ACT Compulsory Third Party Insurance Regulator

Section B – Performance Reporting

B.1 Organisational Overview

The Australian Capital Territory Compulsory Third-Party Insurance Regulator (CTP regulator) is an independent Territory authority established under section 14 of the Road Transport (Third-Party Insurance) Act 2008 (CTP Act) to regulate compulsory third-party (CTP) insurance in the Territory.

The CTP Act is administered by the Chief Minister, Treasury and Economic Development Directorate (CMTEDD). Under section 14 of the CTP Act, the Minister must appoint a public servant as the CTP regulator which must be for not longer than 5 years. The Executive Director, Economic and Financial, CMTEDD was appointed by the Minister as the CTP regulator for a period of 5 years commencing from 9 June 2015. The position is currently held by Ms Karen Doran.

The functions of the regulator are supported by the Financial Framework Management and Insurance Branch of Economic and Financial, within CMTEDD. The regulator’s stakeholders include the members of the ACT community, particularly persons injured in road crashes, motorists who are required by law to purchase CTP insurance, and the licensed insurers.

B.1.1 Principal Objectives

The role of the CTP regulator is to regulate the CTP insurance scheme in the ACT under the CTP Act. The objectives of the Act under section 5A are to:

  • continue improving the system of CTP insurance, and the scheme of statutory insurance for uninsured and unidentified vehicles operating in the ACT;
  • promote competition for CTP premiums;
  • keep the costs of insurance at an affordable level;
  • provide for the licensing and supervision of insurers;
  • encourage the speedy resolution of personal injury claims;
  • promote and encourage the rehabilitation of people injured in motor accidents;
  • maintain an accurate register of motor accident claims to help the administration of the statutory insurance scheme and the detection of fraud; and
  • promote measures directed at eliminating or reducing causes of motor accidents and mitigating their results.

B.1.2 Functions

The functions of the CTP regulator are specified in section 14A of the CTP Act and include:

  • regulating the licensing of CTP insurers;
  • monitoring the behaviour of licensed CTP insurers in relation to their obligations under the Act;
  • improving health outcomes for claimants;
  • monitoring the efficiency of the CTP scheme under the Act and identifying areas for amendment; and
  • ensuring that all premiums meet the fully funded test and are not excessive.

B.1.3 Highlights

Competition and CTP Premium Reductions

Since the successful introduction of competition to the ACT CTP insurance market commencing in July 2013, the three new entrants – AAMI, APIA and GIO – have consolidated their position alongside NRMA insurance in the market.

Competition has continued to drive innovative products and product choice, with the insurers adopting differing strategies to deliver targeted benefits to motorists. This has seen the market become more sophisticated over time, with benefits taking different forms, including:

  • varied multi-policy discounts being offered on associated insurance products, such as NRMA’s comprehensive or home and contents insurance;
  • localised support being provided to ACT institutions, such as GIO’s recent campaign to donate $5 to The Canberra Hospital Foundation for every CTP policy renewed between 7 November to 31 December 2016;
  • differing benefits being offered through the at-fault driver cover product; and
  • a $75 pre-paid eftpos card being provided as an after-market ancillary benefit in return for purchasing APIA CTP insurance.

Importantly, during 2016-17, motorists also continued to benefit from further reductions in premiums, as shown in Figure 1. Since competition commenced in the ACT CTP market in July 2013 up until 30 June 2017, the average private passenger vehicle premium has fallen by $34.50, or 5.8 per cent.

Figure 1 – Fall in CTP premium prices since the introduction of competition

Figure 1 – Fall in CTP premium prices since the introduction of competition

Peer-to-Peer Car Sharing

Peer-to-peer car sharing (P2P car sharing) has been developing for a number of years as another element of the sharing economy. This form of car sharing generally involves offering cars that are owned by private owners or company fleets for short term rental.

Car Next Door (CND) has approached the ACT Government regarding setting up its operations in the ACT (CND currently operates in Sydney and Melbourne). CND focuses on offering privately owned cars for rent, from a few hours and up to one day, through a web-based platform.

