Compulsory third party motor insurance in the ACT is about $100 a year higher than in other jurisdictions.
The trouble with such simplistic comparisons is that they can be politically unpalatable for Governments. Voters hate high taxes and charges. Hence the Government’s announcement this week that it had done something about it.
But the real point of inter-jurisdictional comparisons is not just to compare the rates of taxes and charges, but what you get for them.
We should be so lucky that we pay higher premiums in the ACT. In the ACT we get a lot more from our third-party insurance scheme than motorists in other jurisdictions.
Chief Minister Jon Stanhope argued this week that his changes will cut premiums by $100. The basis of that is that he has introduced competition to the system. The NRMA will no longer be the monopoly insurer. ACT motorists will be able to choose from a range of approved insurers.
Further, the changes will make the ACT a slightly more attractive place to be a motor insurer. The new system changes legal procedures in an attempt to add some certainty to the process.
Stanhope is probably being a bit optimistic in thinking that competition and procedural changes will bring premiums down by 25 per cent. But I hope he is right.
One of the best things he has done as Chief Minister is to resist the push by the insurance industry to reduce the rights of people injured by other people’s negligence – not only in motor accidents but across the gamut of human activity.
The danger is that if premiums do not come down as a result of this week’s changes, the political pressure will remain to reduce the rights of the injured so ensure premiums come down. The pressure will be to cap damages, to have thresholds so that people with statutorily “minor” injuries get no damages, or to have a one-size-fits-all scale for loss of income.
In repeated opinion polls, voters say they are prepared to pay higher taxes to get better education and health services. Alas, with third-party premiums they seem to take the view “it won’t happen to me”, so resent paying more for a better result.
The procedural changes in the new law quite reasonably demand that injured people (through their lawyers) give notice to the insurer within nine months of the accident. The insurer has six months to accept or deny liability. That’s fine. It will help insurers better estimate the “tail” of liability. Under most tort law the plaintiff has six years to sue, and longer if an infant. So insurers have no precise idea what they are up for and so have to charge higher premiums just in case.
The six-month admission of liability rule is helpful because once liability is admitted injured people can get rehabilitation services (like physiotheraphy) that are not covered by Medicare without worrying about cost. It helps them get better.
After that the new rules become unrealistic. The deadlines for assessing estimates of the amount of damages do not seem to take account of the difficulty of getting specialists’ reports nor the length of time for injuries to stabilise. My guess is that we will be seeing a lot of applications for extensions of time.
The pity is that such statutory hurry-alongs are necessary. A properly resourced court system should do it without prompting.
The ending of the monopoly will certainly help, not just because competing insurers are likely to offer competitive – therefore lower – premiums, but also because it is likely to improve insurer practice.
A monopoly tends to take customers for granted. Monopoly insurers are more likely to put claimants to proof and be more likely to resist prompt pay-outs or partial pay-outs.
Certainly, a major advertising theme of competing insurers in other fields – such as house and car-property insurance — is treating claimants fairly and promptly and telling them what is going on.
In personal injury this is critical. If claimants get treated promptly, are informed and get financial burdens lifted with early or partial pay-outs, they tend to get well and back to work quicker, making savings for all insured motorists.
But the best way to reduce premiums is to reduce death and injury on the road. In the ACT we have good roads and therefore a lower toll. It could be driven lower with more education and policing.
To that end a further change to the compulsory third-party system is needed. It seems absurd that the premium is the same for every car. People with poorer driving records or who drive more risky cars should pay higher premiums.
Higher –powered motor cycles pay more than lower-powered ones because they do more damage. Taxis pay more and so do heavy trucks. So why shouldn’t the premium for high-powered cars, sports cars and large four-wheel drives be higher? Incidentally, taxis pay 15 times the car rate. I bet they do not do 15 times the death and injury damage of the average car.
Also, the premium could be related to outstanding demerit points, because those drivers pose greater risk.
Every other form of insurance relates premium to risk – even health insurance up to a point.
A premium differential would be an incentive for people to drive more safely and buy safer cars, driving down the crash rate.
Another thing to sort out is the different state and territory systems. The result for an injured person can be huge depending on where they were injured. Either that or risk a lot of legal shenanigans in trying to sue in the best jurisdiction.
In all, though, the effort should not be solely to drive down premiums, but to reduce risk and to ensure those injured and the families of those killed are treated properly.