ACT Compulsory Third-Party Insurance Regulator

Transmittal Certificate

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Performance Reporting

B.1    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.

The CTP Act is administered by the Chief Minister, Treasury and Economic Development Directorate (CMTEDD). Under section 14 of the CTP Act, the Minister must appoint a public servant as the CTP regulator for up to 5 years. The Executive Director of the Economic and Financial Group (EFG), CMTEDD was appointed by the Minister as the CTP regulator for a period of 5 years commencing from 9 June 2015.

The functions of the regulator are supported by the Financial Framework Management and Insurance Branch of EFG, CMTEDD. The regulator’s stakeholders include the members of the ACT community, particularly persons injured in motor vehicle accidents, motorists who are required by law to purchase CTP insurance, and the licensed insurers.

B.1.1 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, and the scheme of statutory insurance for uninsured and unidentified vehicles operating 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.

B.1.2 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.

B.1.3 Highlights

Competition and CTP premium reductions

Since the successful introduction of competition to the ACT CTP insurance market commencing in July 2013, the three new Suncorp brand entrants – AAMI, APIA and GIO – have consolidated their position alongside NRMA Insurance in the market.

Competition has delivered innovative products and product choice. In addition, during 2017-18, motorists continued to benefit from further reductions in premiums, as shown in Figure 1. Since competition commenced in the ACT CTP market in July 2013 up until 30 June 2018, the average private passenger vehicle premium has fallen by $40.23, or 6.8%.

Figure 1 – Fall in CTP premium prices since the introduction of competition

CTP Deliberative Democracy Process – Citizens’ Jury

In 2017 the Government decided to undertake a deliberative democracy process - a citizens’ jury on the CTP insurance scheme.

Citizens of the ACT came together to discuss, debate and deliberate on the ACT’s CTP scheme.  Through this process, the citizens’ jury was asked to consider the question: ‘What should the objectives of an improved CTP scheme be to best balance the interests of all road users’.

The jury, made up of a representative group of Canberrans, first met in October 2017. Over four days the jury heard evidence from injured people and past CTP claimants, as well as medical, legal and insurance experts, including the CTP Regulator. They also considered community feedback and survey results.

The objectives set by the jury following that process were: early access to medical treatment; economic support and rehabilitation services; equitable cover for all people injured in a motor vehicle accident; greater efficiency and value for money; supporting people to better navigate the scheme and strengthening integrity of the scheme to reduce fraudulent behaviour.

The jury handed their report on the objectives for an improved CTP scheme to a Stakeholder Reference Group (SRG). This group included insurers, the legal profession, a health care consumer representative, a rehabilitation researcher and representatives of the ACT Government which included the CTP Regulator, as well as a scheme designer and actuary. An expert scheme designer, with input from the SRG, developed four models in line with the jury’s priorities. These models were costed by an actuary to determine their potential impact on the premiums driver’s pay.

The jury met for the final time in March 2018 and determined which model best met their priorities. The model chosen by the jury delivers the following improvements:

• everyone injured in a motor vehicle accident will receive up to five years treatment, care and income benefits, regardless of who was at-fault;
• quality of life benefits, which provide compensation for non-financial loss, will be available for all people who meet injury thresholds; and
• anyone whose injury was caused by someone else’s negligence and who is more seriously injured will still be able to access additional common law benefits.

The jury decided this model best met the objectives they set when they first commenced work in October 2017.

The ACT Government has publicly committed to delivering the scheme chosen by the jury and to introducing legislation to the ACT Legislative Assembly by the end of 2018. The aim is for the new scheme to commence in the second half of 2019.

The new CTP scheme will have a significant impact on the CTP regulator’s functions and systems, with additional requirements including, for example, a more extensive information role and some support for the dispute resolution mechanism.

Peer-to-Peer car sharing

Peer-to-peer car sharing (P2P car sharing) has been developing for a number of years as another element of the sharing economy. This form of car sharing generally involves offering cars that are owned by private owners or company fleets for short term rental.

During 2016-17, Car Next Door (CND) which currently operates in Sydney and Melbourne, approached the ACT Government regarding setting up its operations in Canberra. CND focuses on offering privately owned cars for rent, from a few hours and up to one day, through a web-based platform.

At the request of CND, during 2016-17, the CTP regulator facilitated a review by the insurers of the risks associated with a person being injured by a P2P car sharing vehicle. The review found that the risks for these services were substantially lower than for a commercial rental car, and consequently, a new CTP class 25B – Personal Share Vehicle (PSV) was created parallel to CTP class 25A - rideshare vehicle (given similar risks).

