Performance Reporting

Organisational Overview

The Australian Capital Territory Compulsory Third-Party Insurance regulator (CTP regulator) is an independent Territory authority established under section 14 of the Road Transport (Third-Party Insurance) Act 2008 (CTP Act) to regulate compulsory third-party (CTP) insurance in the Territory.

Under section 14 of the CTP Act, the Director-General of the administering directorate is the CTP regulator.  During 2013-14 the CTP Act was administered by the Chief Minister and Treasury Directorate, making the Director-General of CMTD the CTP regulator.

The functions of the regulator were supported by the Financial Framework Management and Insurance Branch of the Economic and Financial Group, within CMTD.  The Directorate also provided oversight of workplace health and safety and associated risk management, facilities management and workplace environment management.  Reporting on these issues is contained in the Directorate's Annual Report.

The regulator's stakeholders include the members of the ACT community, particularly persons injured in road crashes, motorists who are required by law to purchase CTP insurance, and the licensed insurers.

Principal Objectives

The role of the CTP regulator is to regulate the CTP insurance scheme in the ACT under the CTP Act.  The objectives of the Act under section 5A are to:

• continue improving the system of CTP insurance in the ACT;
• promote competition for CTP premiums;
• keep the costs of insurance at an affordable level;
• provide for the licensing and supervision of insurers;
• encourage the speedy resolution of personal injury claims;
• promote and encourage the rehabilitation of people injured in motor accidents;
• maintain an accurate register of motor accident claims to help the administration of the statutory insurance scheme and the detection of fraud; and
• promote measures directed at eliminating or reducing causes of motor accidents and mitigating their results.

Functions

The functions of the CTP regulator are specified in section 14A of the CTP Act and include:

• regulating the licensing of CTP insurers;
• monitoring the behaviour of licensed CTP insurers in relation to their obligations under the Act;
• improving health outcomes for claimants;
• monitoring the efficiency of the CTP scheme under the Act and identifying areas for amendment; and
• ensuring that all premiums meet the fully funded test and are not excessive.

Highlights

As a result of negotiations which occurred in 2012-13, the CTP regulator successfully encouraged competition within the CTP insurance market in the ACT.  This saw three new entrants – AAMI, APIA and GIO – begin operating in the ACT from 15 July 2013 alongside NRMA Insurance.  Over the course of the 2013-14 financial year competition was bedded-down, resulting in a number of benefits flowing to motorists.  Motorists gained from:

• a choice in insurance products being offered;
• higher quality products, with, for example, a number of insurers offering at-fault driver cover; and
• more affordable premiums as after-market discounts were offered by some insurers in the form of rebates.

The CTP regulator also:

• developed and implemented the Industry Deed which regulates the conduct of CTP insurance business under the CTP Act, such as the management of motor accident claims under CTP policies;
• instigated regular meetings between the ACT CTP insurers, the Industry Council of Australia and the CTP regulator which will be used for information sharing and intelligence, with the aim of refining the CTP Insurance scheme; and
• maintained the CTP website and responded to feedback from the public received by way of telephone calls through Canberra Connect, via the CTP website, and via general written correspondence.

Outlook

The CTP regulator will:

• establish a framework to support increased competition that provides benefits to the motorists of the ACT;
• promote public awareness of the causes of motor accidents through funding measures directed at reducing motor vehicle accidents;
• enhance the policy and procedures of CTP insurance for vehicles in the ACT in conjunction with insurers; and
• monitor the effectiveness of the CTP scheme against the objectives of the CTP Act using actuarial review and analysis, premium filings, regular discussion with the CTP insurers and feedback from the community.

Licensed Insurers

Under section 184 of the CTP Act, the regulator may license an insurer to provide CTP insurance in the ACT.  On 19 June 2013, the CTP regulator received applications from AAMI, APIA, and GIO to become licensed insurers in the ACT market.  The licences became effective on 1 July 2013.

Premium Determinations

Section 38 of the CTP Act provides that insurers are only permitted to charge a premium approved by the regulator.  The regulator usually receives a premium filing from licensed insurers at least annually.  The regulator makes an assessment of each premium filing, based on expert independent actuarial advice, and may approve a premium if it will fully fund the insurer's liabilities and is not considered to be excessive.  If a premium filing is not received within a year, the regulator has to review and assess the existing premium in line with the CTP regulator's responsibilities.

