Motor Injury Insights brings you all the news

from the world of motor accident compensation.

October 2017

In this edition:

Claim farming and ‘compensation touting’ complaints

Analysis of road fatality statistics

NSW’s new scheme, due to commence on 1 December

Premiums and affordability across Australia and New Zealand.

finity.com.au

Motor Injury

Insights

| Motor injury insights | October 2017 02

The claim farmers keep coming!We have previously written about the problem of claim farming – the dramatic impact this practice has had on

the UK motor market in the past 15 years (see 2012 article), and the fact that claim farming practices have been

alive and thriving in Australia for at least the last five years (see April 2017 MII).

Claim farming is big business! Call centres, generally based overseas, spend their days making cold calls to

encourage people to lodge CTP claims. The calls are sometimes targeted to people who are known to have

been in a motor accident (where do they get this information?) and sometimes they are just made at random.

People interested in finding out more are generally referred to a legal practice, and there may also be referrals

for car repairs and/or car hire at inflated prices. In NSW, as in the UK, evidence suggests this practice has been

associated with a sharp rise in claims for minor injuries.

Claim farmers are shameless in their approaches to solicitors – see the excerpt from a recent marketing email

sent to a NSW legal firm. We note that, at least in NSW and Qld, it is illegal for a solicitor to pay referral fees,

but somehow this business model seems to work…

Excerpt from a claim farmer’s marketing email

We are producing over 180 clients per day in the UK… We have started in Australia working with claims

management companies but are now looking to work with solicitors as we are greatly looking to

increase our campaign as we are just scratching the surface and expect to produce over 80 clients per

day within two months as long as we can work with the right firms… Orders are always made the day

before and have to be placed before 5pm to ensure you receive the clients the following day... If you

wish to order 60 clinical negligence clients per day, we will need at least three days’ grace, but you will

receive an increase of 20 clients per day… Our agreement is set up as an internet marketing agreement

for compliance purposes…

| Motor injury insights | October 2017 03

The number of complaints across Australia more than doubled between May 2016 and May 2017.

Importantly, these numbers are only those who bother to report claims touting to the ACCC; we can

only speculate on the total number of people receiving the calls!

Alarmingly, complaints in Qld, WA and SA have more than doubled in the last six months. CTP insurers in

Qld are already seeing higher claim frequencies associated with minor injury claims – it doesn’t take a lot

of imagination to see how this could be linked to increased claim farming activity.

The number of touting complaints in NSW fell in the latest half-year. This may be partly linked to the impact

of the NSW Police Strike Force into CTP fraud (see article on Ravens).

We have previously noted the difficulties faced by insurers in dealing with claim farming – it is time

consuming, costly and often futile to pursue individual claimants for fraud. However, investing time and

effort in challenging exaggerated claims, and ensuring they are not over-compensated, will pay off in the long

term. Concerted efforts by regulators and insurers working together to understand the dimensions of the

problem can help identify key characteristics of suspicious claims. And surely the legal and medical bodies

also have an interest in ensuring ethical behaviour by their members, and should be warning against any

involvement with claim farmers.

FIGURE 1 – CLAIM FARMING COMPLAINTS

Australia-Wide By Jurisdiction

Com

plai

nts

per M

onth

900

800

700

600

500

400

300

200

100

0

Jan

16

Mar

16

May

16

Jul 1

6

Sep

16

Nov

16

Jan

17

Mar

17

May

17

Com

plai

nts

per H

alf-Y

ear

NSW VIC QLD WA SA TAS ACT NT

1,600

1,400

1,200

1,000

800

600

400

200

0

Jun 16 Dec 16 Jun 17

It is fascinating how agile the claim farming business model seems to be. The charts below show the numbers

of complaints about ‘compensation touting’ received by the ACCC – and indicate that when the going gets

tough in one state (NSW), claim farmers can move their focus elsewhere.

| Motor injury insights | October 2017 04

What can we learn from fatality statistics?For people injured in horrific motor accidents, there can be a fine line between surviving with very serious

injuries and succumbing to those injuries. With only small numbers of people suffering severe traumatic

brain or spinal cord injuries as a result of motor accidents, data on motor accident fatalities may

provide information that can help our understanding of trends in lifetime care scheme participants –

for example, what can we learn about the age distribution of potential participants?

Are fatalities increasing?

Nationwide, the numbers of road fatalities steadily decreased to 2014, but in the two years since,

fatalities have increased by 13%. The increase has not, however, been uniform:

• Fatalities have increased for cars, motorcycles and pedestrians, but not bicycles – see Figure 2.

• The movements in fatality numbers vary widely by jurisdiction – see Table 1.

FIGURE 2 – AUSTRALIAN ROAD FATALITIES

Fewer fatalities among the young

For the under 30 age groups, road fatality rates (fatalities as a percentage of the population) have reduced

significantly over the last 10 years. A key reason for the reduction is the introduction of Graduated Licensing

Systems (GLS) for young drivers. In the early 2000s, no Australian jurisdiction had a comprehensive GLS,

but all jurisdictions had some form of GLS by 2014.

The road fatality rate for older age groups (above 55) has remained reasonably stable, and because there

have been fewer fatalities among the young, the older age groups now account for a greater proportion of

total fatalities – increasing from around 20% to 30% (see Figure 4). Furthermore, with the ageing of Australia’s

population, the absolute number of fatalities from older age groups has increased.