On 13 July 2017 CTP subordinate legislation in the form of the Road Transport (Third‑Party Insurance) Amendment Regulation 2017 (No 2) was notified to facilitate the new PSV arrangements. The CTP regulator wrote to insurers requesting PSV filings in July 2017, with the insurers providing filings in early to mid-August 2017.  The PSV premiums were effective from 18 September 2017.

CND has advised it expects to enter the ACT in the coming months. The CTP regulator has requested to be kept informed of the launch date to assist CND entering the market in terms of registration and CTP insurance. Other neighbourhood car sharing companies, such as Drive My Car and Popcar, are already operating in the ACT.

Light Rail Vehicles

During the course of 2016-17 and 2017-18, the CTP regulator assisted will amendments to the CTP Act to extend scheme coverage to include any personal injuries arising from a traffic accident involving a light rail vehicle (LRV). This allows persons with injuries arising from an LRV accident to be treated in a consistent manner with accidents involving other types of vehicles. Changes to the CTP Act became effective 11 October 2017.

The CTP regulator requested all insurers to file premiums for the new CTP class 26 - LRV by  1 November 2017. New LRV premiums were effective 1 February 2018, and Canberra Metro paid for CTP coverage [and lifetime care and support (LTCS) levy] on 3 April 2018 to allow the first five LRVs to commence testing.

Streamlining the CTP premium filing process

Following work undertaken in 2016-17, the CTP regulator continued to develop a ‘streamlined’ premium filing process with insurers during 2017-18.

To respond to changes in the competitive landscape, including insurers filing smaller, more regular changes in premiums more often, parties worked together to implement revised Premium Guidelines.

The key change was to revise section 6 of the Guidelines (which outlines the arrangements and data requirements for premium filings) to permit insurers to undertake a combination of full de novo and partial filings. Smaller, lower risk partial filings meeting various requirements (including premium changes within specified bands set by the scheme actuary) will no longer be subject to the detailed filing process. This will improve the efficiency of the filings process for both the insurers and the CTP regulator.

The Guidelines also included enhanced data provision requirements for the insurers to allow the scheme actuary to undertake more detailed and comparable analysis of full de novo filings.

The new Premium Guidelines were notified on 12 July 2018.

The CTP regulator wrote to insurers on 13 July 2018 informing them, based on the Scheme Actuary’s advice, that the annual bands for the relevant partial flings commencing 1 February 2018 are premium:

• increases of up to 3% will not be considered excessive i.e. +0.5% (minimum threshold) to +3.0%; and
• reductions of up to 8% will be considered to provide full funding i.e. -0.5% (minimum threshold) to -8.0%.

Autonomous Vehicles

In November 2016, the Transport and Infrastructure Council ² approved work to start developing a regulatory framework to support the safe operation of autonomous vehicles (AVs), which included the following recommendation:

Recommendation 7: That state and territory governments undertake a review of compulsory third-party and national injury insurance schemes to identify any eligibility barriers to accessing these schemes by occupants of an automated vehicle or those involved in a crash with an automated vehicle.

That, subject to the review of insurance schemes, each state and territory government amends its compulsory third-party insurance schemes in close consultation with each other and industry, and that resulting reforms are nationally consistent wherever possible.

To respond to Recommendation 7, a ‘CTP Insurance Review’ project (CTP review) has been put in place comprising representatives from the National Transport Commission (NTC) and Motor Accident Injury Insurance (MAII) schemes. The objectives of the CTP review are to:

• identify barriers to accessing compensation, under current MAII schemes, for personal injuries caused by an automated driving system (ADS);
• seek views on whether existing MAII schemes should be amended to provide cover for injuries caused by an ADS; and
• seek views on other options that could provide cover for injuries caused by an ADS.

The work also considers, and links to other NTC projects [such as the Changing Driving Laws and Safety Assurance System (SAS) strategies], around establishing legal obligations for automated driving system entities (ADSEs). The CTP Review considers these legal obligations in the context of possibly including insurance options to address personal injury arising from accidents occurring because of defective AVs.

During 2017-18 the CTP regulator provided advice and input into a discussion paper and participated in discussions as part of the MAII schemes and AV Working Group.

A discussion paper on possible changes to MAII schemes to recognise AV driving functions and entities is currently in the process of being finalised. The NTC will then seek public feedback on options for providing insurance coverage for accidents involving an AV in the second half of 2018.

During 2017-18 the CTP regulator also provided advice on a range of CTP and LTCS matters involving AVs, including more recently, the NTC projects – ‘Changing Driving Laws to Support Automated Vehicles’ and ‘Proposed Criteria for the Statement of Compliance’ (Part of the SAS for Autonomous Vehicles).