A premium filing assessment considers claims frequency, claim size, investment returns, administrative expenses, legal expenses and insurer profit – generally elements that serve to make up the overall cost of service for an insurer participating in the ACT CTP market.

The role of the CTP scheme actuary is to provide expert actuarial advice to the CTP regulator.  This role is performed by Cumpston Sarjeant Consulting Actuaries, under contract.

Profit Margins

Section 46 of the CTP Act requires that the CTP regulator must assess the profit margin included in the CTP premium and the actuarial basis on which the profit is worked out.  The assessments must be reported on annually.

With regard to the relevant filing documents of the insurers (1 September 2012 for NRMA and 1 July 2013 for new entrants to the scheme - AAMI, GIO and APIA), the regulator received actuarial advice from the scheme's actuary.  All the insurers' profit margins were assessed as being in a reasonable range.  The range for the industry, as assessed by the scheme actuary for 2013-14 was 8%-12%.

Loadings on Short Term Premiums

The following loadings apply to premiums on CTP policies with a duration of less than 12 months ('Short Term Premiums'):

• insurer's administration loading: $2.50; and
• insurer's lost investment income loading.

The CTP Premium Guidelines require the CTP regulator to publish the insurer's lost investment income loading each year in the annual report.  These loadings will be applied to short term premiums by the rego.act system in accordance with the formula in section 2.9.2 of the premium guidelines.  The amount is determined by the scheme actuary and will apply for the relevant financial year.  The loading for the 2013-14 financial year was 0.225%.

CTP Average Annual Risk Premium

Section 46A of the CTP Act requires that the regulator publish the average annual risk premium for CTP in the ACT.  The risk premium represents the base risk amount that each insurer bears when providing CTP insurance in the ACT.  Presently there are four licensed CTP insurers in the ACT.  As such, the risk premium has been derived using a weighted average of data from all of the insurers and the Nominal Defendant in order to determine the average risk premium price per policy.

The average risk premium price per policy for 2013-14 was $441.24.

Nominal Defendant

The Nominal Defendant is liable for claims against uninsured or unidentified motor vehicles for which a CTP insurer cannot be identified.  Under section 13 of the CTP Act, the Australian Capital Territory Insurance Authority (ACTIA) is the Nominal Defendant.  The Annual Report of the Nominal Defendant is annexed to ACTIA's Annual Report.

Performance Analysis

The ACT CTP regulator's 2013-14 performance indicators are included in the Statement of Intent, and are reported as part of the regulator's Statement of Performance.

The 2013-14 financial year saw the CTP regulator develop and accomplish the following indicators in a more competitive market place with additional insurers.

Explanation of Measures and Performance

a. CTP Premiums are approved in accordance with the Road Transport (Third-Party Insurance) Act 2008

The CTP regulator is required to approve or reject a premium application under section 41 of the CTP Act.  Under section 42, there are two grounds that permit the CTP regulator to reject a premium filing.  These grounds are to ensure that the premiums applied for by CTP insurers are not too low (the fully funded test) and not too high (the excessive premium test).

The premium filings received from AAMI, APIA and GIO in July 2013 were all assessed and approved in accordance with the Act.  NRMA was granted a premium filing extension until November 2014.  A review of NRMA's claims file for the year ending 30 June 2014 indicated that the CTP scheme continued to be fully funded.

b. Insurers obligations under the Act are complied with

A licensed CTP insurer has obligations generally under the CTP Act, and specific licence conditions under section 185 of the CTP Act that must be complied with.  As part of the CTP regulator's functions under the CTP Act (section 14A), the regulator monitors the compliance of CTP insurers with their obligations.

Any specific issues of non compliance are brought directly to the attention of the CTP regulator.  The CTP regulator will only produce a report to the Treasurer where there are identified areas of non compliance.  There were no issues of non compliance identified in 2013-14 and as such no report was produced.

c. Industry Deed

This Deed is an agreed operational arrangement between all licensed CTP insurers in the ACT, ACTIA (as the Nominal Defendant) and the ACT CTP regulator.  It was developed and agreed by insurers and was consequently signed by all insurers by September 2013.