As part of entering the ACT market, CND entered into discussions with the CTP regulator regarding CTP insurance arrangements and a suitable premium for its vehicles in the context of its operating framework. During 2016-17, the CTP regulator facilitated a review by the insurers of the risks associated with a person being injured by a CND vehicle. As many of the metrics and risks were similar to rideshare, and the CND platform focused on private cars offering ‘neighbourhood’ P2P services, the risks were assessed to be substantially lower than for a commercial rental car. In this context, and given the need to ensure the CTP scheme remains contemporary and reflects the appropriate risks of different vehicle classes, a new CTP class 25B - personal share vehicle (PSV) was created parallel to CTP class 25A - rideshare vehicle.

Changes to the CTP subordinate legislation were made during 2016-17 to facilitate the new PSV arrangements, with the Road Transport (Third-Party Insurance) Amendment Regulation 2017 (No 2) being notified on 13 July 2017. CTP insurers are expected to file premiums for the new CTP PSV class in August 2017, with CND expected to enter the market shortly thereafter.

Light Rail Vehicles

During 2016-17 the CTP regulator contributed to the Road Transport Reform (Light Rail) Legislation Amendment Bill 2017, which amended various Road Transport legislation to allow the ACT’s light rail vehicle (LRV) network to become operational in 2018.

From a CTP perspective, amendments to the CTP legislation were required to extend the scheme coverage to include any personal injuries arising from a traffic accident involving an LRV. Key changes included:

  • amending the definition of vehicle so that it includes an LRV;
  • ensuring that an LRV is a vehicle that can be insured under a CTP policy;
  • outlining the process for how CTP insurance for light rail vehicles will be selected; and
  • creating a new CTP class for LRVs.

The CTP regulator has passed on a range of information to assist insurers to initially review a CTP premium to be charged for each LRV. Insurers will be requested to file premiums for the new CTP class 26 - LRV in 2017-18. The LRV operator will then be required to select an insurer for the mandatory CTP coverage of each LRV. This process will be completed in time for the commencement of the testing phase of the LRVs, prior to their scheduled operation in 2018.

Streamlining the CTP Premium Filing Process

During 2016-17 the CTP regulator worked with insurers on a ‘streamlined’ premium filing process.

With the arrival of competition in the ACT CTP market, there have been a number of noticeable trends in relation to premium filings. While the CTP Act requires insurers to file once a year, insurers are:

  • filing more often than annually;
  • filing relatively smaller changes in premiums;
  • requesting a shorter timeframe in the assessment and actioning of their premium filings; and
  • requesting more disaggregated market share information, such as the types of vehicles (vehicle classes) being insured, to allow them to undertake more detailed analysis for strategic planning and pricing purposes.

To respond to these changes, a number of options were proposed to provide a more streamlined and efficient premium filing process, for all parties involved, while also encouraging more affordable premiums through ongoing competition. Insurers provided in-principle agreement to the new arrangements.

Final comments from the insurers on the proposed streamlining arrangements were received in late 2016-17. Subject to further deliberation on some of the parameters, it is expected that the streamlining arrangements will be finalised and put into operation in 2017-18.

The insurers also agreed with a proposal put forward by the CTP regulator regarding the provision of more detailed market share information based on premiums collected by vehicle class. The first report on this basis was provided to the insurers in August 2017 (containing July 2017-18 market share data).

Autonomous Vehicles
Working with the National Transport Commission (NTC)

In November 2015 the NTC was tasked by the Transport and Infrastructure Council[1] to identify any regulatory or operational barriers associated with automated road and rail vehicles.

During 2016-17, the CTP regulator responded to a number of discussion papers conducted by the NTC on automated vehicles (AVs). The outcome was the NTC Regulatory reforms for automated road vehicles policy paper which outlined recommendations to address a number of regulatory barriers preventing the progress of highly or fully automated vehicles. The NTC considered that regulatory changes were required to permit on-road trials, remove unnecessary legal barriers and provide for the safe operation of AVs.

Within the CTP framework, of particular importance were the decisions made in 2016 by Transport Ministers that:

  • the human driver remains in full legal control of a vehicle that is partially or conditionally automated, which has given clarity to arrangements for CTP coverage of AV trials. This will allow the ACT to undertake future innovative AV trials – see ‘Seeing Machines’ trial below; and
  • jurisdictions undertake a joint review during 2017-18 to identify any eligibility barriers to occupants of an AV or those involved in a crash with an AV accessing CTP and NIIS schemes.
Seeing Machines AV Trial

The ACT Government recently agreed to provide $1.35 million in funding to Seeing Machines for a trial using AVs. It is proposed that the program will comprise a number of AVs operating unrestricted on ACT public roads with up to 40 drivers each engaging in the driving of an AV for a two week period.