Road Safety initiatives

In 2017-18 the CTP regulator contributed a further $50,000 to the Australasian New Car Assessment Program (ANCAP) Safer Vehicle Choices road safety initiative, working in conjunction with both the Road Safety Policy unit in the Justice and Community Safety Directorate (JACSD) and ANCAP. The initiative largely builds on the successful 2016-17 ANCAP partnership campaign promoting safer vehicle choices which the CTP Regulator contributed to.

The 2017-18 strategy again targets safer vehicles choices for young and older drivers, who statistically have a higher risk of being involved in an accident than other drivers, with these motorists encouraged to purchase the safest car (with the highest ANCAP star rating) they can afford.  Evidence indicates that a person has ‘twice the chance of being killed or seriously injured in a 3 star rated car compared to a 5 star rated car’.³ The campaign is aimed at both reducing motor vehicle accidents and hence personal injuries, and also reducing the severity of the injuries sustained in such accidents.

The campaign will be implemented through a multi-pronged strategy with the ANCAP crash vehicle display⁴ occurring in universities and other Canberra locations; safer vehicle choices signage being displayed on Transport Canberra buses; and television advertisements running in the latter part of 2018.

A growing number of accidents in the ACT occur where talking or texting on a mobile phone is undertaken while driving. As a result, in 2017-18 the CTP regulator also contributed $15,000 towards reactivating the road safety campaign targeting the dangers of driver distraction such as texting or talking on a hand-held mobile phone with advertisements on social media and bus backs running in the second half of 2018.

The initiative aims to reiterate awareness of using phones and texting while driving and is aimed at reducing motor vehicle accidents and personal injuries as a result of such accidents.

Other highlights

The CTP regulator also:

• met with Heads of Motor Accident Injury Schemes (HMAIS) to discuss a range of national and strategic issues and to share information on issues facing individual CTP and LTCS schemes;
• met with the ACT CTP insurers, the ACT Nominal Defendant and the Insurance Council of Australia to share information and discuss a range of topical issues, with the aim of continually refining the operation of the CTP Insurance scheme;
• attended Australian Prudential Regulatory Authority (APRA) meetings with representatives from other privately underwritten CTP schemes to discuss regulatory and supervisory matters in respect to CTP insurers (following the signing of a Memorandum of Understanding between the CTP regulator and APRA in August 2017); and
• maintained the CTP website and responded to feedback from the public received by way of telephone calls through Access Canberra, via the CTP website at http://apps.treasury.act.gov.au/compulsorytpi/feedback, and general written correspondence.

B.1.4 Market Share

Market share indicates the proportion of the CTP market held by each insurer.  It provides an indication of how the ACT community is responding to a competitive market.

Figure 2 shows the average market share over each of the financial years from 2013-14 when competition began, through to the end of the latest financial year of 2017-18. Market share is based on premiums collected by insurers.

While Suncorp’s brands (and in particular it’s leading brand GIO) achieved significant gains in market share over the period 2013-14 to 2016-17, this share stabilised in 2017‑18. Relative to the 2016-17 market share:

• GIO’s market share was largely unchanged at 35.3% over the 2017-18 financial year [a loss of 0.1 percentage point (pp) compared to 35.4% over the 2016-17 financial year];
• NRMA’s market share was also largely unchanged at 56.3% over the 2017-18 financial year (an increase of 0.3 pp compared to 56.0% over the 2016-17 financial year); and
• AAMI and APIA continue to hold relatively small market shares at 7.8% and 0.6% over the 2017‑18 financial year respectively.

Figure 2 – Movement in insurers’ average market share since the introduction of competition

B.1.5 Premiums and scheme affordability

One of the objectives of the CTP Act is to keep the costs of insurance at an affordable level.

The premiums charged by insurers reflect the benefit structure underlying the ACT’s CTP insurance scheme. The ACT’s current scheme design differs from that of other State CTP schemes which tend to contain limits on benefits. For example, other CTP schemes limit access to common law and damages for non‑economic loss (general damages and pain and suffering) to severe injuries – the current ACT scheme has no such restrictions. The ACT arrangements are reflected in the higher premiums motorists pay in the Territory and hence impact on the relative affordability of the scheme.

The proposed new CTP scheme will in conjunction with introducing defined benefits for everyone, introduce thresholds and a general damages scale for common law claims and is currently anticipated to result in a reduction in premiums once it commences in the second half of 2019.

As shown in Figure 3, affordability, measured as premiums as a proportion of ACT average weekly earnings (AWE) improved, falling by 5.3 percentage points over the period 2013-14 to 2017-18.  This reflects average premiums falling as a proportion of AWE throughout this period. Affordability has improved despite slow wage growth.

Figure 3 – Average Premiums for Private Passenger Vehicles and as a Proportion of ACT Average Weekly Earnings

Notes: The average CTP premium is for a class 1 passenger vehicle based on a 12 month policy.

