Qld CTP insurance review: Lawyers clash with insurers over costs of scheme

QLD’s compulsory car-injury insurance system is under review, and lawyers and insurers are clawing at each other over potential reforms.

Queensland’s CTP scheme is under review, amid debate about whether insurers and lawyers boost costs.

LAWYERS and insurers are clawing at each other over potential changes to Queensland’s compulsory car-injury insurance system.

The lawyers argue insurers make too much profit from compulsory third-party insurance, and urge State regulators to trim these margins.

Insurers, meanwhile, claim “disproportionate” legal costs weigh on the CTP system and say these charges should be fully disclosed to regulators.

Queenslanders are often covered for injuries in motor vehicle accidents under CTP insurance, which comes with your registration.

The Motor Accident and Insurance Commission regulates the scheme, worth $1.4 billion in annual premiums. Insurers must set prices within MAIC’s ceiling and floor limits.

But the regulator has put the scheme under review, saying the emergence of automated smart vehicles, a new National Injury Insurance Scheme and medical advances create opportunities for reshaping CTP.

It called for submissions and a committee is slated to furnish a report to Government by December 9.

The regulator raised issues in a discussion paper: why all insurers often charge prices near the top allowable level, and whether lawyers should be made to disclose fees to regulators — as has occurred in NSW.

The system was designed so insurers have an 8 per cent profit “allowance” in premiums, the regulator said in its paper. “(But) the independent actuary’s estimate of insurer profit over the last five years is in the range of 25 per cent to 31 per cent,” it said.

‘UNSUSTAINABLE PROFIT LEVELS’

The Australian Lawyers Alliance, in a submission, wrote: “The biggest issue currently facing the scheme is the unsustainable profit levels of the private insurers. Estimated to currently be between three and four times greater than intended by scheme design, these profits represent an unnecessary cost on Queenslanders.”

The regulator should “act to adjust the operation of the scheme to bring these profits into line with … community expectations”, the lawyers said. They even proposed the Government take over underwriting the scheme if efforts failed.

Lawyers are able to charge up to 50 per cent of the total settlement after refunds and disbursements, but the alliance argued lawyers did not actually reap that much. No counter figure was provided.

The alliance was opposed to disclosing fees to regulators. “Fees, refunds and outlays are (already) fully disclosed to clients,” they argued.

The Queensland Law Society argued it was “acceptable” for the regulator to seek fee information, but added other data such as private health refunds should be collated to understand how much claimants actually receive.

Insurer Suncorp, which has almost 50 per cent of Queensland’s CTP market, argued that lawyers should have to disclose fees to the regulator to help improve the scheme’s efficiency.

Fellow insurer RACQ also argued “costs associated with legal representation for minor cost claims appear disproportionate to the benefit received by the claimant”.

CALLS FOR CHANGE TO PRICING SYSTEM

RACQ further argued that the regulated minimum price was not realistic. RACQ chief executive Ian Gillespie told The Courier-Mail that the body for the time being was “prepared to accept lower returns on its CTP business as the impacts of scheme reform become more certain”.

“RACQ has no desire to exit the scheme, however if any future changes make the scheme prospectively unprofitable it will be necessary to reconsider our ongoing involvement,” he said.

RACQ lobbied for a change the current system, where prices are stuck for the whole quarter, to instead allow insurers to shift pricing during the quarter within ceiling and floor limits.

Suncorp also lobbied for the gap between the ceiling and floor prices to “be increased to allow insurers to price more aggressively”. “At present, the level of discount insurers can implement isn’t sufficient to lure customers away from bundling discounts and general brand loyalty,” Suncorp said.

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