The trial vehicles will be level 3 ‘conditional automation’ vehicles which involve the automation of the dynamic driving task (the AVs are capable of self-driving most of the time) with the expectation that the human driver will respond appropriately to a request to intervene. That is, the person in the AV is still required to be in control of the vehicle.

The trial intends to study the change in driving behaviour from the use of these AVs. Seeing Machines’ devices and software will monitor the drivers’ facial movements and expressions to determine whether they are paying sufficient attention and an alert is sounded if the driver needs to look at the road and retain full control of vehicle.

During 2016-17 the CTP regulator commenced working with Innovate Canberra regarding CTP insurance arrangements for the trial. Subject to Seeing Machines’ AVs being registrable for the trial and meeting other conditions (including the full business case meeting the requirements of government), the CTP regulator expects that the CTP scheme would be in a position to cover personal injuries to third parties arising from accidents occurring as a result of the AVs trial.

The trial AVs are expected to commence operating on Canberra roads by early 2018. This matter is to be further progressed in 2017-18 in order to meet the trial commencement date.

Road Safety Initiatives

In 2016-17 the CTP regulator contributed $20,000 to an Australasian New Car Assessment Program (ANCAP) Safer Vehicle Choices road safety initiative, working in conjunction with the Road Safety Policy unit in the Justice and Community Safety Directorate (JACSD) and ANCAP itself.

The strategy promoted safer vehicles to young and older drivers, who have a significantly greater risk of crashing than other drivers, with these motorists encouraged to purchase the safest car (with the highest ANCAP star rating) that they could afford. Evidence indicates that a person has ‘twice the chance of being killed or seriously injured in a 3 star rated car compared to a 5 star rated car’.[2] The campaign was aimed at not only reducing crashes and hence personal injuries, but also reducing the severity of the injuries sustained in motor vehicle crashes.

A multi-pronged communication strategy was implemented, with the safer vehicle choices message being disseminated:

  • via a launch event at St Mary MacKillop College in Isabella Plains on Friday 28 July, with an ANCAP display of a 1998 and 2015 Corolla which were crashed head on at 64km/h, with the message: ‘in the 2015 car you walk away, in the ’98 model you’re unlikely to survive’ (Figure 2):

Figure 2 – Launch of the ANCAP Safer Vehicle Choices campaign

Figure 2 – Launch of the ANCAP Safer Vehicle Choices campaign

  • by way of printed material being included with driver licence renewals for both young and older drivers commencing in August 2017;
  • via ‘Safer vehicle choices saves lives’ postcards and posters throughout the ACT’s libraries, the Fitness to Drive Medical Clinic and ACT Police Stations;
  • on social media including Twitter, Instagram and Facebook;
  • on video screens inside Access Canberra shopfronts;
  • via the following roadside Variable Messaging Signs; and
    • Safer Vehicle Choices Save Lives
      ancap.com.au
    • What’s Your ANCAP?
      VISIT ancap.com.au
  • targeted young and old driver vehicle signage being displayed on Transport Canberra buses over the period August to October 2017, such as the one shown in Figure 3 below.

Figure 3 – ANCAP campaign – targeted young drivers bus advertisement

Figure 3 – ANCAP campaign – targeted young drivers bus advertisement

In 2016-17 the CTP regulator also contributed $50,000 towards a Tailgating campaign with television advertisements running through June, July and August 2017 highlighting the risks of driving too closely to the vehicle in front of you.

Just under half of all reported crashes are rear end crashes in the ACT, where tailgating is a major causal factor. The commercials raised the awareness of tailgating and were aimed at reducing motor vehicle crashes and personal injuries as a result of this occurrence.

Australian Prudential Regulatory Authority (APRA) Agreement

One of the main objectives of the CTP regulator is to regulate the licensing of insurers operating under the CTP scheme and to supervise licensed insurers.

Having appropriate access to information from APRA, the national prudential regulator of the insurance (and banking) industry, that highlights potential risk factors that may impact on the financial health of the insurance industry as a whole, or emerging risks in particular insurers licensed to write CTP insurance in the ACT would assist the CTP regulator to meet its obligations concerning the solvency of insurers.

In this context, during 2016-17 the CTP regulator liaised with APRA to develop a Memorandum of Understanding (MOU) which provides a framework for the exchange of financial information to assist both agencies in respect of their regulation functions.