The CTP regulator attends regular meetings with ACT insurers and the Insurance Council of Australia, at which insurers have the opportunity to raise concerns with the operational arrangements of CTP insurance in the ACT.  There were no issues with the Deed identified in 2013-14.

d. The scheme is fully funded

All premium filings by licensed CTP insurers are reviewed by the scheme actuary to ensure they are fully funded. Review of the premium filings ensures that the scheme is able to pay out all future liabilities.  Where an insurer does not make a premium submission during the financial year, the CTP regulator will request an independent actuarial review of the insurers' books to ensure that the ACT scheme will continue to be fully funded.  The scheme actuary considered that all insurers' premiums met the fully funded test in 2013-14.

e. Assess satisfaction of claimants with insurers, medical professionals and lawyers

Not Measured - It was the intention of the CTP regulator to undertake an assessment of the satisfaction of claimants.  Due to privacy legislation and the wording contained in the privacy statement of CTP claim forms, the regulator was unable to conduct these assessments without potentially putting itself at risk of breaching privacy laws.

f. Make guidelines under the Act

CTP Premium Guidelines commenced on 12 July 2013.  Revision to these guidelines, and the Early Payment Guidelines have not been required.  No other guidelines have been implemented under the Act in 2013-14.

g. Complaints handling within 10 working days of receipt of the complaint

Of the 30 written complaints received, 27 enquiries were responded to within the ten working day timeframe.  This is equivalent to a compliance rate of 90%, a 5% improvement from the 85% target.

Community Engagement and Support

The functions of the CTP regulator include identifying feedback from the community as a major part of monitoring the effectiveness of the CTP scheme against the objectives of the CTP Act.  To achieve this, the CTP regulator updated and maintained the CTP website and responded to feedback from the public received via Canberra Connect, the Minister's office and the CTP website.

Internal Accountability

Under the Government's Administrative Arrangement Orders, the CTP regulator resides within the Chief Minister and Treasury Directorate.  The CTP regulator is the Director-General of the Chief Minister and Treasury Directorate as outlined in Section 14 of the CTP Act.  The functions of the CTP regulator are supported by the Financial Framework Management and Insurance Branch of the Economic and Financial Group, Chief Minister and Treasury Directorate.

Risk Management and Internal Audit

Internal Audit

The CMTD Audit and Risk Committee considered matters relating to the CTP regulator.

An internal audit was completed during the year on the processes and datasets relevant to the payment and reporting of ACT CTP Insurance premiums.  The integrity of the processes and datasets are critical to the calculation of the Nominal Defendant Levy undertaken by the CTP regulator on a quarterly basis.

Risk Management Plan

The CTP regulator developed and implemented a risk management plan in accordance with the Australian/New Zealand risk management AS/NZS ISO 31000:2009 and the ACT Government's Enterprise Wide Risk Management Framework.  The CTP regulator has overall responsibility for risk management, and for ensuring compliance with the risk management plan.

The risk management plan identifies the key risk areas as operational, financial, legal and reputational risk.  The risk management plan has identified the following potential risks:

• CTP regulator not meeting stakeholder expectations;
• insufficient resources available to achieve statutory requirements caused by new insurers entering  the ACT scheme; and
• failure to meet legislative requirements.

These risks are mitigated through the use of appropriate governance structures, application of risk based management strategies and financial reporting processes.

Legislative Assembly Inquiries and Reports

During the reporting period the CTP regulator did not participate in any Legislative Assembly Committee inquiries related to its activities.

Auditor General and Ombudsman Reports

The ACT Auditor-General's Office issued an unqualified Audit Report relating to the ACT Compulsory Third-Party Insurance regulator financial statements for the year ended 30 June 2013 and an unqualified Report of Factual Findings relating to the ACT Compulsory Third Party Insurance regulator statement of performance for the year ended 30 June 2013.

There were no performance audits conducted by the Auditor-General with respect to the CTP regulator and no Ombudsman Reports.

Human Resources Management Reporting

The CTP regulator does not employ personnel.  The functions of the CTP regulator are supported by the Financial Framework Management and Insurance Branch of the Economic and Financial Group, Chief Minister and Treasury Directorate.

Government Contracting

The CTP regulator is party to the following agreements:

The CTP regulator has:

• complied with the quotation and tender thresholds laid out in the Government Procurement Regulation 2007; and
• ensured all contractors have complied with their employee and industrial relations obligations.

Due to the nature of the CTP regulator's enabling legislation, functions and administrative support, it did not report against the following sections of the Annual Report Directions.

Performance Reporting

B.4

Governance and Accountability

C.3

Legislation Based Reporting

D.1-D.8

Human Resources Management and Reporting

E.1-E.5

Financial Management Reporting

F.4, F.5