The Future of CTP Green Slips

The current system for Compulsory Third Party (CTP) green slip insurance in NSW is influenced by many issues that end up hitting the hip pockets of consumers. As the name suggests, it’s compulsory to have CTP insurance. That is, legally, you must have this type of insurance for your vehicles. Motor vehicles cannot be registered, new registrations renewed, without one.

CTP insurance is often called a green slip. Changes to the green slip system in NSW have been proposed to try to manage the affordability, efficiency and sustainability issues affecting green slips.

Green Slips As They Stand Now

The green slip scheme links insurance to your vehicle to cover compensation claims from any at fault accidents which result in someone else’s injury or death. It covers your vehicle anywhere in Australia, twenty-four hours a day for: Green slips do not cover you for damage to your own property or to other vehicles.

Green Slip Compensation

If you are injured in a road accident for which you weren’t at fault, you may be able to claim compensation for: Under the scheme, since 2010 at fault drivers have also been entitled to claim up to five thousand dollars in reimbursement for reasonable medical costs and lost earnings from their own CTP provider.

CTP insurance also includes a Lifetime Care and Support scheme which covers any child under sixteen years of age who is injured in an accident, and those seriously injured, whether at fault or not.

Issues With CTP Insurance

The main issue with CTP green slips in NSW is they are fault based. The outcome of a fault based scheme is a claims process which is complex and adversarial. The scheme is clogged with disputes over liability, extent of fault, injury severity and amount of compensation.

The adversarial nature gives rise to high legal fees, medical and administration costs, court action and delayed compensation for those injured in accidents.

For drivers in NSW this means higher premiums.

Seven insurers are certified with the regulatory body for green slips – the Motor Accidents Authority (MAA). The insurers set their own premiums and use different factors to do so, which is why there can be significant variation between insurers.

The increased frequency of claims coupled with the uncertainty and delays in settling claims makes setting premiums difficult. Higher premiums are set to cover insurers against the risk and uncertainty.

Proposed Reforms

The first aspect of the proposed reforms is to bring the scheme in line with other states by changing it to a non-fault based system. The second is to define the benefits to which insured parties are entitled.

These proposed changes do not remove an individual’s common law rights where an injury results in greater than ten percent whole body impairment. Nor do the changes affect the Lifetime Care and Support scheme for those having experienced severe injuries.

The advantage of removing the at fault basis of green slip insurance will be a reduction in disputes over liability and fault.

Defining compensation entitlements can be expected to to reduce the number and cost of disputes over compensation and make the claims process simpler, which will result in claims being paid earlier.

Other proposed reforms to CTP Insurance in NSW include These changes are expected to take the pressure off premium pricing by reducing the expenses of the system and removing some of the uncertainty currently factored in when setting premiums.

With the proposal of these reforms the MAA is seeking to increase its power and increase competition between insurers. It says that the changes will simplify CTP insurance and offer greater flexibility in setting premiums. The MAA cites the experience in other states as more efficient and effective than in NSW.

Is There A Downside to Reform?

As with any system there are potential downsides to the reforms being proposed.

It can be expected that by removing fault, more people will be entitled to claim than can currently.

It is also possible that people who currently could claim but don’t bother, or give up facing the difficulties of claiming or the expense of disputing claims in the systems may now choose to pursue their claim.

With any system where compensation levels are capped there is the risk that the level of the cap may not be sufficient to fully compensate people for their injuries. In that case it could put pressure on other insurance schemes, with people forced to rely on other personal insurance policies.

The Future

The greatest potential change to the future of green slips is removing fault from the equation. This effectively removes the adversarial nature of the process, and will reduce the number of disputes, court time and costs associated with the green slip scheme, making them more affordable.

Comments on the proposed MAA reforms closed in early April. We await the results of the MAA reforms to green slips, including the reduced premium advantages they should offer NSW drivers.