Claims and injury management assurance activity: a review into Contributory Negligence
1. Overview
This report outlines the findings from a review of the application of the contributory negligence threshold by licenced insurers in the 2017 scheme. Youi were not included in the review due to their limited exposure at the time the review was conducted.
The review had two components: a review of claims data where decision relating to contributory negligence were made on or before 30 November 2020, and interviews with 40 claims personnel across five NSW CTP scheme insurers.
All licenced insurers have been provided with detailed findings and have subsequently submitted improvement plans to address shortfalls identified by SIRA. The findings of the activity did not warrant Regulatory Notices being issued to insurers.
2. What is Contributory Negligence and why does it matter?
In NSW, people injured in a motor vehicle accident can receive personal injury benefits, known as statutory benefits, regardless of whether they’re at fault. These benefits are paid for up to 52 weeks and cover income support, medical expenses and vocational rehabilitation programs.
Nine months after the claim is made, the insurer decides whether to continue payments after 26 weeks. When it makes this decision, the insurer assesses whether the injured person was at all to blame for their own injuries - in other words, whether there was any contributory negligence.
Contributory negligence is expressed as a percentage. If an insurer assesses contributory negligence at 62 per cent or more, the injured person is deemed to be ‘mostly’ at fault, limiting the payment of benefits to 52 weeks from the date of accident. If the insurer finds contributory negligence under 62 per cent, the injured person can continue to receive financial benefits at a reduced amount.
An injured person may have an entitlement to make a damages claim, which is an additional claim for a lump sum payment which injured people can make when they’ve suffered more serious injuries and were not wholly at fault for the accident. A final agreed contributory negligence on the claim will result in reduced settlement amount for the injured person.
3. Review criteria
To determine the capability of insurers to undertake contributory negligence decisions SIRA focussed on assessing insurer processes and procedures and claims personnel competency, related to:
- their understanding of contributory negligence and the relevance and impact of the 62 threshold
- their contributory negligence decision-making approval and authorisation frameworks
- the integration of their learnings from the internal review process, specifically overturned decisions
- their communication of the contributory negligence decision to injured people
- their claims personnel training and development.
4. Findings
4.1 Claims data
A review of claims data from 1 December 2017 to 30 November 2020 was undertaken to assess how effectively insurers were making decisions.
Of the statutory benefits claims accepted at first liability 858 injured people (4.3 per cent) requested an internal review due to a finding of fault or contributory negligence. Of these claims there was:
- no change in the first and final decision on file on 556 (65 per cent) of claims, indicating the decision was affirmed at internal review or dispute
- a decrease in contributory negligence on 188 (22 per cent) of claims after internal review or dispute.
Of these:
- 37 were overturned due to new information being submitted
- 122 of injured people were legally represented
- 141 claims had a reduction of contributory negligence by more than 20 per cent.
- a significant increase in contributory negligence on 109 (13 per cent) of claims, which suggests data was uploaded incorrectly into the claims system.
4.2 Interviews
SIRA found that most interviewees:
- understood how contributory negligence could financially impact an injured person
- met expectations when it came to gathering information and determining contributory negligence claims
- understood the mechanism for review and approval of decisions
- used both verbal and written communication to explain decisions to injured people
- experienced challenges gathering information to support the decision making process.
- Training and development was undertaken as part of onboarding, however, there was inconsistent practices relating to maintaining expertise.
It was identified that there are insurer practices that that require attention. Table 1 includes a summary of the findings relating to each insurer.
Table 1. Summary of review findings by insurer
Insurer A | Staff had adequate understanding of contributory negligence and its importance in the claim life-cycle Adequate approval and authorisation frameworks Process for communicating decisions overturned at internal review or through a dispute was evident Use of both written and verbal explanation to communicate decisions to injured people. Training and development in place for staff. |
Insurer B | Staff had adequate understanding of contributory negligence and its importance in the claim life-cycle Adequate approval and authorisation frameworks Processes for sharing information and outcomes of decision was inconsistent and required improvement Use of both written and verbal explanation to communicate decisions to injured people Training and development in place for staff. |
Insurer C | Staff had adequate understanding of contributory negligence and its importance in the claim life-cycle Adequate approval and authorisation frameworks Process for communicating decisions overturned at internal review or through a dispute was evident Use of both written and verbal explanation to communicate decisions to injured people. Training and development in place for staff. |
Insurer D | Staff had adequate understanding of contributory negligence and its importance in the claim life-cycle Adequate approval and authorisation frameworks Processes for sharing information and outcomes of decision was inconsistent and required improvement. Use of both written and verbal explanation to communicate decisions to injured people. Training and development in place for staff. |
Insurer E | Staff had adequate understanding of contributory negligence and its importance in the claim life-cycle Adequate approval and authorisation frameworks Process for communicating decisions overturned at internal review or through a dispute was evident. This included published decisions relating to other insurers. Use of both written and verbal explanation to communicate decisions to injured people. Training and development in place for staff. |
Outcomes of SIRA’s review
SIRA has set the following directions and expectations with insurers
1. Insurers have been directed to:
- provide SIRA their processes for determining and applying contributory negligence on damages claims,
- monitor contributory negligence volumes as the scheme matures to ensure they are making appropriate decisions.
2. Two insurers have been directed to provide SIRA with improvement plans to make sure they are sharing overturned decisions with their team.
3. All insurers have been directed to submit improvement plans showing how they are educating frontline staff to explain contributory negligence to injured people.
4. Four insurers have been recommended to share case law and determinations with their teams to educate them on contributory negligence and broaden their knowledge.
SIRA will continue to monitor and assess the application of contributory negligence in the scheme.