B.1.6 Average cost of claims and claims frequency

The average cost of a claim and claims frequency are important drivers of CTP insurance premiums. The higher the average cost per claim and claims frequency, the more funding insurers need to cover future claim payments and hence the need to set higher premiums.

The average claim data provided in Figure 4 are based on both finalised and open claims - comprising reported claims, historical payments and case estimates, by accident year.⁵ The inclusion of both finalised and open claims provides a complete picture of the scheme experience for accidents occurring in that year.

While case estimates reflect the best estimate of the future cost of open claims, they will inevitably differ from the ultimate cost of the claim. Generally, where there is more information available on the claim, that is, they are more established claims for older accident years, case estimates are considered to be better estimates of the ultimate cost. Because of this, to objectively reflect a reasonable picture of the average cost over time, the following figure provides data only up to 2014‑15, as the data for the accident years of 2015-16 to 2017-18 are at this point in time too underdeveloped to reflect costs for these years with sufficient accuracy. ⁶

Figure 4 demonstrates that the average claims cost over the period 2008-09 to 2014-15 generally ranged from $100,000 to $120,000 with the exception of 2012-13, where the cost was just above $146,000. The average cost over the seven year accident period was $114,624.

The average claim cost is driven by total claims costs (largely reflecting the overall severity of the accident injuries) and the number of claims.

Figure 4 – Average claim cost, by accident year

Notes:  

• Payments make in earlier years have not been indexed to reflect 2014-15 values.
• The average cost per claim by accident year is based on both finalised and open claims comprising reported claims, historical payments and case estimates.  Payments are gross amounts and claims numbers reflect only those claims for which payments have been made or are expected to be made.
• Accident years are on a financial accident year basis.
• Data for all years are subject to change and reflect ‘best case estimates’ given all years comprise both finalised and open claims, with the open claims (and where applicable re-opened claims) containing varying proportions of case estimates. Further, the date only reflects actual claims made to date.

Claims frequency (also known as the ‘accident rate’) is an important measure as it indicates the proportion of the Territory’s motor vehicles that are involved in a motor vehicle accident and which make a CTP claim. It is calculated by dividing the number of CTP claims (by accident year) by the number of registered vehicles with a CTP policy.

As shown in Figure 5, the number of claims and frequency of claims at a broad level move together.  For the latest years, from 2015-16 to 2016-17:

• the number of claims fell by 4.7% to 910.  This was higher than the average claims number over the 2009-10 to 2016-17 period of 804 ^(a); and
• claims frequency fell by 2.3 percentage points to 31.7 claims per 10,000 vehicles.  This is below the average frequency of 33.7 for the 8 year period ^(a):
• claims frequency has remained within a fairly tight band over the 2009-10 to 2016-17 period, between a low of 31.5 and a high of 35.5 (that is, 32 to 36 in every 10,000 motor vehicles were involved in an accident that led to a CTP claim) ^(a).

In 2016-17 the number of claims was higher than the average over the 2009-10 to 2016-17 period, while claims frequency in 2016-17 was lower than the average over the same period. This reflects the relationship between the trend in numbers of claims relative to the growth in the number of ACT registered vehicles with a CTP policy.

Data for 2017-18 are not shown as they are not sufficiently developed at this point in time.

Figure 5 – Number of claims and claims frequency, by accident year

Notes:  

• ^(a) Data from 2008-09 are excluded from this analysis given that the number of claims and claims frequency are understated.  
• As the new CTP Act became effective 1 October 2008, claims data for 2008-09 reflects a part-year effect.
• Claims data are on an accident year basis (by financial year), that is, claims made during the year the accident occurred.
• In deriving claims frequency, the number of claims are divided by the number of ACT registered vehicles with a CTP policy (excludes trailers and non‑engine caravans / campervans).

B.1.7 Claims payments

Claim payments by heads of damage (HoD) is a useful measure for analysing where a scheme’s funding is being spent and, importantly, the proportion of claims being paid directly to injured persons.

To provide an objective view of HoD trends over the period 2008-09 to 2013-14, Figure 6 provides HoD payments as a proportion of total payments for those claims that have been finalised, on an accident year basis.

The accuracy of the HoD percentages paid in each accident year is affected by the proportion of claims that have been finalised, with older accident years having a higher proportion of finalised claims. In this context, the time series provided excludes accident years from 2014-15 onwards as these years have relatively low proportions of finalised claims, and are therefore too incomplete at this point in time to be representative of the general trend in the various HoD.

The data shows that over the period 2008-09 to 2013-14:

• general damages was the largest component averaging 34% of total costs over the 6 year period (from a low of 32%, to a high of 38%);
• treatment and care costs averaged 23% of total costs, and had the highest variability over the period shown (from a low of 19%, to a high of 27%);
• economic loss averaged 22% of total costs (from a low of 19%, to a high of 24%); and
• legal costs averaged 21% of total costs (from a low of 20%, to a high of 23%).

