SIRA claws back $183.1 million in excess insurer profit
19 December 2023
SIRA claws back $183.1 million in excess profit from Compulsory Third Party (CTP) insurers, after activating the transitional excess profit and losses (TEPL) mechanism in the 2023 TEPL assessment cycle.
TEPL is a retrospective mechanism of guiding and adjusting the premiums for CTP insurance in NSW, alongside the prospective premium guidance provided in the Schedule 1E of the Motor Accident Guidelines. The prospective guidance is based on forward assumptions informed by the prior experience, whilst TEPL is a correction mechanism that is using actual experience for a hindsight adjustment of premiums.
SIRA Chief Executive Adam Dent said that it was the third year SIRA had used the TEPL mechanism to recoup excess insurer profit.
Over the past three years, SIRA has clawed back over $452 million from CTP insurers excess profits.
“The $183.1 million of insurer profit clawed back this year will be injected into the Motor Accidents Operational Fund and will help offset the levy increases, maintaining the savings introduced from the claw back of insurer profit last year. Green Slip prices in 2023 are on average $29 lower because of the excess insurer profits SIRA clawed back in the last assessment cycle and this discount will be maintained over 2024 as a result of the claw back in this cycle” Mr Dent said.
Claw back amounts and customer levy discount by the yearly TEPL assessment cycle:
- In 2020, no TEPL claw back or customer levy discounts.
- In 2021, $90.6 million clawed back from the accident year (AY) 2018, equivalent of a $15 customer levy discount.
- In 2022, $175.5 million clawed back from AY2018 and $3.2 million clawed back from AY2019, resulting in an increased $29 customer levy discount.
- In 2023, $113.8 million clawed back from AY2018 and $69.3 million clawed back from AY2019, maintaining the $29 customer levy discount.
SIRA chooses to activate the TEPL mechanism when the profit earned by an insurer on the sale of compulsory CTP Green Slips is above 10 per cent. This is after setting aside the funds required for the injured road users to receive the necessary treatment and care and the income support they are entitled to in the legislation.
The need to claw back insurer profit should lessen as insurers begin to understand the actual claims experience emerging in the 2017 motor accidents scheme and adjust CTP prices accordingly.