Good drivers could pay lower premiums

affordable charge

Our last Qld News, Queensland CTP scheme is under review, listed a few recommendations for change to compulsory third party (CTP). Another recommendation was to investigate new kinds of risk rating. This means insurers could charge good drivers a lower premium – or charge risky drivers higher premiums.

Current risk rating does not encourage much price competition. If your CTP premium were linked to your driving record, crash history, demerit points or vehicle safety features, it would be a fairer price for your risk. It might even encourage good driving and lower the chance of accidents involving you or other motorists.

Tracking driver behaviour

This kind of risk rating cannot work without having good, up to date information. This could be possible using telematics – in-car technology to measure driver behaviour. Insurers could also draw on information available from the DTMR motor vehicle registration system.

One difficulty could be if the driving record is linked to the person who registers the vehicle, rather than other people who drive it. Any new risk rating system would have to link driving behaviour with the actual driver. Another problem is the system could unfairly affect young people with higher crash risks.

Insurer reaction

The four CTP insurers in Qld had mixed reactions to the recommendation for new forms of risk rating:

  • QBE (8% market share) strongly supports risk rating to encourage competition and allow insurers to reward safer drivers
  • Allianz (27% market share) does not support risk rating because it says modestly higher premiums do not encourage safer driving or reduce accidents.
  • Suncorp (49% market share) and RACQ (16% market share) did not specifically comment on risk rating.

In NSW, there is already risk rating based on more detail, such as crash history, demerit points, age of youngest driver and age of vehicle. However, the review concluded Queensland’s CTP insurance scheme is strong and does not require major reform. So if any risk rating is introduced, it is likely to be minor.