about the fact that there had been a marked increase in contributory negligence claims by insurers in recent years as the basis for applications for discretionary exemptions, and it argued that this unfairly penalised claimants. The committee welcomed a commitment on the part of the MAA that provisions for costs in insurer-initiated proceedings would be considered as part of the review of the cost regulation. We consider it important that any inappropriate incentives to initiate court proceedings be addressed. We recommend that the MAA monitor trends in insurer claims of contributory negligence to determine whether legislative action is required.

The Law Society criticised the current process for matters before CARS where insurers decline liability or fault. The committee recommended that MAAS, in consultation with relevant stakeholders, consider the Law Society's proposal that only in such matters the matter of liability be determined by the District Court, with the broader matter being remitted to CARS for assessment. Having considered concerns on the part of CARS' principal claimants assessor about unnecessary claims, costs and procedural delays in respect of claims involving children, the committee recommended that the Minister for Finance amend the legislation to give CARS assessors the power to assess claims and approve the terms of settlement for persons under legal incapacity, including children.

Finally, on the basis of the submission from an individual report that a CARS assessment took 11 months to be determined, the committee sought advice from the MAA about the timeliness of this decision and other decisions more generally. The committee was concerned about the delay in relation to this matter, but it is satisfied that the overall timeliness of CARS' decisions, as reflected in the average length of the CARS lifecycle, is sound and appears to have improved significantly with the advent of the revised claims assessment guidelines. Given the emotional, physical and financial impact that a lengthy dispute might have on a claimant, the committee recommended that the MAA ensure that, when an assessor recognises there will be a delay in a CARS assessment, the claimant understands the processes involved and is aware of the reasons for the delay.

I will complete the rest of this report when I sum up later. The committee worked well on this inquiry and obtained some exciting information about the way in which the CARS process is structured. The committee has nothing but praise for the solicitors who have participated in the CARS process. Generally, the inquiry into this process was very interesting. The secretariat worked well on the program and I thank all members for their participation. I look forward to hearing what other members have to say about the committee's report.

The Hon. JOHN AJAKA [3.02 p.m.]: I contribute to debate on the thirty-sixth report of the Standing Committee on Law and Justice entitled "Review of the exercise of the functions of the Motor Accidents Authority and the Motor Accidents Council". I thank the Chair, the Hon. Christine Robertson, for the thorough manner in which she conducted the hearings, and I thank other members of the committee for their valuable contributions. I also thank secretariat staff for all their assistance and efforts. I will focus my contribution on five of the recommendations that I found to be of particular importance.

I will begin with recommendation 2, which calls on the Motor Accidents Authority [MAA], to act by 30 June 2009 on the recommendation of the committee's eighth review to undertake a review of the whole person impair assessment for two purposes: first, to establish the extent of the inconsistencies and, second, to identify, if necessary, additional quality control mechanisms to improve consistency. In its previous review the committee made a number of recommendations relating to the Medical Assessment Service [MAS], including, among other things, issues associated with assessments of whole person impairment. Whole person impairment disputes require an assessment of the degree of permanent impairment resulting from injuries that a person sustains in a motor vehicle accident. The threshold test used to determine whether such a person is entitled to damages for non-economic loss is whether his or her degree of whole person impairment exceeds 10 per cent and is permanent.

Throughout the course of the previous review, the New South Wales Bar Association and the Law Society of New South Wales expressed concern about inconsistencies in the assessment of whole person impairment. It was suggested that medical assessors appear to differ in the assessments that they make. The MAA agreed that consistency should be made a priority to ensure the continued integrity of the scheme. The committee notes that the MAA made this issue a priority and, to this end, it has instituted a quality assurance program and assessor training. However, given that the committee heard evidence of ongoing concerns that more needs to be done to achieve consistency in the implementation of the MAS assessments of whole person impairment, the committee now reiterates, in its thirty-sixth report, that a full review of these assessments be undertaken.

Recommendation 3 calls on the MAA, first, to make its strategies to improve claimants' understanding of the Claims Assessment and Resolution Service [CARS] a priority; second, to allocate resources accordingly; and, third, to evaluate the effectiveness of those strategies by conducting a further study of claimants' perceptions of CARS. CARS is an independent dispute resolution service operating outside the court system. All disputed motor accidents claims must be considered by CARS prior to proceeding to court. Once received by CARS, a claim either is exempt from assessment and can proceed directly to court, or it is referred to an assessor for general assessment. CARS also assesses procedural disputes about claims as they arise by way of special assessment, in accordance with the provisions of the Motor Accidents Compensation Act 1999. One of the key issues that arose throughout the hearings was claimants' perceptions of the CARS assessment process. Mr David Bowen, General Manager of the MAA, stated in evidence that the MAA:

need[s] to be providing more information to claimants about what happens ... Despite all the information [provided to claimants] they are probably not as prepared for what goes on, how it is conducted, and what rights and responsibilities they have before the CARS hearing.