The MOU was signed in August 2017. Staff of the CTP regulator’s office have already attended a biannual APRA meeting in May 2017 to discuss regulatory and supervisory matters in respect to CTP insurers.

Other Highlights

The CTP regulator also:

  • introduced a new joint Motor Accident Notification Form and Motor Accident Medical Report (MANF / MAMR) and a revised Notice of Claim Form (NoC), with the former obviating the need for the claimant to request a medical practitioner to complete two MAMRs – these forms were notified and became effective 16 November 2016;
  • introduced revised Early Payment Guidelines to reflect the operation of the new MANF / MAMR form and clarified the claims process that allows claimants to submit claims forms to the at-fault insurer if the at-fault vehicle is known – the Guidelines were effective November 2016;
  • met with the ACT CTP insurers, the ACT Nominal Defendant and the Insurance Council of Australia to share information and discuss a range of topical issues, with the aim of continually refining the operation of the CTP Insurance scheme; and
  • maintained the CTP website and responded to feedback from the public received by way of telephone calls through Access Canberra, via the CTP website at http://apps.treasury.act.gov.au/compulsorytpi/feedback, and general written correspondence.

B.1.4 Market Share

The ACT Government established competition to, amongst other things, introduce innovative CTP insurance products; place downwards pressure on premiums; encourage more direct pathways to rehabilitation and treatment; and encourage a quicker return to health while obviating as many long‑term injuries as possible.

Market share indicates the proportion of the CTP market held by each insurer. It provides an indication of how the ACT community is reacting to a competitive market as well as reflecting how the new insurers are establishing themselves in the market.

Information from insurers indicates that a significant proportion of motorists are changing CTP provider based on the premiums on offer at the time of renewal. This was reinforced by the findings of the section 275 Review report which found that: “The ACT CTP market has exhibited considerable price sensitivity with relatively small reductions leading to increased market share for respective brands.”[3]

Figure 4 shows the average market share over each of the financial years from 2013-14 when competition began, through to the end of the latest financial year of 2016-17. Market share is based on premiums collected by insurers.

Over the period shown in the following figure, Suncorp’s leading brand – GIO – continued to gain market share rising to 35.4 per cent over the 2016-17 financial year [a gain of 4.5 percentage points compared to the market share over the 2015-16 financial year], albeit the rate of the gain slowed, compared with NRMA’s share declining to 56.0 per cent over the 2016-17 financial year (a decline of 3.8 percentage points compared to the market share over the 2015-16 financial year). AAMI and APIA continue to hold relatively small market shares at 7.8 per cent and 0.8 per cent over the 2016‑17 financial year respectively.

Figure 4 – Movement in Insurers’ Average Market Share Since the Introduction of Competition

Figure 4 – Movement in insurers’ average market share since the introduction of competition

B.1.5 Premiums and Scheme Affordability

One of the objectives of the CTP Act is to keep the costs of insurance at an affordable level.

The premiums charged by insurers reflect the benefit structure underlying the ACT’s CTP insurance scheme. The ACT’s scheme design differs from that of other State CTP schemes which tend to contain limits on benefits. For example, other CTP schemes limit access to common law and damages for non‑economic loss (general damages and pain and suffering) to severe injuries – the ACT scheme has no such restrictions. The ACT arrangements are reflected in the higher premiums motorists pay in the Territory and hence impact on the relative affordability of the scheme.

Affordability, measured as premiums as a proportion of ACT average weekly earnings (AWE), declined over the period 2009-10 to 2013-14. This reflects average premiums increasing at a faster rate than the increase in AWE throughout this period. However, consistent with competition being introduced to the CTP scheme in July 2013, affordability has improved since this time as evidenced by the recent trend in premium reductions. This has also occurred despite slow wage growth.

Figure 5 – Average Premiums for Private Passenger Vehicles and as a Proportion of ACT Average Weekly Earnings

Figure 5 – Average Premiums for Private Passenger Vehicles and as a

B.1.6 Average Cost of Claims and Claims Frequency

The claims frequency and average cost of a claim are important drivers of CTP insurance premiums. The higher the claims frequency and average cost per claim, the more funding insurers need to cover future claim payments and hence the need to set higher premiums.