Figure 6 – Heads of Damage as a proportion of total payments, by accident year

Notes:

• Payments made in earlier years have not been indexed to reflect 2013-14 values and are in relation to claims finalised.
• Payments are gross payments.
• Treatment and care costs comprise ‘treatment costs’ and ‘past and future care costs’.  Legal costs comprise ‘Defendant legal costs’, ‘Investigation costs’ and ‘Plaintiff Legal costs’, but not solicitor-client fees.

B.1.8 Fraud

One of the objectives of the CTP Act is to establish and keep a register of motor accident claims to assist with the administration of the statutory insurance scheme and the detection of fraud. The electronic Personal Injury Register (PIR) is the database of all motor accidents that occur in the ACT.

The CTP regulator is aware of cold calling and claims farming practices. There is evidence that these practices are continuing to occur in the ACT and other CTP schemes around Australia, and that the claims farming practices continue to evolve.

The CTP regulator will continue to analyse the ACT’s scheme data and work co-operatively with other Heads of MAII schemes and the ACT CTP insurers in regard to fraud issues and monitoring.

B.1.9 Scheme Data

The ACT’s PIR system is the electronic register of all claims and payments relating to motor accidents involving personal injury in the ACT under the current CTP scheme. The data are collected from CTP insurers and the Nominal Defendant at regular intervals.

The new CTP scheme (a hybrid no-fault common law scheme) has significant ramifications for the CTP regulator’s data collection and reporting systems, with new data fields required to be collected.

During 2017-18 CMTEDD progressed the business requirements; design; and project planning for implementing a new information technology system (ITS) which will reflect the new CTP scheme’s configuration and capture the required reporting requirements, including defined benefits.

In early 2018-19 it is expected that the project planning and associated requirements will be finalised, with the majority of the financial year dedicated to finalising the technical arrangements; liaising with stakeholders; building the business system; and testing the ITS in time for the commencement of the new scheme, expected in the second half of 2019.

B.1.10 Profit Margins

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

All the insurers’ profit margins were assessed as being in a reasonable range. These profits are expected profits at the time premiums are filed.

The range for the industry as assessed by the scheme actuary in 2017-18 was 8% to 11% (in 2016-17 the range was also 8% to 11%).

B.1.11 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 is assessed that 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 accordance with the same criteria.

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 currently performed by Finity Consulting Pty Limited, under contract.

See B.2 Performance Analysis, performance indicator (a) for details on filings received during 2017‑18.

B.1.12 Licensed Insurers

Under section 184 of the CTP Act, the regulator may license an insurer to provide CTP insurance in the ACT.

No applications from new insurers to become licensed insurers in the ACT were received during 2017-18.

B.1.13 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 3.5.3 of the Premium Guidelines. The amount is determined by the scheme actuary and applies for the relevant financial year. The loading for the 2018-19 financial year is 0.187% per month (2017-18: 0.177%).

B.1.14 CTP Average Annual Risk Premium

The regulator is required to 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 2017-18 was $419.84 (2016-17: $422.73).

B.1.15 Nominal Defendant

The Nominal Defendant is liable for claims against uninsured or unidentified motor vehicles (including unregistered vehicle permits) 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.

Section 3.5.2 of the CTP Premium Guidelines requires the Nominal Defendant loading (NDL) to be assessed on a yearly basis by the scheme actuary. The NDL that will ‘apply to the next financial year’ is to be published in the CTP regulator’s annual report.

At the request of the CTP regulator, the scheme actuary has undertaken a review of the NDL for 2018-19. It has been determined that the NDL will increase to 4.7% in 2018-19 (the loading was increased to 4.5% in February 2018).

The principal reason for the increase is due to the commercial insurers continuing to reduce premiums during 2017-18. As the NDL is a fixed percentage applied to the base CTP premium,⁷ reduced base premiums automatically result in a lower amount being transferred to the Nominal Defendant. This necessitates an increase in the NDL to maintain required funding.

B.1.16 Outlook

Priorities in 2018-19 and over the next three financial years relate to the objectives of the CTP Act and include:

• assisting CMTEDD to develop legislation to implement the new CTP scheme and an ICT solution for the increased data requirements. It is expected that the new scheme will commence in the second half of 2019;
• working with the National Transport Commission and other CTP regulators on identifying how CTP schemes deal with autonomous vehicles;
• working with peer-to-peer car sharing companies wanting to enter the ACT market;
• monitoring and reviewing the streamlined CTP premium filing process for specified (lower risk) filings to enhance the efficiency of the process for all impacted parties, while also encouraging more affordable premiums through ongoing competition;
• continuing to monitor the scheme’s performance; and
• contributing to targeted road safety initiatives that assist in reducing motor accidents and personal injuries, and mitigating their impact.

