The ACT Government squibbed it with compulsory third-party car insurance. Rather than look at how the scheme works, it merely passed on the extra costs to motorists. They amount to $74 a year _ a 40 per cent increase.
The Law Society calls the action “responsible”. Perhaps that is because its members have so much to gain by the present system.
Under the present scheme everyone pays a $252 premium to insure themselves against legal liability from injuring someone on the roads. That liability flows from proof of fault and proof of damage. Establishing that proof is done by lawyers either by negotiation or in court.
Lawyers’ advertising has caused an increase in claims, especially small claims. More people with minor injuries realise they can get damages without risk as lawyers take on injury cases without up front costs and rarely charge if they lose (which is very rare anyway). This is very commendable in cases of serious injury, but a costly nuisance in small cases. The trouble with small cases is awards of general damages for pain and suffering and to a lesser extent compensation for lost wages when people have sick-pay entitlements anyway. No-one objects to medical costs.
NSW tried to overcome this by setting a threshold of $15,000, so people had to bear the first $15,000 of general damages themselves. The lawyers overcame it by merely presenting their small claims at over $15,000 and negotiating down. Further the judges starting awarding to more to compensate for the lost $15,000.
Lawyers argue that everyone should be entitled to “full” compensation and to use the forces of the law and lawyers to get it. It is a superficially attractive, but idealistic argument. Road-accident compensation has for a long time been a community matter _ not a matter of purely individual rights. The trouble with the present system is that it over-compensates people with minor injuries and under-compensates people with catastrophic injuries. Worse, it does not cover people who are injured on the road through their own fault or nobody’s fault. A driver in a single-car accident gets nothing, no matter how badly injured and no matter that the accident was caused by a blow-out, a bee sting or a moment’s inadvertence.
It would have been far better to have pruned the small claims and used the 40 per cent increase in premiums to cover these people. In doing that the fault element would be eliminated resulting in savings of legal costs.
A much more important reform, which the ACT Government squibbed, was changing the daft system of uniform premiums. Young, males drivers do most of the killing and maiming on the roads, yet they pay the same premium as a person who has driven accident-free for decades.
Premiums should be graded for age, sex, accident and conviction history and make and model of car. That would be an incentive for more careful driving and to buy a less powerful car.
Various road and traffic authorities have huge stores of information about accidents. It should be fairly straightforward for an actuary to establish risks and set premiums accordingly. Bizarrely, there only differences in premiums in NSW is between different locations, but people will not move house to get a lower premium, but they might change cars or drive more carefully.
It is easy to see why the ACT Government squibbed reform. There is no joy in making a system more just or efficient if you upset articulate lawyers, lots of people with minor injuries and a swag of motorists who would see themselves discriminated against for being young, male drivers of powerful cars.
The group which would benefit most by reform: those about to be badly injured, especially through their own fault or no-one’s fault do not exist as a pressure group. People imagine it simply will not happen to them. Further, even when bad car-accident injury happens, the victims do not unify to seek a better car-accident compensation scheme. They tend to join groups to help them overcome their particular disability: brain damage, blindness, being unable to walk and so on.
So the system will continue to under-perform for the very people it is supposed to protect _ those badly injured in car accidents.