The State Insurance Regulatory Authority (SIRA) has reached the second stage of assessing compulsory third-party (CTP) insurer profit to determine if the regulator must recover it and return it to New South Wales (NSW) drivers.
After the conclusion of the preliminary review of profit at an industry level, actuaries have started reviewing the profit earned by each CTP insurer on the Green Slips sale. Under the transitional excess profits and losses (TEPL) mechanism, introduced in the 2017 CTP reforms, SIRA now has the power to claw back insurer profit above 10%.
SIRA implemented the TEPL mechanism in 2021 for the first time to recover nearly $91 million in insurer profits and redistribute it among NSW motorists through Green Slips savings.
The current assessment aims to determine whether insurers earned excess profit in the 2018, 2019, and 2020 accident years and if their future claims costs for profit may be recouped.
SIRA reminded insurers that they may apply to the regulator to retain up to 3% of profit each accident period for investing in measures proven to deliver benefits to the scheme. To date, it has granted preliminary approval for five applications.
“To receive final approval and to retain a share of profit, insurers must have evidence that the innovation has delivered measurable benefits,” SIRA added.
SIRA expects to release its decision on the matter before the end of 2022. Aside from assessing CTP insurer profit, the regulator has been improving NSW by amending the state's home building insurance scheme and workers' compensation surgeon fees.