B.2    Performance Analysis

The ACT CTP Insurance regulator’s 2017-18 performance indicators are included in the Statement of Intent, and are reported as part of the regulator’s Statement of Performance.

The 2017-18 financial year saw the CTP regulator develop and achieve the following indicators.

Explanation of Performance Indicators

a.            ACTP 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 Road Transport (Compulsory Third-Party Insurance) Act 2008 (CTP Act). Under section 42, there are two grounds on which the CTP regulator is permitted to reject a premium filing: the premiums applied for by CTP insurers are too low (the fully funded test); or are too high (the excessive premium test).

Premium filings were received from AAMI and APIA in June 2017 (approved in July 2017).  Premium filings from all insurers for the new CTP Personal Share Vehicle class 25B were received in August 2017. Premiums for the new CTP Light Rail Vehicle (LRV) class 26, and to allow a common basis from which bands for streamlined partial premium fillings could be determined, were received from NRMA in October 2017 and AAMI, APIA, GIO in November 2017. All of the premium filings (and granted extensions) were assessed and approved in accordance with the Act.

b.            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 present and 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 insurer’s books to ensure that the ACT CTP Insurance scheme will continue to be fully funded. The scheme actuary considered that all insurers’ premiums met the fully funded test in 2017-18.

c.             Make guidelines under the Act

The guidelines under the Act were discussed as a standing item at the 2017-18 ICA meetings.

In addition, changes to the Premium Guidelines under the Act were drafted and discussed at the April 2018 ICA meeting, and progressed out of session with insurers during 2017-18. The instrument was notified on 12 July 2018.

The key change was to revise section 6 of the Guidelines to permit insurers to undertake a combination of full de novo and partial filings. Smaller, lower risk partial filings meeting various requirements (including premium changes within specified bands set by the scheme actuary) will not be subject to the detailed filing process. This will improve the efficiency of the process for both the insurers and the CTP regulator. Enhanced data provision requirements from the insurers were also adopted to allow the scheme actuary to undertake more detailed and comparable analysis of full de novo filings.

The Early Payment Guidelines were monitored and discussed during 2017-18, however, revisions were not necessary before 30 June 2018. No other guidelines have been implemented under the Act in 2017-18.

d.            To continue to refine the system of CTP insurance for vehicles in the ACT in conjunction
with the insurers

The CTP regulator and insurers met twice during 2017-18 at meetings facilitated by the ICA (there was also out-of-session correspondence with insurers on important issues). The meetings and correspondence included discussion of matters relating to improving the operation of the CTP scheme, namely:

• Informing insurers about the CTP Deliberative Democracy process (August 2017 meeting) and providing an outline of the citizens’ jury outcomes and targeted consultation process during the legislative drafting for the jury’s chosen model (April 2018 meeting);
• discussing changes to the Premium Guidelines to finalise streamlining provisions for relevant premium filings;
• discussing the CTP arrangements for the ACT’s light rail vehicles;
• discussing the way motorists are informed about their ‘current’ CTP insurer on the registration renewal notices;
• seeking input into a draft response to NSW on proposed cross-border claims arrangements following implementation of a new NSW CTP scheme; and
• providing an update to insurers on the status of the entry of peer-to-peer car sharing organisations into the ACT market.

e.            Promote public awareness of the causes of motor accidents through funding measures|
directed at reducing causes of motor vehicle accidents

The CTP regulator contributed $65,000 in 2017-18 to various road safety strategies aimed at mitigating third-party motor vehicle injuries. This comprises:

• $50,000 for an Australasian New Car Assessment Program (ANCAP) Safer Vehicle Choices campaign; and
• $15,000 for a Texting while Driving campaign.

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

In 2017-18, the CTP regulator achieved 100% compliance with this performance indicator in cases where no further information was required from another Directorate.

B.3    Scrutiny

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

There were no Ombudsman reports with recommendations in relation to the CTP regulator.

The Auditor-General Report No.1 of 2018: ACT Government Strategic and Accountability Indicators made a number of recommendations that were relevant for the CTP regulator.  In regard to:

• Recommendation 3 (b), the CTP regulator has been requested to amend accountability indicators so they meet the criterion of Clarity; and
• Recommendation 4, all Territory entities, including the CTP regulator, have been requested to document their procedure for the review, selection and approval of strategic and accountability indicators.

The amendment of accountability indicators [recommendation 3 (b)] and the documentation of procedures for the review, selection and approval of strategic and accountability indicators (recommendation 4) will be reviewed in line with updated guidance material once it has been released.

