RACQ responds to Queensland CTP Scheme Review
RACQ has called for the introduction of premium equalisation to restore fairness and address the challenges impacting Queensland’s Compulsory Third Party (CTP) scheme.
As outlined in the Club’s submission to the CTP Scheme Review 2023, led by the Motor Accident Insurance Commission (MAIC), RACQ believes premium equalisation is the fairest solution for all parties involved in the scheme.
Club CEO David Carter said the role of CTP in Queensland is essential, and as one of four providers RACQ is committed to working with MAIC and the Queensland Government to ensure the ongoing stability of the scheme.
“For the most part, Queensland has a good CTP scheme that runs well,” Mr Carter said.
“Motorists pay one of the lowest CTP premiums in Australia and Queenslanders are likely to experience fair and reasonable outcomes should they get injured on our roads and need to lodge an insurance claim under the CTP scheme.
“But we need to address a key issue that’s eroding fairness and stability and that is the unbalanced risk that RACQ members are forced to carry in the scheme even though only 470,000 of our 1.2 million CTP policy holders are members.
“Premium equalisation is a fair solution and is the best way forward for the scheme with minimal disruption to those involved.
“This model would allow for premiums to be re-distributed across insurers based on the risk profile of their portfolio.
“This means for every dollar of CTP risk an insurer holds in the scheme, they would receive the appropriate level of premium, and if an insurer holds less risk, they receive less premium – a fair outcome for everyone.
“It would not impact motorists or the annual premium they pay, nor would it impact any other associated professionals who work in the scheme, including legal and health practitioners.
“Importantly, it would not impede the care or benefits available to injured persons, and community-rated pricing would also be retained to ensure affordability for motorists.”
Under the scheme’s current model, an insurer cannot choose what risks to underwrite and cannot refuse a motorist who selects them for their CTP. All drivers with the same vehicle class pay the same CTP premium, regardless of their individual risk.
According to industry research, RACQ’s strong brand reputation has attracted a larger share of riskier vehicles and drivers. This means, RACQ’s portfolio has a greater proportion of older vehicles, young or inexperienced drivers, shorter policy terms and re-registered vehicles compared to other insurers, yet we can’t charge more for this risk, and we can’t turn these motorists away.
This imbalance has resulted in the Club’s portfolio experiencing higher claims frequencies (which is the number of claims received per policy, ranging from 6% to 20%1 greater than the industry average (according to independent actuarial analysis). At the same time, RACQ’s brand strength in Queensland has led to significant market growth further exacerbating the Club’s elevated risk and claim frequency. This in turn has led to greater claims costs despite the fact the Club’s claim management performance is on par with industry.
“Put simply, the larger the market share for RACQ, the greater the unfairnesses as we do not receive the appropriate premium to cover our level of risk,” Mr Carter said.
“A premium equalisation model would not change how motorists choose their CTP insurer, nor would we want it to. It would create a level playing field across all insurers by matching the level of premium to the level of risk.”
If a premium equalisation model was adopted, an actuarially developed risked model would calculate an insurer’s portfolio risk based on various agreed attributes. Premium would be equalised by debiting insurers with a better than average risk mix, and crediting insurers with a below-average risk mix.
As part of its submission, RACQ reinforced the need for a swift review given the scheme requires urgent action from the Queensland Government.
“RACQ has a strong reputation for looking after people injured in road collisions and supporting their recovery. We’re proud of our participation the scheme, and the outcomes of this review will be critical to future-proof Queensland’s CTP insurance scheme and ensure trusted insurers, like RACQ, can continue to be there for Queenslanders when they need us most,” Mr Carter said.
To read RACQ's full submission click here.
[1] Based on independent analysis of data between accident years 2016 to 2022
Related topics
-
The information in this article has been prepared for general information purposes only and is not intended as legal advice or specific advice to any particular person. Any advice contained in the document is general advice, not intended as legal advice or professional advice and does not take into account any person’s particular circumstances. Before acting on anything based on this advice you should consider its appropriateness to you, having regard to your objectives and needs.
Insurance products (excluding Travel Insurance) are issued by RACQ Insurance Limited ABN 50 009 704 152 (RACQ). Conditions, limits and exclusions apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the PDS and any applicable Supplementary PDS before making a purchase decision on this product. You can also access our Target Market Determinations on this website.
Banking and loan products issued by Members Banking Group Limited ABN 83 087 651 054 AFSL/Australian credit licence 241195 trading as RACQ Bank. Terms, conditions, fees, charges and lending policies apply. This is general advice only and may not be right for you. This information does not take your personal objectives, circumstances or needs into account. Read the disclosure documents for your selected product or service, including the Financial Services Guide and the Terms and Conditions, and consider if appropriate for you before deciding.
Except for RACQ Bank, any RACQ entity referred to on this page is not an authorised deposit-taking institution for the purposes of the Banking Act 1959 (Cth). That entity’s obligations do not represent deposits or other liabilities of RACQ Bank. RACQ Bank does not guarantee or otherwise provide assurance in respect of the obligations of that entity, unless noted otherwise.
RACQ Operations Pty Ltd (ABN 80 009 663 414 AR 000234978) and Members Travel Group Pty Ltd (ABN 45 144 538 803 AR 000432492) are acting as an Authorised Representative of the issuer of the insurance, Tokio Marine & Nichido Fire Insurance Co., Ltd. (ABN 80 000 438 291 AFSL 246 548). Any advice set out above is general in nature only, and does not take into account your objectives, financial situation or needs. Before purchasing any travel products, please consider the RACQ Travel Insurance Product Disclosure Statement (PDS) and the Target Market Determinations (TMDs) that apply to these products. Whilst the PDS outlines the Terms and Conditions of these products, the TMDs outline the intended class of customers that comprise the target market for these travel products. This will allow you to consider which products best suit your objectives, financial situation and needs and consider the products appropriateness to your personal circumstances. TMDs also outline matters involving the distribution and the review of these products. The PDS, Supplementary PDS and TMDs for each travel product can be found here.