Accordingly, the committee recommends that increasing claimants access to and understanding of CARS be made a priority, along with an evaluation of user satisfaction. Recommendation 8 calls on the MAA, in conjunction with the Motor Accidents Assessment Service reference group, to explore the possibility of allowing external stakeholders, including insurers and the legal profession, access to its practice manual for claims assessment and resolution service assessors, along with information contained in periodic electronic assessor newsletters where those resources contain advice to assessors about the evidence that they should take into account in making and documenting their assessments.

During the hearings the Insurance Council of Australia made a submission to the effect that the escalation in the level of CARS assessment is, in part, attributable to lack of transparency in the CARS process, in the sense that individual assessors are allowed to make determinations without providing evidence-based reasons for their assessments. The committee sought the opinions of the Law Society, the Bar Association and the MAA in relation to this submission. Essentially, the general response was that there is already a significant level of transparency in relation to the CARS assessment process.

Another outstanding proposal for greater transparency was in respect of insurers access to the practice manual for assessors and the principal claims assessors newsletter with incidental advice to assessors. It is the opinion of the committee that where these resources contain advice to CARS assessors about the evidence that they should take into account in making and documenting assessments, it may be fair for insurers and other stakeholders to have access to their contents. It was argued, on the other hand, that it may be appropriate for such information to remain for internal CARS use only. The possibility of making such information available to external stakeholders, and the consequences of doing so, is something that we recommend should at least be explored further.

Recommendation 9 calls on the Motor Accidents Authority [MAA] in liaison with the Law Society of New South Wales to continue to make the study of the impact of the costs regulation a high priority. Outdated costings have a significant impact on claimants, who often are out of pocket because of the substantial difference between market rates for legal services and the recoverable amount. Dissatisfaction with the present cost regulation has been raised with the committee for some time, and I note that a review of the regulation is well underway. In its eighth review the committee recommended that the MAA make as a priority its study of the impact of the costs regulation, conducted with the assistance of the Law Society of New South Wales. In submissions to the committee's present review the Law Society stated:

Apart from the Cost Study which is currently on foot the Society commends with some urgency, that legal costs require immediate increases as a result of the changed system [following the 2007 legislative amendments to claims in dispute resolution procedures]. This is over and above the indexation issue, last attended to in 2005.

The New South Wales Bar Association also voiced concerns about the recoverable costs for legal representatives in CARS assessment conferences. Accordingly, the committee recommends that the MAA continue to make the study of the impact of the costs regulation a priority. Recommendation 10 continues in respect of the issue of costs. It calls on the MAA to liaise with the Law Society to ensure that this study, in accordance with recommendation 9, will also consider provisions for costs in insurer-initiated court proceedings so that claimants are not unfairly financially penalised by having to participate in such proceedings. The committee was concerned that claimants were financially disadvantaged when an insurer makes an application for a CARS case to be referred. The claimant will at least recover the reasonable costs of such a process so that, in effect, they are not penalised if the insurer was clearly unsuccessful in those circumstances. I refer now to recommendation 12, which states:

That the Motor Accidents Authority, in consultation with relevant stakeholders including court administrators and the judiciary, consider the proposal that in matters where liability has been declined, only the matter of liability be determined by the District Court, with the broader matter then remitted to the Claims Assessment and Resolution Service for assessment.

The committee considers that there may be some merit in the Law Society's proposal that in matters where liability has been declined, only the matter of liability be determined by the District Court, with the broader matter then being remitted to CARS for assessment. The committee was concerned that delays would occur with the matter being dealt with by the District Court both on liability and assessment of damages bases but, more importantly, additional costs would be incurred by claimants. The committee considered that it would be available for the MAA to consider this proposal in consultation with the relevant stakeholders, court administrators and the judiciary.

The Hon. CHRISTINE ROBERTSON [3.12 p.m.], in reply: I thank the Hon. John Ajaka for his contribution to this debate. Several other matters relating to the scheme or the Motor Accidents Authority's [MAA] operations more broadly were raised during this year's review. On the basis of a concern of the Law Society that some communications with self-represented clients might give insurers an unfair advantage, the committee welcomed the MAA's proposal to review this issue. We recommended that the review be conducted in tandem with the Motor Accidents Council [MAC] and that it consider the need for existing guidelines to be reformulated. In response to a proposal by the Motorcycle Council of New South Wales the committee suggested that the MAA, in consultation with the MAC, consider the advantages and feasibility of further itemisation of the medical care and injury services levy on compulsory third party [CTP] green slips. Of course, the Motorcycle Council of New South Wales is one of the consultation bodies that works with the MAA.

After considering the MAA's response to concerns expressed by People with Disability Australia about a $5-million capital grant for the redevelopment of Ferguson Lodge, an accommodation service for people with disability, the committee is satisfied that the grant is appropriate. The committee acknowledges the gains made in respect of road crash fatalities and the contributions of government, industry and the community to these significant outcomes in recent years. It further acknowledges the complexity of this task and the imperative for all parties to continue to work to improve road safety. We were pleased to observe the proactive efforts of the MAA in respect of this important goal. We look forward to learning about the MAA's new and more evidence-based strategy for promoting road safety, and will monitor its implementation and outcomes in future reviews.

