Thousands of people are injured every year in motor vehicle accidents in New South
Wales. The Government’s proposed overhaul of Compulsory Third Party (CTP) Motor
Accident Insurance will affect all road users.
The CTP Motor Accident Insurance scheme has been in place for around 15 years. The
scheme introduced mandatory third party insurance for all motorists to ensure
compensation was accessible to those injured in a motor vehicle accident.
The proposed reforms stem from concerns that the current system returns less than half
of CTP funds to injured road users despite rising premiums. Lengthy delays in
processing claims in a complex system and an increase in fraudulent claims have also
sparked interest for reform. Specific objectives of the overhaul are:
increasing the share of available benefits to those most seriously injured;
streamlining the present claims process;
reducing fraudulent claims;
reducing the costs of CTP insurance
Changing from a fault-based to hybrid no-fault scheme
The present scheme restricts access to compensation to injured people who can show
that a motor vehicle accident was caused by another person. However, some people
may still be protected through the ‘nominal defendant’ scheme which provides access to
compensation when an at-fault driver is uninsured or unidentified.
Further provisions allow compensation for injured people in the event of a ‘blameless’
accident and cover for medical and treatment expenses for injured children under 16
years.
The proposed hybrid no-fault scheme will extend cover to include ‘at-fault’ injured road
users as well as pedestrians injured by bicycle riders.
Lump sum payments for non-economic loss (either negotiated between an injured
person’s legal representative and insurer or awarded in court) existing under the present
scheme, will be retained for people suffering severe injury. Severe injury is presently
defined as an injury causing a person to suffer more than 10% whole person
impairment.
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For those suffering less serious injuries (comprising most CTP claims) a defined
statutory benefit scheme will apply. This means that the nature and duration of
compensation or benefits available will be set by legislation rather than negotiated
between the injured person and insurer. Legal representation is likely to be removed for
people with minor injuries. These claims will instead proceed through the system with
benefits capped to the legislative limit awarded only in accordance with the recognised
‘category’ of injury and provided within set timeframes.
Are the changes good or bad?
By introducing a no-fault system, it is anticipated that an additional 7,000 people who are
injured on our roads each year will be assisted. The reforms recognise that people
should not be punished for momentary lapses in judgment. Assisting all people who
have suffered the misfortune of a motor vehicle accident also has potential to reduce
reliance on other social security measures.
The new system is likely to reduce waiting times and streamline payments to injured
people. By removing the need to establish fault (which would typically require
negotiation between an injured person’s lawyer and the insurer) claimants can expect to
receive benefits sooner than under the present scheme.
By defining the amount of benefit payable for most claimants, the level of uncertainty
from an insurer’s perspective is reduced which ideally contributes towards reductions in
premiums.
An emphasis on providing treatment and rehabilitation to persons suffering minor
injuries, as opposed to monetary payments, is likely to reduce the incidence of
fraudulent claims and contribute to more affordable CTP insurance for all road users.
So what are the concerns?
The reforms have raised significant concern. The proposed system assumes only two
levels of injury – those of ‘low severity’ or those people ‘most seriously injured’.
Consequently, a person injured but not to the extent prescribed as ‘most seriously
injured’ will be dealt with according to new statutory based limits.
Although it is unclear yet how injury types will be ‘categorised’ and payments capped,
the process is very different to the current system which may recognise the unique
impact similar injuries have on different people.
For example, with appropriate assistance, an office professional might return to work
reasonably okay after fracturing a leg however the return of a professional athlete or
plumber to their pre-injury occupation is unlikely to be so easy. The reforms may not
take into account that certain workers have few alternative career choices.
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The reforms deter legal representation for ‘moderate’ injuries even through those injuries
may have profound effect on an individual’s lifestyle and financial future. For this reason,
it is feared that those suffering moderate injuries, not considered ‘severe’ enough under
the system will simply fall through the cracks.
The trade-offs for a speedier system also raise concerns. Whilst this might deliver
benefits quicker to those who need them, such a simplistic approach may evade the
thorough examination that a valid claim deserves.
The new system at a glance
More people covered for injuries sustained on New South Wales roads
Defined benefits capped for people suffering minor or moderate injuries
Less complex and quicker claims process with earlier access to benefits
Focus on medical treatment and rehabilitation rather than lump-sum payments for
people with less-severe injuries
Retention of the common law system only for those suffering severe injuries
Conclusion
The details of the proposed new system are yet to be finalised with the changes
expected to take effect in around July.
The objective of a compensation scheme is to put a person suffering injury in as close
as possible a financial position as he or she was prior to having suffered the injury. This
is achieved by providing medical treatment, rehabilitation and domestic care to facilitate
recovery and financial payments to compensate for loss of earnings and, in more
extreme cases, non-economic loss or ‘pain and suffering’.
Most people would welcome a system that is less complex, reduces insurance
premiums and fraud and provides benefits sooner to those who need them. There are
however serious concerns that the introduction of statutory defined payments will pose
significant restrictions on injured people accessing fair and just compensation.
If you have been injured in a motor vehicle accident or know of somebody who might
need advice in this complex area of law, please call us on 02 9191 9293 or email
mail@rnlegal.org