Assessment of CTP insurer profit underway

20 June 2023

SIRA has reached the second stage in its annual assessment of compulsory third party (CTP) insurer profit, which will ultimately determine if insurer profit should again be clawed back and returned to NSW drivers.

After concluding the preliminary review of profit at an industry level, actuaries are now reviewing the profit earned by each individual CTP insurer on the sale of Green Slips.

Under the transitional excess profits and losses (TEPL) mechanism introduced in the 2017 CTP reforms, SIRA has the power to claw back insurer profit above 10%.

SIRA activated the mechanism for the first time in 2021 to claw back almost $91 million in insurer profits. In 2022 SIRA activated the mechanism for the second time to claw back almost $178 million in insurer profits.

This profit was redistributed among NSW motorists through savings on Green Slips.

The current assessment is reviewing whether insurers earned excess profit or experienced excess losses on the 2018, 2019, 2020 and 2021 accident years.

The assessment must also determine that there is sufficient certainty of insurer’s future claims costs for profit to be recouped.

Insurers can apply to SIRA to retain up to 3% of profit each accident period for investing in measures that are proven to deliver benefits to the scheme.

To date, SIRA has granted preliminary approval for eight applications.

To receive final approval and to retain a share of profit, insurers must have evidence that the innovation has delivered measurable benefits.

SIRA’s decision on whether CTP insurer profit will be returned to motorists is expected before the end of 2023.