The Premium Problem
Sydney Morning Herald
Friday December 2, 2005
GREEN slip premiums are down and insurers' profits are up. That sounds like a win-win situation. However, green slips are flashing orange - and the Government should heed the warning.
Third party premiums are falling partly because road accident injuries and deaths have dropped (even though there are many more vehicles on the road). But the main factor is the change to the rules in 1999 which made it harder for victims to claim. Accident victims must suffer significant permanent impairment to claim for more than economic loss. Pain and suffering now go uncompensated in all but about 10 per cent of cases. It used to be 60 per cent. Third party claims have fallen 27 per cent in the past six years since the new rules began. This has been a boon to motorists as average green slip premiums have fallen from $441 six years ago to $322. Meanwhile, the insurers' profit margin has climbed one percentage point to 8.7 per cent of premiums. The Motor Accidents Authority, which oversees green slips, thinks that is reasonable. However, those profit figures do not tell the full story because claims take years to settle. The authority's latest annual report says that on present estimates, those profit margins may ultimately prove as high as 25 per cent. A profit bonanza for insurers was not what was intended when third-party insurance was handed over to the private sector. The benefits of competition were to flow on to the public. The same applies to the reform of compensation law. The conundrum for Macquarie Street will be where those benefits should go. The politically tempting option will be to have green slip premiums fall even further. After all, there are millions of drivers and most have votes. The accident victims, on the other hand, are relatively few. However, that should not detract from their case. There have been numerous reports of accident victims who feel they have been badly treated under the 1999 motor accident compensation regime. Their lawyers complain the system is unfair and inconsistent, and tell of clients with agonising injuries and long recoveries who get no compensation for general damages. The insurance companies dismiss the lawyers' complaints as simply self-serving. The Government should adjudicate this argument by undertaking a comprehensive assessment of the 1999 scheme's impact on the injured to determine whether the hard luck stories are indicative of deep-seated inequity. The pending report of a State Parliament inquiry into personal injury should provide a good basis for such a review.
© 2005 Sydney Morning Herald