NSW aims to slash insurers’ ‘super profits’

NSW aims to slash insurers’ ‘super profits’ | Insurance Business

NSW aims to slash insurers’ ‘super profits’
In a bid to create a fairer and more affordable scheme for NSW motorists and injured road users, the NSW Government has released a discussion paper aimed at reducing the ‘super profits’ enjoyed by insurers.

In a statement, the Department of Finance, Services and Innovation revealed that only 45¢ in every green slip dollar goes to injured road users.

Nineteen cents in every green slip dollar is taken as profit by the insurers operating in the state, including insurance giants NRMA, QBE, Allianz (Allianz and CIC-Allianz), and Suncorp (AAMI and GIO), reported the Sydney Morning Herald (SMH).

This 19¢ in ‘super profits’, SMH noted, is more than double the insurers’ estimated profit while setting prices. The rest of the green slip dollar covers insurer’s expenses (15¢) and legal and investigative expenses (18¢).

Victor Dominello, minister for Innovation and Better Regulation, said it was due to excessive insurer profits that motorists are paying higher green slip premiums.  

“Since the current NSW CTP scheme was introduced in 1999, insurance companies have made an average profit margin of about 20%,” he said.

“We are determined to put an end to the days of insurer super profits. Our reforms will provide Government with greater powers to regulate these profits so that more money goes to injured road users. The changes will also see a significant reduction in premiums for motorists.”

The discussion paper, released Friday last week, proposed to reduce the 19% insurer profits to a more appropriate margin of 8%. It also introduced a ‘clawback’ (or profit normalisation) mechanism when moving to a new scheme, more powers for the regulator to cap and control prices, and more transparent premium review processes, SMH reported.

The paper basically moves to set defined benefits for low-severity injuries, retain common law for the most seriously injured, and for the first time, extend protection to at-fault road users, said the report.

Anthony Day, Suncorp’s chief executive of insurance, said the company backed the CTP reforms that reduce premiums for motorists, curtail fraud, and provide adequate and sustainable returns for insurers.

“The NSW CTP scheme needs to focus on getting people better, rather than drawn-out legal proceedings for minor injuries,” he told SMH.

“Positive reform provides more certainty and ensures that more of every dollar in premiums will go to helping people get back on their feet, rather than waiting for a lump sum.”

The Government has also announced the appointment of Graeme Innes, former disability discrimination commissioner, as a member of the NSW State Insurance Regulatory Authority Board.

Dominello commented on Innes’s appointment: “Dr Innes has a wealth of experience both as a lawyer and disability advocate. He understands the challenges faced by those who are injured and will advocate for a scheme that protects injured road users and ensures they have optimal outcomes.”

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