Figure 6 demonstrates that the average claims cost for 2016-17 increased by $13,095 or 11.0 per cent from 2015-16 to $132,204. This increase was due in part to several multi‑million dollar claims being finalised in the June 2017 quarter. Total payments made in the over $1 million category during 2016-17 (which related to a number of accidents over the period 2010-2013) were over twice that made during 2015-16.

Claims frequency is an important measure as it indicates the proportion of the Territory’s motor vehicles that are involved in an at-fault motor vehicle accident that caused an injury. It is calculated by dividing the number of CTP claims by the number of registered vehicles.

The frequency of claims increased in 2016-17 relative to 2015-16, but was in line with the average frequency over the period 2011-12 to 2016-17. For the CTP Scheme overall, claims frequency has remained within a fairly tight band over the 2011-12 to 2016-17 period, hovering between a low of 29 and a high of 39 (that is, 29 to 39 in every 10,000 motor vehicles were involved in an accident).

Figure 6 – Average Claim Costs and Claims Frequency

Figure 6 – Average Claim Costs and Claims Frequency

Notes:

In deriving claims frequency, the number of claims are those added in the quarter and converted to a yearly basis, which are divided by the number of ACT registered vehicles with a CTP policy (excludes trailers and non‑engine caravans / campervans).
The average cost per claim is based on the payments made for the number of claims finalised in the quarter and converted to a yearly basis.

B.1.7 Claims Payments

Figure 7 provides details on claim payments by heads of damage. The data shown captures payments for claims that have been finalised in the relevant financial year, but which relate to earlier accident periods. So, for example, for the claims payments finalised in 2016-17, these data relate to claims for the accident period of 2010 to 2017.

As the bulk of the claims finalised during 2016-17 relate to the 2014 and 2015 accident periods,[4] with some claims payments also made in regard to earlier years, this highlights the length of time taken to settle claims between parties and the access that injured persons have to the courts, where judgments take time to be finalised.

In relation to the 2016-17 CTP finalised claim payments:

  • general damages was the largest payment type and represented 27.8 per cent of payments;
  • treatment and care costs for injured persons were $29.4 million, or 26.9 per cent of payments;
  • legal costs represented 25.8 per cent of payments (not including solicitor-client fees); and
  • economic loss costs constituted 19.5 per cent of claim payments.[5]

Over the period 2011-12 to 2016-17 claim payments for economic loss; treatment and care; and legal costs were the fastest growing components at 51.1 per cent per annum; 46.9 per cent per annum; and 46.5 per cent per annum respectively.

Treatment and care costs grew substantially between 2015-16 and 2016-17 as a result of several large multi-million dollar payments being finalised in the June 2017 quarter for this heads of damage. This also led to an increase in legal costs over the same period.

These trends reflect both the existing CTP Scheme design as well as the percentage of claimants who choose to pursue a court settlement for their claim.

Figure 7 – Distribution of Claims Payments by Heads of Damage

Figure 7 – Distribution of Claims Payments by Heads of Damage

Note:

Treatment and care costs comprise ‘treatment costs’ and ‘past and future care costs’.
General Damages comprise ‘General Damages costs’ and Economic Loss costs comprise ‘Economic Loss costs’.
Legal costs comprise ‘Defendant legal costs’, ‘Investigation costs’ and ‘Plaintiff Legal costs’, but not solicitor-client fees.

B.1.8 Fraud

One of the objectives of the CTP Act is to establish and keep a register of motor accident claims to assist with the administration of the statutory insurance scheme and the detection of fraud. The electronic Personal Injury Register (PIR) is the database of all motor accidents occurring in the ACT.

The CTP regulator is aware of cold calling and claims farming practices. There is evidence that these issues are occurring in the ACT and other CTP schemes around Australia, and that the claims farming practices are becoming more sophisticated.

The CTP regulator will continue to analyse the ACT’s scheme data and work co-operatively with other Heads of Motor Accident Insurance Schemes and the ACT CTP insurers in regard to fraud issues and monitoring.

B.1.9 Scheme Data

During 2016-17, the CTP regulator completed stage 1 of the PIR project which involved Shared Services ICT installing the PIR onto the ACT Government’s ICT platform as its own self-standing system; identifying changes to ensure the operational integrity of the PIR; and documenting the existing coding base to facilitate the proficient future ICT support of the PIR system.

In 2017-18, the CTP regulator intends to commence stage 2 of the PIR project to enhance the statistical analysis and reporting capabilities of the PIR.

