Queensland MAIC reviews its CTP scheme

big changes

Queensland last reviewed its CTP scheme in 2016. This state currently enjoys the most affordable CTP premiums on the mainland. In March 2023, the Motor Accident Insurance Commission (MAIC) released a discussion paper about how to improve the state’s CTP scheme.

The discussion paper offered 3 scenarios. These are status quo, changes in scheme design, or a public underwriting model.

Scenario 1: maintain the status quo

There are 4 insurers licensed to sell CTP insurance in Qld: Suncorp, Allianz, QBE and RACQ. They all charge the same price so there is no price competition. Research has found Qld motorists value affordability more than any other factor.

Insurers made an average profit of 20% in the past 8 years. This is well above the 8% margin assumed by the MAIC. Of each premium, 51% goes to insurers to cover claims, 10% for insurer profits and expenses and 40% to scheme levies. (These are levies for hospital and emergency services, statutory insurance, nominal defendant levy and the NIISQ levy. )

Scenario 2: make scheme design changes

The MAIC paper suggests 4 changes in scheme design. These are: premium equalisation, random allocation, multiple licences; and promotion of decision-making.

Premium equalisation – premiums would be redistributed among insurers according to the risk they take. This would not affect motorists but could attract new insurers or encourage existing insurers.

Random allocation – CTP insurers would be randomly allocated to new vehicle registrations.  Motorists would no longer need to choose an insurer.

Multiple licences – insurers could hold licences for their individual brands, allowing them to compete more on price and offerings.

Promote decision-making – Registration renewals would remove the default CTP insurer and show all insurer ratings. This promotes more active decision making.

Scenario 3: transition to public underwriting

The scheme has been privately underwritten since 1937. In this scenario, the state would become the sole CTP underwriter. One organisation would look after motorists, lawyers, and all injured people. This would simplify premium setting. Moreover, money saved from efficiencies could be reinvested in road safety and road trauma.

Scenario 3 could make sense because the main purpose of a privately underwritten scheme – to stimulate price competition – has not happened.

The MAIC will collate public and industry feedback on these 3 scenarios. It will be interesting to see what recommendations the MAIC decides to make.

If it opts for the status quo scenario, it could repeat the RACQ’s aborted attempt to reform the Qld scheme in 2020.