Green Slips May Fall As Insurers Reap Millions

Sydney Morning Herald

Thursday December 1, 2005

Michael Pelly Legal Reporter

MOTOR vehicle insurers are sitting on a $500 million goldmine, due largely to the state's negligence reforms, a revelation that will increase pressure on them to cut "green slip" premiums further.

The Motor Accidents Authority's annual report shows the 1999 changes - which made it harder for victims to recover damages - have been instrumental in cutting the number and size of claims.

Insurers concede that if the trend continues, compulsory third party insurance, or green slips, will deliver profits beyond all expectations.

The report, tabled in Parliament this week, shows average premiums have fallen from $441 to $322 - the lowest figure since 1995. However, a spokesman for the NSW Special Minister of State, John Della Bosca, said the accidents authority would "continue to monitor the situation closely and intervene if necessary" to force lower premiums.

The report shows insurers wrote $5.385 billion worth of green slip premiums from 2000 to 2003. They are now projecting profits of 19 to 25 per cent on this income, or $1.14 billion - well beyond the 8 to 10 per cent margin the authority says is a reasonable return for the risk involved.

That figure could rise even further, with the frequency of claims dropping from an estimate of 46 per 10,000 vehicles to 32. There have also been fewer accidents due to road safety campaigns and dry weather.

The authority stressed the figures were only estimates of "realised" profits, but said the risk involved was less than for other "long tail" insurance after legislative changes in 1999 made it harder to recover damages.

The president of the plaintiff lobby group Australian Lawyers Alliance, Richard Royle, said it was "clear the volatility had gone out of the market and insurers are now printing money annually".

"There has also been a road safety dividend. Insurers have pocketed most of it and it is the injured who are seeing none of it."

The deputy chief executive of the Insurance Council of Australia, Dallas Booth, conceded the early years of the scheme had been good to insurers: "As of now, things appear to be favourable, but we have to wait."

He said only 66 per cent of claims for 2000 had been finalised and it would be two to three years before final returns on premium income were available. But Mr Booth agreed that if the trend continued, profits would approach the industry-wide figure of 26 per cent that was achieved in 1996.

© 2005 Sydney Morning Herald

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