B.4    Risk Management

The CTP regulator has 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 staff and/or resources available to achieve outcomes;
• failure to meet legislative requirements; and
• Personal Injury Register being unavailable on the ACT ICT platform.

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

B.5    Internal Audit

The CTP regulator is part of the CMTEDD Audit and Risk Committee.

CMTEDD’s Annual Report section on Internal Audit Committee applies to the CTP regulator.

No internal audits of the CTP regulator were undertaken during 2017-18.

B.6    Fraud Prevention

The functions of the CTP regulator are supported by the Financial Framework Management and Insurance (FFMI) Branch of the Economic and Financial Group (EFG), CMTEDD who adhere to the CMTEDD Fraud and Corruption Prevention Plan.

B.7    Workplace Health and Safety

The CTP regulator does not employ any personnel.

The functions of the CTP regulator are supported by the FFMI Branch of EFG, CMTEDD who adhere to the Directorate’s Workplace Health and Safety practices.

B.8    Human Resource Management

The CTP regulator does not employ personnel.  The functions of the CTP regulator are supported by the FFMI Branch of the EFG, CMTEDD.

The CMTEDD’s Annual Report section on HR management applies to the CTP regulator.

B.9    Ecological Sustainable Development

The CMTEDD’s Annual Report section on Ecologically Sustainable Development applies to the CTP regulator.

Financial Management Reporting

C.1    Financial Management Analysis

General Overview

Objectives

The role of the Australian Capital Territory Compulsory Third-Party Insurance regulator (CTP regulator) is to regulate the compulsory third-party (CTP) insurance scheme in the ACT under the CTP Act. The CTP regulator’s functions are to be carried out in accordance with the objectives of the CTP Act under section 5A, which are to:

• continue and improve the system of CTP insurance, and the scheme of statutory insurance for uninsured and unidentified vehicles operating in the ACT;
• promote competition in setting premiums for CTP policies;
• keep the costs of insurance at an affordable level;
• provide for the licensing and supervision of insurers providing insurance under CTP insurance policies;
• encourage the timely resolution of personal injury claims resulting from motor accidents;
• promote and encourage, as far as practicable, the rehabilitation of people who sustain personal injury because of motor accidents;
• establish and keep a 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.

In accordance with section 163C(1) of the CTP Act, the CTP regulator collects an amount for the Nominal Defendant Fund from each licensed CTP insurer in the Territory, as well as the Commonwealth and ACT Governments, that appropriately covers the claims against uninsured or unidentified motor vehicles for which the Nominal Defendant has responsibility. The amount collected by the CTP regulator is transferred to the Office of the Nominal Defendant.

Under the CTP Act, the CTP regulator is required to maintain a current register of all claims lodged for personal injury following motor vehicle accidents occurring within the borders of the ACT.  These claims are recorded on the ACT’s Personal Injury Register (PIR).

Risk Management

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 key risks identified are financial, operational, legal and reputational. The key operational risk is related to whether the CTP regulator has sufficient resources, both in terms of financial and staffing capacity (including the number of staff as well as staff experience and expertise), to fulfil its obligations and operate effectively.

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

Financial Performance

The following financial information is based on the audited Financial Statements for 2017-18 and 2016-17, and the forward estimates contained in the 2018-19 Budget Statements.

Total Expenses

1.  Components of Expenses

For the financial year ended 30 June 2018, the CTP regulator recorded total expenses of $0.501 million. The largest component was administrative support expenses within supplies and services, which represents 43.3% of the total expenditure or $0.217 million. Administrative support expenses were associated with the reimbursement of salary and associated expenses for Chief Minister, Treasury and Economic Development Directorate (CMTEDD) staff to undertake the CTP regulator's functions. The CTP regulator did not employ any staff.

Figure 1 indicates the components of the CTP regulator’s expenses for 2017-18.

Figure 1 – Components of Expenses

2.            Comparison to Budget

Total expenses of $0.501 million were $0.035 million, or 6.5% lower than the 2017-18 Budget of $0.536 million. The decrease mainly relates to lower than anticipated actuarial expenses. Budgeted actuarial expenses for an update and ad hoc work were not required during 2017-18.

3.            Comparison to 2016-17 Actual Expenses

Total expenses of $0.501 million were $0.1 million higher than the actual expenses of $0.401 million. The increase mainly relates to information technology costs ($0.061 million) and the amortisation of intangible assets ($0.032 million) associated with capital upgrades to the CTP scheme’s Personal Injury Register information system.

4.            Future Trends

Expenses are budgeted to increase by $0.052 million (10.4%) in 2018-19 mainly due to:

• higher ICT costs associated with ongoing maintenance of the PIR system; and
• higher actuarial costs due to increased actuarial work on the 3 yearly section 275 review of the scheme.

