Will CTP insurance be privatised across the country?

In Australia, compulsory third party (CTP) insurance regimes are required for all car owners. This means they are covered for damage caused to someone else's property in the event of a crash and for any injuries caused to others.

While you can elect which insurance supplier you wish to provide your CTP in Australia, the overall schemes are mostly underwritten by government agencies. The premiums are set by licensed insurers every quarter, but a commission is generally in charge of setting an upper and lower limit for these and has regulatory powers over the industry. 

While private companies take control of organising these regimes in ACT, some of the nation's largest insurance companies, including Suncorp and Insurance Australia Group, are pushing to have these, and state-run workers compensation, privatised countrywide.

In every other jurisdiction but ACT, CTP and workers compensation schemes are run by government bodies, and according to the Sydney Morning Herald, these have a combined value of $15 billion in gross written premiums, with private insurance companies taking around $5 billion of the total.

South Australia looks set to move in this direction, as it will call for private tenders in 2016 to offer CTP insurance, replacing the state-run monopoly. 

These private companies have laid submissions to the federal government's inquiry into the financial services industry headed by David Murray.

"There is considerable potential for the private sector to increase efficiency and productivity in this part of the financial sector to provide better outcomes for policy holders and most importantly, people who are injured," The Suncorp submission reads, according to the Sydney Morning Herald. This was signed by chief executive of personal insurance Mark Milliner and chief executive of commercial insurance Anthony Day.

The Suncorp submission states that by opening up these state controlled insurance schemes, consumers could benefit from more competitive, transparent, innovative and efficient service provision in the insurance market.

However, the inquiry's interim report suggests otherwise.

Insurance Australia Group also pushed for privately underwritten workers compensation schemes across the country, saying in its submission that private insurers have more expertise to "adapt to different pricing models commensurate with the specific needs and characteristics of different schemes," according to the Sydney Morning Herald.

There have been problems recently with regulators. A September 19 article in the Courier Mail has highlighted a discord in the market as NRMA has left the Queensland CTP scheme. IT cited pricing as a problem. Insurers in the state are now claiming the ceiling price set by the Motor Accident Insurance Commission is too low. Of the four insurers in the state, only one is pricing below this ceiling, according to the article. 

What about other forms of insurance?

These insurance companies are also making claims that the country needs to make other public policy changes in order to improve the overall availability of insurance in the country.

Suncorp's submission recommends changes to improve the simplicity, value and delivery of products and services to consumers.

"This includes development of a simplified life, trauma, total and permanent disability (TPD) and income protection product assessment questionnaire that could be accessed by consumers through the ASIC MoneySmart website," SunCorp Life boss Geoff Summerhayes told the Sydney Morning Herald.

This sentiment was echoed by FSC director of policy for the FSC, Andrew Bragg who said he recommends the review consider streamlining the prudential framework so the industry can create new products to better meet the needs of consumers.

Currently, the regulations in place have causes fragmentation in the industry so separate licences are required for individual products. A move that has stifled companies from providing multi-purpose policies such as combined health and life policies.

Posted by Richard West.