The State Insurance Regulatory Authority (SIRA) has warned compulsory third-party (CTP) insurers that almost $91 million in profit on Green Slips could be returned to motorists through cheaper premiums. The 2017 CTP reforms implemented by the NSW Government introduced regulatory powers allowing SIRA to control the level of insurer profits under the transitional excess profits and losses (TEPL) mechanism.
In a Press release, SIRA chief executive Adam Dent noted that he had decided to activate the mechanism to ‘recover excess insurer profit following a rigorous assessment of profit in the new scheme’. He said that over the last six months SIRA worked with insurers to assess the profitability of providing CTP insurance in NSW.
“To bring savings back to the customer, SIRA decided to recover insurer profit above 10%,” Dent said. “I have informed insurers of my decision to claw back almost $91 million, which means that in 2022 NSW motorists will enjoy an average saving of $19 on their Green Slip.”
The TEPL mechanism provides insurers with a 28-day cooling-off period to appeal the decision to recover excess profit. Dent stated that this cooling-off period expires on November 29, 2021 and that, to date, insurers have not indicated an intention to appeal the decision.
“A key feature of the 2017 reforms was introducing the power to recover profit, so insurers were aware of this possibility when they signed up to offer CTP insurance in the new scheme,” he said. “With any new scheme, as claims experience develops, there will be greater certainty of costs and insurers will price premiums accordingly.”
The activation of TEPL applies to profit on claims lodged in the first accident year - between December 01, 2017 and December 31, 2018. Meanwhile, SIRA has also evaluated profits in the second accident year – between January 2019 and December 2019 – but opted not to proceed with the clawback until there is an increased certainty of claims costs.
Dent added that SIRA will undertake a further assessment of insurer profits in 2022 and continue to assess insurer profit each year using the provisions of the 2017 Act to establish whether further savings can be returned to customers.
SIRA noted that the 2017 reforms have delivered ‘continued benefits’ for injured people who can now avail of earlier access to income support, treatment and care. Under the provisions of this scheme, 78% of injured people receive benefits within three months of their accident. This is compared to only 26% before the reforms were implemented. Meanwhile, 95% of people receive access to treatment and care within four weeks and 72% before a claim has been lodged.
As the price of Green Slips vary by vehicle type and region, SIRA highlighted that the savings will be applied as a 35% reduction in levies that form part of the price – ensuring that the saving can be shared fairly among motorists. SIRA will publicise the final recovery amount and average savings once the cooling-off period has expired.