Finally, the committee returned to issues associated with the fall in claims frequency since the introduction of the new scheme, which were examined in detail in its seventh and eighth reviews. We were concerned by reports of disincentives to claiming within the CTP scheme. At the same time, we acknowledge the MAA's forthcoming initiatives to encourage earlier notification of claims, as well as the various services it provides to claimants, and the fact that the review of the cost regulation will address disincentives arising from legal costs. The New South Wales Bar Association has voiced concerns that relative to insurers and motorists more broadly, injured persons have not gained as much from the scheme. The committee continues to consider that a fair balance in benefits to insurers, motorists and injured people is important, but believes that it is a matter of policy opinion as to how the benefits of the new scheme should be shared most fairly.

We consider that these issues may gain greater weight if claims continue to decrease and, if so, whether the precise factors contributing to such falls become more apparent. The committee will continue to monitor this issue with interest. I take this opportunity to acknowledge the effective working relationship the committee has developed with the MAA and its management team, as well as the MAC since its first review in 2000. The MAA has worked collaboratively with the committee during each review, undertaking significant work and willingly sharing information to enable us to fulfil our role. Importantly, the MAA also has been open to the committee's recommendations. At the same time, the committee sought to contribute constructively to the scheme's improvement. I believe that ours is an excellent example of a productive oversight relationship and that the committee has made an important contribution to the maturation and continuing improvement of both the authority and scheme.
The committee's contribution, in turn, has relied on the valuable input of review participants, particularly that of the key stakeholders: the Law Society of New South Wales, the New South Wales Bar Association and the Insurance Council of Australia. Their considered views have enabled us to thoroughly examine the issues affecting the scheme and to develop meaningful recommendations for action. On behalf of the committee I thank our review participants for their important contributions during this review and those that preceded it. I express my thanks to my committee colleagues for their thoughtful contributions to this year's review, as in previous years. Our monitoring role has benefited as much from our individual perspectives as from our cooperative approach. I thank also Ms Madeleine Foley, Mr Simon Johnston, Ms Merrin Thompson and Mr Sam Griffith of the committee secretariat for their assistance in the conduct of the review and production of this report.

The Government response on this report is slightly overdue and the committee will request that response as soon as possible. However, matters have been dealt with and recommendations have proceeded, particularly in relation to changes to the Act for our biannual reviews. The committee has not long finished its review and has not reported on the MAA report, yet newspapers were reporting that the New South Wales Government had increased the cost of green slips. As chair of the committee I immediately inquired about this issue and received a response that is important to register because the Government, of course, did not increase CTP green slip premiums. In setting compulsory third party premiums insurers allow for income generation from investing the premium held for projected future claims payments. Compulsory third party insurance is unique in that it is a long-tailed insurance taking many years to finalise claims. A CTP claim may be made up to three years after the accident in cases of more severe injury, which have higher claim costs, and it may take a number of years for the injury to stabilise. This is in contrast to short-tail insurance products such as motor vehicle property damage or home and contents loss or damage, where claims are made and paid in the same year as the premiums are collected.

One of the consequences of the global financial crisis is a reduction in this investment income for CTP insurers, which subsequently impacts on the premium they must collect to ensure they have the funds to pay claims, and the New South Wales scheme remains viable. Under the Australian Prudential Regulation Authority regulatory framework, insurers are encouraged to invest the premium held for projected future claims of payments in low-risk or risk-free investment options—for example, Commonwealth Government bonds. The global financial crisis has resulted in a very large drop in investment returns, including a significant decrease in Commonwealth bond rates. These rates have been reduced on three occasions since July last year, falling from 6.2 per cent in July 2008 to 4.8 per cent in October 2008. Compulsory third party premium filings, which took effect from 1 July 2008, were based on the then higher Commonwealth bond rate. In light of the significant lower investment returns now anticipated, insurers require additional premiums to ensure they have adequate funds to make claim payments.

Overall this has resulted in premium increases in all green slip zones with increases in the best prices ranging from approximately $18 in country areas to $23 in the metropolitan area. As the standing committee is aware, while green slip prices have increased this year, their affordability over the last decade improved dramatically as a result of the Government's reforms to improve compulsory third party scheme stability. Today's prices remain lower than average premiums in 1999 before the reform initiatives took effect. In real terms this represents a reduction of more than $150. I thank very much Mr David Bowen, who is the general manager of the Motor Accidents Authority, for that information because I viewed with concern the possibility that the reporting process was not appropriate. I am very pleased to include his response in Hansard on that specific issue. I look forward to revisiting the Motor Accidents Authority in two years time.

Question—That the House take note of the report—put and resolved in the affirmative.

Motion agreed to.