B.1.10 Profit Margins

Section 46 of the CTP Act requires that the CTP regulator must assess the profit margin included in the CTP premium and the actuarial basis on which the profit is calculated. The assessments must be reported on annually.

During 2016-17 relevant filing documents were received from NRMA in July 2016 and from GIO in November 2016. An additional premium filing was also received from NRMA in April 2017. Premium filings were due from AAMI and APIA in April 2017, however, Suncorp requested an extension for these filings until 30 September 2017, which was granted by the CTP regulator. A high level review of AAMI and APIA’s current premiums was also undertaken to ensure that the premiums were still valid for the extension period.

All the insurers’ profit margins were assessed as being in a reasonable range. These profits are expected profits at the time premiums are filed.

The range for the industry as assessed by the scheme actuary in 2016-17 was 8 per cent to 11 per cent (in 2015-16 the range was 8 per cent to 12 per cent).

B.1.11 Premium Determinations

Section 38 of the CTP Act provides that insurers are only permitted to charge a premium approved by the regulator.

The regulator usually receives a premium filing from licensed insurers at least annually. The regulator makes an assessment of each premium filing, based on expert independent actuarial advice, and may approve a premium if it is assessed that it will fully fund the insurer’s liabilities and is not considered to be excessive. If a premium filing is not received within a year, the regulator has to review and assess the existing premium in accordance with the same criteria.

A premium filing assessment considers claims frequency, claim size, investment returns, administrative expenses, legal expenses and insurer profit – generally elements that serve to make up the overall cost of service for an insurer participating in the ACT CTP market.

The role of the CTP scheme actuary is to provide expert actuarial advice to the CTP regulator. During 2016-17, in the lead up to the existing contract with Cumpston Sarjeant Consulting Actuaries expiring, a review of the contractual arrangements of the CTP scheme actuary was undertaken. To achieve inter alia, scale related efficiencies, a bundled contract comprising actuarial services for CTP insurance, the Lifetime Care and Support Scheme and the Private Sector Workers’ Compensation Scheme was put out to tender. Finity Consulting Pty Limited was successful for all these services and was contracted as the new CTP scheme actuary, commencing effective from 29 May 2017.

B.1.12 Licensed Insurers

Under section 184 of the CTP Act, the regulator may license an insurer to provide CTP insurance in the ACT.

No new applications from other insurers to become licensed insurers in the ACT were received during 2016-17.

B.1.13 Loadings on Short Term Premiums

The following loadings apply to premiums on CTP policies with a duration of less than 12 months (‘Short Term Premiums’):

  • insurer’s administration loading: $2.50; and
  • insurer’s lost investment income loading.

The CTP Premium Guidelines require the CTP regulator to publish the insurer’s lost investment income loading each year in the annual report. These loadings will be applied to short term premiums by the rego.act system in accordance with the formula in section 3.5.4 of the premium guidelines. The amount is determined by the scheme actuary and will apply for the relevant financial year. The loading for the 2017-18 financial year is 0.177 per cent per month.

B.1.14 CTP Average Annual Risk Premium

The regulator is required to publish the average annual risk premium for CTP in the ACT. The risk premium represents the base risk amount that each insurer bears when providing CTP insurance in the ACT. Presently there are four licensed CTP insurers in the ACT. As such, the risk premium has been derived using a weighted average of data from all of the insurers and the Nominal Defendant in order to determine the average risk premium price per policy.

The average risk premium price per policy for 2016-17 was $422.73.

B.1.15 Nominal Defendant

The Nominal Defendant is liable for claims against uninsured or unidentified motor vehicles (including unregistered vehicle permits) for which a CTP insurer cannot be identified. Under section 13 of the CTP Act, the Australian Capital Territory Insurance Authority (ACTIA) is the Nominal Defendant.

Section 3.5.2 of the CTP Premium Guidelines requires the Nominal Defendant Loading to be assessed on a yearly basis by the scheme actuary. The Nominal Defendant loading that will ‘apply to the next financial year’ is to be published in the CTP regulator’s annual report.

At the request of the CTP regulator, the scheme actuary has undertaken a review of the Nominal Defendant loading for 2017-18. As a result of increasing claims costs, predominantly due to an increase in the number of claims, as well as an increase in the average claim size, it has been determined that the Nominal Defendant Loading will increase to 4.5 per cent (the loading was 4.0 per cent in 2016-17).