Expenses are expected to remain steady in 2019-20.

Total Income

1.            Components of Income

For the year ended 30 June 2018, the CTP regulator recorded a total income of $0.549 million. The CTP regulator’s income was derived from the levy on ACT CTP vehicle registrations ($0.528 million) and interest from cash at bank ($0.021 million).

Figure 2 indicates the components of the CTP regulator’s income for 2017-18.

Figure 2 – Components of Income

2.            Comparison to Budget

Revenue for the year ended 30 June 2018 of $0.549 million was largely in line with the budget of $0.536 million.

3.            Comparison to 2016-17 Actual Income

Total revenue of $0.549 million for 2017-18 was essentially in line with the 2016-17 actual revenue of $0.532 million.

4.            Future Trends

Income in the forward years is relatively consistent with the 2017-18 income levels.

Financial Position

Total Assets

1.            Components of Total Assets

The total asset position at 30 June 2018 was $0.894 million and shows the CTP regulator held 70.4 % of its assets in cash. The intangible asset is the CTP scheme’s Personal Injury Register information system.

Figure 3 indicates the components of the CTP regulator’s total assets as at 30 June 2018.

Figure 3 – Total Assets at 30 June 2018

2.            Comparison to Budget

Total assets of $0.894 million at 30 June 2018 were $0.156 million or 21.1% higher than the Budget of $0.738 million mainly due to higher levels of cash resulting from:

• lower than anticipated expense payments; and
• higher cash at bank at 1 July 2017 than anticipated at the time of the budget.

3.            Comparison to 2016-17 Actuals

Total assets at 30 June 2018 of $0.894 million were $0.105 million, or 13.3% higher than the
30 June 2017 actual result of $0.789 million. The increase was mainly associated with a higher cash balance resulting from higher revenue received than the expenses.

4.            Liquidity

‘Liquidity’ is the ability of the CTP regulator to satisfy its short-term debts as they fall due. A common indicator for liquidity is the current ratio, which compares the ability to fund short-term liabilities from short-term assets. A ratio of less than 1-to-1 may indicate a reliance on the next financial year’s CTP regulator insurance levy to meet short-term debts.

Table 1 indicates the liquidity position of the CTP regulator.

Table 1 – Current Ratio

The CTP regulator’s current ratio at 30 June 2018 was 6:1, which is more than sufficient to pay its liabilities as they fall due.

The CTP regulator has budgeted to maintain a strong level of liquidity for future years.

Total Liabilities

1.            Components of Total Liabilities

The CTP regulator’s total liabilities of $0.107 million at 30 June 2018 relate to trade payables associated with the funding of road safety initiatives to mitigate third-party motor vehicle injuries, and accrued expenses associated with audit fees, actuarial expenses, and administrative support expenses.

2.            Comparison to Budget

Total liabilities of $0.107 million, at 30 June 2018 were $0.087 million higher than the Budget of $0.020 million. This was mainly due to higher than anticipated accrued expenses for road safety initiatives and actuarial services for work performed.

3.            Comparison to 2016-17 Actuals

The actual liabilities of $0.107 million at 30 June 2018 were $0.057 million higher than the
30 June 2017 actual amount of $0.050 million. In 2017-18, a large proportion of the payables relates to the funding of road safety initiatives. There were no outstanding initiative payments at
30 June 2017.

C.3    Capital Works

The CTP regulator did not undertake any Capital Works Projects in the 2017-18 financial year.

C.4    Asset Management

The CTP regulator has one intangible asset, in addition to its operational bank account. The intangible asset relates to software for the ACT Personal Injury Register and is amortised on a straight line basis over its useful life of 5 years.

C.5    Government Contracting

The CTP regulator did not have any contracts which value exceeds $25,000 signed in 2017-18.

² The Transport and Infrastructure Council, comprised of Commonwealth, state, territory and New Zealand Ministers, reports to the Council of Australian Governments, and plays a key role in delivering national reforms to improve the efficiency and productivity of Australia’s infrastructure and transport systems.
³ ANCAP website - https://www.ancap.com.au/safety-ratings-explained.
⁴ The ANCAP display involved a 1998 and 2015 Corolla which were crashed head on at 64km/h, with the message: ‘in the 2015 car you walk away, in the ’98 model you’re unlikely to survive’.
⁵ Accident year means the year in which the accident occurred, not the year in which payments occur.
⁶ Data for the 2015-16 accident year and beyond are deemed by the scheme actuary to be too underdeveloped to contribute to a reliable longitudinal analysis at this point in time, as the case estimates as a proportion of finalised and open claims (comprising both payments and estimates) is well over 50%.
⁷ The base CTP premium is calculated as the CTP premium less GST and the Nominal Defendant Loading.