Commencement date on or after 1 Nov 2014
The MAA's Market Practice Guidelines (MPGs) have not been comprehensively reviewed for many years. They are now being reviewed as part of the MAA's wider program of review of all its Guidelines, instruments and regulatory processes to enhance the overall efficiency, affordability and claimant outcomes of the MAA Scheme.
This Explanatory Note provides the context and a high level summary of the changes to the MPGs.
Accompanying the MPGs is a Practice Note that provides background information on the new MPGs and offers some clarification of the MAA's expectations as to how insurers should apply them in practice.
All licensed insurers are acutely aware of the community rating component of the pricing requirements aimed at delivering affordable premiums to all vehicle owners. These same requirements also lead to some policies being under-priced and some over-priced relative to risk. It is therefore essential that all insurers are able to obtain a share of the over-priced policies to balance their share of the under-priced policies. The mechanism used by the MAA to assist this form of market equilibrium has always been the requirement that insurers must not refuse to provide a CTP quote or policy to any motor vehicle owner. The MAA refers to this arrangement as the equal access regime.
Previous versions of the MPGs have supported the equal access regime through a set of requirements as to what market practices insurers must or must not use in operating their CTP businesses. Meeting these requirements has been deemed to mean satisfying the MPGs and the stipulated equal access to insurance for every vehicle owner.
In practice this approach has led to two issues that the new MPGs are designed to resolve:
- In some cases insurers limit access and availability of cover, or they discriminate against some vehicle owners, in ways that nominally meet the MPGs but which in practice do not conform with the spirit and intent of the equal access regime at which the MPGs are aimed.
- The way that the MPGs are expressed, as a set of requirements and standards that must be met, tends to constrain the activities of insurers by a set of rules that discourage or prevent flexibility and innovation by insurers in operating their CTP portfolios.
Furthermore, some insurers have claimed a lack of clarity regarding the MAA's expectations in relation to their interpretation of some rules in the current MPGs. Part of this lack of clarity could be due to unstructured communication between the MAA and insurers about market practices.
The revised MPGs and their accompanying Practice Note are intended to overcome these problems by reversing the way the MPGs are structured and the way the MAA applies them. Instead of the MPGs stating rules and standards that must be adhered to, the MAA is moving to a principles-based approach whereby:
- Four principles are articulated but standards for meeting them are not specified
- Each insurer is required to describe to the MAA in detail its CTP operating arrangements and to explain how they meet the principles
- The MAA reserves the right to disapprove of and to require modifications to any of the arrangements which by its assessment do not adequately conform to the principles.
The description with explanation at (2) above is an entirely new approach by the MAA. It is aimed at giving greater flexibility to insurers while generating a greater level of openness with the MAA and also putting in the hands of the MAA the assessment as to whether each insurer is meeting the four principles.
An insurer’s description of its CTP arrangements can be in the form of a narrative or a set of tables or a report with several sections. There is no template. The form of the documentation supplied by each insurer and associated dialogue that will take place with the MAA is destined to evolve in the next year or two towards a comprehensive understanding between the insurer and the MAA of the insurer’s CTP operating arrangements.
By adopting this approach, the MAA is allowing insurers to operate as they see fit within the overall constraint that they do not contravene the principles. Insurers will therefore have greater freedom to decide their operating arrangements but they will also bear greater responsibility for the integrity of their own arrangements in relation to the MPGs.
The four principles contained therein are that insurers must:
- Act in good faith with all Customers
- Use processes and business practices that do not unfairly discriminate against individual Customers or groups of Customers
- Engage in processes and business practices that are transparent and practical for the purpose of issuing policies to Customers.
- Make CTP Policies readily accessible and available to all Customers
The MAA and CTP insurers are jointly working on a number of initiatives that necessitate some amendment to the current MPGs. The initiatives include:
- Systems integration between insurer systems and Roads and Maritime Services (RMS) for the real time provision of data and to notify RMS in real time of the existence of a Green Slip for registration purposes
- Green Slip Redesign, to provide customers with a printed or emailed Certificate of Insurance that is clear, accurate and not misleading, and informs the customer of all risk rating factors used to determine their premium
- Enabling electronic commerce for Green Slips by removing the requirement to provide offers of renewal only by post
The MPGs have been updated to support these initiatives.