CTP prices set to drop when insurer profit is returned to motorists
CTP insurers have been put on notice that almost $91 million in profit on Green Slips could be returned to motorists through cheaper premiums.
The NSW Government’s 2017 CTP reforms introduced regulatory powers for SIRA to control the level of insurer profits under the transitional excess profits and losses (TEPL) mechanism.
SIRA Chief Executive Adam Dent said that he had decided to activate the mechanism to recover excess insurer profit following a rigorous assessment of profit in the new scheme.
“Over the last six months SIRA worked with insurers to assess the profitability of providing CTP insurance in NSW,” Mr Dent said.
“To bring savings back to the customer, SIRA decided to recover insurer profit above 10%.
“I have informed insurers of my decision to claw back almost $91 million, which means that in 2022 NSW motorists will enjoy an average saving of $19 on their Green Slip.”
The TEPL mechanism provides insurers with a 28-day cooling off period to appeal the decision to recover excess profit.
Mr Dent said the cooling off period expires on 29 November 2021.
“To date insurers have not indicated an intention to appeal the decision,” Mr Dent said.
“A key feature of the 2017 reforms was introducing the power to recover profit, so insurers were aware of this possibility when they signed up to offer CTP insurance in the new scheme.
“With any new scheme, as claims experience develops, there will be greater certainty of costs and insurers will price premiums accordingly.”
The activation of TEPL applies to profit on claims lodged in the first accident year - between 1 December 2017 to 31 December 2018.
SIRA also assessed profits in the second accident year – between January 2019 and December 2019 – but decided not to proceed with the claw back until there was greater certainty of claims costs.
Mr Dent said that SIRA would undertake a further assessment of insurer profits in 2022.
“SIRA will continue to assess insurer profit each year using the provisions of the 2017 Act to determine if further savings can be returned to customers,” Mr Dent said.
The 2017 reforms have delivered continued benefits for injured people, who now receive earlier access to income support, treatment and care.
Under the new scheme, 78 per cent of injured people receive benefits within three months of their accident compared to 26 per cent before reforms.
Ninety-five per cent of people access treatment and care within four weeks and 72 per cent before they even lodge a claim.
As the price of Green Slips vary by vehicle type and region, the savings will be applied as a 35% reduction in levies that form part of the price, so that the savings can be shared fairly among motorists.
SIRA will communicate the final recovery amount and average savings once the cooling off period has expired.