B.1.16 Outlook

Priorities in 2017-18 and over the next three financial years relate to the objectives of the CTP Act. In this context, the CTP regulator will:

  • review, in conjunction with all States and the NTC, the regulatory impacts of autonomous vehicles on the CTP and national injury insurance schemes (NIIS) to identify any eligibility barriers to accessing these schemes by occupants of an automated vehicle, or those involved in a crash with an automated vehicle, and amend the CTP scheme where required;
  • finalise the CTP premium filing process for personal share vehicles (PSVs) to ensure that peer‑to‑peer car sharing operators, such as Car Next Door, are able to enter the ACT market;
  • finalise the CTP premium filing process for light rail vehicles (LRVs) to ensure that personal injuries arising from a traffic accident involving a LRV are treated in a consistent manner with accidents involving other vehicles;
  • review, in conjunction with all States, the feasibility of implementing a system to seamlessly transfer the registration and CTP policies of heavy vehicles between jurisdictions (to overcome the need to establish a new registration in the State of migration);
  • progress the modification of the PIR to allow improved fraud detection and analysis of scheme statistics and trends to be undertaken;
  • implement a streamlined CTP premium filing process for specified (lower risk) filings to enhance the efficiency of the process for all impacted parties, while also encouraging more affordable premiums through ongoing competition;
  • identify other improvements to the scheme and processes as necessary; and
  • contribute to targeted road safety initiatives that assist in reducing motor accidents and personal injuries, and mitigating their impact.

B.2 Performance Analysis

The ACT Compulsory Third-Party (CTP) Insurance regulator’s 2016-17 performance indicators are included in the Statement of Intent, and are reported as part of the regulator’s Statement of Performance.

The 2016-17 financial year saw the CTP regulator develop and accomplish the following indicators.

Explanation of Performance Indicators

a. CTP Premiums are approved in accordance with the Road Transport (Third-Party Insurance) Act 2008

The CTP regulator is required to approve or reject a premium application under section 41 of the Road Transport (Compulsory Third-Party Insurance) Act 2008 (CTP Act). Under section 42, there are two grounds that permit the CTP regulator to reject a premium filing. These grounds are that the premiums applied for by CTP insurers are too low (the fully funded test) or are too high (the excessive premium test).

Premium filings were received from NRMA in July 2016 and from GIO in November 2016. An additional premium filing was also received from NRMA in April 2017. Premium filings were due from AAMI and APIA in April 2017, however, Suncorp requested an extension for these filings until 30 September 2017, which was granted by the CTP regulator. A high level review of the current premiums for AAMI and APIA was undertaken to ensure that the current premiums were still valid for the extension period. All of the premium filings (and granted extensions) were assessed and approved in accordance with the Act.

b. The scheme is fully funded

All premium filings by licensed CTP insurers are reviewed by the scheme actuary to ensure they are fully funded. Review of the premium filings ensures that the scheme is able to pay out all present and future liabilities. Where an insurer does not make a premium submission during the financial year, the CTP regulator will request an independent actuarial review of the insurers’ books to ensure that the ACT CTP Insurance scheme will continue to be fully funded. The scheme actuary considered that all insurers’ premiums met the fully funded test in 2016-17.

c. Make guidelines under the Act

The guidelines under the Act were discussed as a standing item at the 2016-17 Industry Council of Australia (ICA) meetings, as well as out-of-session with insurers.

A range of matters have been discussed throughout 2016-17 that will be incorporated into guideline amendments in 2017-18 once they have been finalised.

The Early Payment Guidelines were revised to provide guidance on the submission of the early payment claim form following amendments to the claims forms, and became effective 18 November 2016.

No other guidelines have been implemented under the Act in 2016-17.

d. To continue to refine the system of CTP insurance for vehicles in the ACT in conjunction with the insurers

The CTP regulator and insurers met twice during 2016-17 at meetings facilitated by the ICA (out-of-session correspondence was also conducted with insurers on important issues). The meetings and emails included discussion of matters relating to improving the operation of the CTP scheme, namely:

  • reviewing the circumstances and approach to personal share vehicles
    (peer-to-peer car sharing);
  • reviewing the treatment of light rail vehicles;
  • streamlining of the premium filing process to improve efficiency;
  • discussing the results of an online CTP insurance quiz undertaken in 2016 aimed at increasing ACT motorists’ awareness and understanding of the CTP scheme;
  • developing Sharing Guidelines for the Industry Deed;
  • revising claims forms; and
  • finalising implementation of the Personal Injury Register.
e. Promote public awareness of the causes of motor accidents through funding measures directed at reducing causes of motor vehicle accidents

