Qld CTP reform: analysts tip hit to Suncorp alone could be $100m, and it has half the market

REFORMS to Qld’s compulsory car-injury insurance scheme could slice profits for insurers by more than $100m.

Qld’s CTP scheme covers vehicle-accident injuries, and reforms could cut insurers profits by more than $100 million. Pic: Regi Varghese

REFORMS to Queensland’s compulsory car-injury insurance scheme could slice profits for insurers by more than $100 million, according to stockmarket analysts.

Queensland’s compulsory third-party insurance scheme has been under review since late last year and the office of Treasurer Curtis Pitt, who has been lobbied by insurers, said on Monday the review outcomes would be released “soon”.

In a review discussion paper, regulator the Motor Accident and Insurance Commission had estimated CTP insurers had earned up to four times the profits that had been anticipated. That is between $65 and $81 per car policy per year in the past five years, MAIC estimated.

Analysts at Morgan Stanley have now estimated if premiums fell from around $350 to the low $300 mark by 2019 that Suncorp’s CTP margins would drop from 30 per cent to 16 per cent.

While this was above MAIC’s 8 per cent margin target, Morgan Stanley said even that 16 per cent scenario envisioned a $100 million hit to Suncorp’s insurance earnings.

“Suncorp is aware of the risks and is seeking margin expansion elsewhere,” Morgan Stanley said.

Brisbane-based Suncorp, which declined to comment, rules with 49 per cent of the market. Measuring the impact industrywide is not as simple as doubling Suncorp’s $100 million impact because different insurers earn different CTP margins.

The other three insurers, QBE (8 per cent market share), RACQ (16 per cent) and Allianz (27 per cent), declined to provide financial predictions of any reforms. “We continue to work with MAIC and the State Government,” RACQ said.

CTP covers people for some injuries in accidents and comes with registration for Queensland’s 2.7 million cars and station wagons.

The regulator sets a price ceiling and floor each quarter and just tightened the screws, with the ceiling falling from $368.60 to $352.60. All four insurers are charging the ceiling price.

Meanwhile, Sunshine Coast-based insurer Youi has confirmed that gross written premium growth for its home and car insurance was 0.5 per cent in its recent half year results.

That puts the nine-year-old company’s growth, after years of rapid acceleration, behind that of Suncorp at 1.9 per cent and Sydney-based IAG at 6.7 per cent, according to UBS analysts. “This result indicates that IAG and Suncorp should face an easier operating environment to lift rates in personal (insurance),” UBS analysts said.

Also on Monday, the Australian Lawyers Alliance defended State regulators of the CTP system as functional and doing their job.

It came after The Courier-Mail on Monday morning revealed that RACQ had last year accused Treasury bureaucrats of providing misleading advice during the introduction of a new injury scheme into CTP. Treasury denied any misleading advice was provided.

The ALA rejected the notion that their support would be to curry favour with bureaucrats in the current review, saying they had a history of taking on other regulators.

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