CTP insurance rorts must be stamped out
Tuesday 13 September, 2017
By Anthony Day, CEO Insurance Suncorp
Picture this. It’s a normal morning on Brisbane’s roads for the city’s commuters. Two cars are waiting at an intersection to enter a main road. The front car begins to slowly move forward, but then stops suddenly. The car behind, travelling at five kilometres per hour, lightly taps into the front car’s rear bumper.
There’s no visible damage to either car and no one is visibly hurt. The drivers exchange details and continue to their destination.
Despite the innocuous nature of the accident, the driver of the front car makes an insurance claim through the Compulsory Third Party (CTP) scheme for a whiplash injury.
The driver says their neck and shoulder are sore and claims $455,000 in damages for injuries sustained in the accident. This includes $18,000 for a physiotherapist appointment every five weeks for the next 51 years.
The insurance company argues that these costs are over the top and while the driver only gets a fraction of the amount claimed, the claimant still receives an inflated payout for what most Queenslanders would consider a gentle bump.
The fact is, all Queensland motorists pick up the bill for this type of rorting through higher CTP premiums, which is paid alongside registration fees. Hundreds of honest Queensland motorists end up paying for this type of claim.
Alarmingly, this kind of rorting is happening with increasing frequency across the State. Even though the number of car crashes is declining, CTP claims for minor injuries (or alleged injuries) have grown by around 30 per cent over the past two years. More and more people and their lawyers are exploiting the system to get cash payouts.
Insurers do all they can, within the legal system, to fight these exaggerated claims to ensure other motorists aren’t paying for the rorters. However, fighting back doesn’t come cheap and these inflated claims add significant administration and legal expenses to the most basic claim. Time that could be better spent managing legitimate claims from honest motorists.
The only way to stamp out this activity is to remove the incentive. Replacing lump sum payouts for minor injuries with guaranteed defined benefits will ensure people with genuine minor injuries get the medical support they need and payment for any lost income, while deterring fraudulent claims.
This has the added bonus of keeping CTP insurance affordable. We estimate that only around 40 cents in every dollar of premium currently ends up in the pocket of injured people, which is not only inefficient, but unfair. Reform of the system, that introduces defined benefits, can increase that amount to more than 60 cents.
These reforms make future claims costs easier for insurers to predict, which means regulator-approved profit levels will stay in line with expectations. Importantly, more of every dollar in premium would go to the seriously injured people who need it most, instead of those who are taking advantage of the system.
This solution has been tried and tested in other states, mostly recently in NSW which was previously a hotbed of fraudulent activity. With the ACT Government now signalling its intent to introduce similar reforms, Queensland will be one of only two states in Australia to retain an antiquated system that allows lawyers to argue for inflated payouts, and then legally take half of it from injured people.
The answer is simple. It is time to stop the rorts and introduce reforms that deliver a fairer, sustainable and affordable CTP scheme for Queenslanders.
Media Inquiries: Nadia Farha 0408 535 993