The CTP regulator contributed $70,000 in 2016-17 to various road safety strategies aimed at mitigating third-party motor vehicle injuries. This comprises:

  • $50,000 for a tailgating campaign; and
  • $20,000 for a vehicle safety campaign.
f. Complaints handling within 10 working days of receipt of the complaint

In 2016 -2017, the CTP regulator achieved 100 per cent compliance with this performance indicator, in cases where no further information was required from another directorate.

B.3 Scrutiny

During the reporting period the CTP regulator did not participate in any Legislative Assembly Committee inquiries related to its activities.

There were no Audit Office reports with recommendations in respect to the CTP regulator, and no Ombudsman reports.

B.4 Risk Management

The CTP regulator has a risk management plan in accordance with the Australian/New Zealand risk management AS/NZS ISO 31000:2009 and the ACT Government’s “Enterprise Wide Risk Management Framework”. The CTP regulator has overall responsibility for risk management, and for ensuring compliance with the risk management plan.

The risk management plan identifies the key risk areas as operational, financial, legal and reputational risk. The risk management plan has identified the following potential risks:

  • CTP regulator not meeting stakeholder expectations;
  • insufficient staff and/or resources available to achieve outcomes;
  • failure to meet legislative requirements; and
  • Personal Injury Register being unavailable on the ACT ICT platform.

These risks are mitigated through the use of appropriate governance structures, application of risk based management strategies and financial reporting processes.

B.5 Internal Audit

The CTP regulator is part of the CMTEDD Audit and Risk Committee.

CMTEDD’s Annual Report section on Internal Audit Committee applies to the CTP regulator.

No internal audits of the CTP regulator were undertaken during 2016-17.

B.6 Fraud Prevention

The functions of the CTP regulator are supported by the Financial Framework Management and Insurance Branch of Economic and Financial, CMTEDD who adhere to the CMTEDD Fraud and Corruption Prevention Plan.

B.7 Workplace Health and Safety

The CTP regulator does not employ any personnel.

The functions of the CTP regulator are supported by the Financial Framework Management and Insurance Branch of Economic and Financial, CMTEDD who adhere to the directorate’s Workplace Health and Safety practices.

B.8 Human Resource Management

The CTP regulator does not employ personnel. The functions of the CTP regulator are supported by the Financial Framework Management and Insurance Branch of Economic and Financial, CMTEDD.

The CMTEDD’s Annual Report section on HR management applies to the CTP regulator.

B.9 Ecologically Sustainable Development

The CMTEDD’s Annual Report section on Ecologically Sustainable Development applies to the CTP regulator.

Section C Financial Management Reporting

C.3 Capital Works

The CTP regulator did not undertake any Capital Works Projects in the 2016-17 financial year.

C.4 Asset Management

The CTP regulator has one intangible asset, in addition to its operational bank account. The intangible asset relates to software upgrades to the ACT Personal Injury Register and is amortised on a straight line basis over its useful life of 5 years.

C.5 Government Contracting

The CTP regulator is party to the following agreements:

External Sources of Labour and Service (Total contract value exceeds $200,000)

Name

Description and Reason for Contract

Cost $

(GST Exclusive)

Procurement Type

Contract Date

Cumpston Sarjeant
Consulting Actuaries

Provide actuarial review and advice

$37,977

Public Tender

Jan 2014

Finity Consulting Pty Limited

Provide actuarial review and advice

$29,595

Public Tender

May 2017

Footnotes


[1]  The Transport and Infrastructure Council, comprised of Commonwealth, state, territory and New Zealand Ministers, reports to COAG, and plays a key role in delivering national reforms to improve the efficiency and productivity of Australia’s infrastructure and transport systems.

[2]   ANCAP website - https://www.ancap.com.au/safety-ratings-explained.

[3]  Review of the operation of the Road Transport (Third-Party Insurance) Act 2008, 16 March 2016, page 1.

[4]   Claims also relate to the 2016 and 2017 accident periods.

[5]   A small component for ‘other costs and recoveries’ totalling ($0.499) million has been excluded from the heads of damage breakdown.