TABLE 1 – CHANGE IN FATALITIES: 2014 TO 2016

Num

ber o

f Fat

aliti

es

1,800

1,600

1,400

1,200

1,000

800

600

400

200

02006 2007 2008 2011 20142009 2012 20152010 2013 2016

Car Motorcycle Pedestrian Bicycle

Jurisdiction % Change

NSW 24%

VIC 17%

NT 15%

QLD 13%

TAS 12%

ACT 10%

WA 5%

SA (20%)

Australia 13%

| Motor injury insights | October 2017 05

FIGURE 3 – ROAD FATALITY RATES

FIGURE 4 – AGE MIX OF ROAD FATALITIES

Fata

litie

s pe

r Mill

ion

Peop

le160

140

120

100

80

60

40

20

0

100%

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

2006

2006

2007

2007

2008

2008

2009

2009

2010

2010

2011

2011

2012

2012

2013

2013

2014

2014

2015

2015

2016

2016

0-14 15-29 30-54 55+

<30 30-54 55+

If the changing age mix of fatalities is reflected in the serious injury (NIIS eligible) statistics, we might expect

to see an increasing proportion of older people in lifetime care schemes. The design and costing of these

schemes has taken a historical view of the experience to estimate potential participants. The last four to five

years’ experience suggests that the age proportions might be different from expectations, with more older

people. If this trend continues, then all else being equal (including the total number of participants remaining

constant), a higher proportion of older age participants in lifetime care schemes should mean lower cost

pressures for these schemes.

Sources:• bitre.gov.au/statistics/safety/fatal_road_crash_database.aspx• roadsafety.transport.nsw.gov.au/downloads/gls.pdf

| Motor injury insights | October 2017 06

Update on Premiums

CTP Premiums around Australia and NZ

Figure 5 summarises the headline CTP premium rates effective 1 July 2017. The amounts include any

loadings relating to Lifetime Care (for those jurisdictions with separate schemes), as well as stamp duty,

GST and other levies. The 2016 rates and the % movement in the year are also shown.

FIGURE 5 – CTP RATES AT JULY 2017: STANDARD MOTOR CAR

The NSW premium is similar to a year ago. Premiums increased during the year, but recent lower

numbers of legally represented minor injury claims prompted premium reductions effective 1 July 2017,

offsetting the mid-year increases. Recent changes in legal cost regulations and fraud mitigation efforts

(see article on Strike Force Ravens) appear to have partially reversed the increasing claim frequency

trend of recent years.

For Queensland, a $16 increase in the NIISQ levy was more than offset by reductions in the ‘CTP component’

of premiums, giving a total reduction in the year of $16.60. In Tasmania, lower scheme claims costs were

passed on to motorists. The NZ premium fell by 13% (which follows reductions of 33% and 41%); favourable

investment returns during 2016/17 resulted in a better than expected funding position.

Of the Australian jurisdictions, Tasmania continues to have the lowest premium, and the ACT the highest.

700

600

500

400

300

200

100

0(2%) 0% 2% 3% (5%) 0% 2% (7%) (13%)

ACT

Third party + lifetime care for catastrophic injuries No-fault

NSW SA WA QLD NT VIC TAS NZ (in NZ$)

Jul 17 Jul 16

| Motor injury insights | October 2017 07

Affordability Index

Figure 6 shows a CTP ‘affordability index’ by jurisdiction (aqua bar). The index expresses the

standard metro car premium shown in Figure 5 as a percentage of average weekly earnings – a

smaller percentage means better affordability. Since the jurisdictions have different benefit regimes,

we can’t draw conclusions about comparative scheme performance from this index. The diamonds

show the affordability index at July 2016.

FIGURE 6 – CTP AFFORDABILITY INDEX AT JULY 2017

Since last year, affordability has improved in most jurisdictions – the exceptions being NSW and WA,

where affordability is largely unchanged. Affordability improved in Qld, Tasmania and NZ, driven by

the premium reductions noted earlier.

Qld now joins WA as the most affordable of the Australian jurisdictions, closely followed by Tasmania.

60%55%50%45%40%35%30%25%20%15%10%5%0%

ACT

Third party + lifetime care for catastrophic injuries No-fault

NSW SA WA QLD NT VIC TAS NZ (in NZ$)

Jul 17 Jul 16

Cla

ss 1

Met

ro P

rem

ium

as

a %

of A

WE

| Motor injury insights | October 2017 08

Jurisdiction RoundupNSW

New CTP scheme commences 1 December

Table 2 summarises some of the key reforms to the NSW CTP scheme. The new scheme sees an overall shift in

focus from common law to statutory benefits.

TABLE 2 – KEY REFORMS TO NSW CTP

Area Observations

Premiums Renewals will start to go out from mid-October, and the Government has been consistently saying that the premium for the average motorist will go down by more than $100.

Motorcycle premiums will not reduce, because of the high cost of adding the ‘at-fault rider’ cover.

Benefits At-fault parties will now be entitled to weekly benefits and medical treatment for up to six months (up from a maximum of $5,000 in the current scheme). Will there be a slow take-up from this group due to lack of awareness?

A key reform was the introduction of a minor injury test. Benefits for ‘not at-fault’ claimants who have minor injuries will be limited to six months, and there will be no access to common law. Draft regulations define an injury as ‘minor’ if:

• It is a soft tissue injury (including neck or spine injuries with non-verifiable radiculopathy), or

• It is a psychological injury diagnosed as acute stress or adjustment disorder only.

The soft tissue distinction between minor and other claims should be reasonably robust, but there is concern about the subjective nature of the psychological injury definition. For example, an adjustment disorder is considered a ‘minor’ injury, and an anxiety disorder is not, and in diagnostic terms there can be grey areas between these.

Transition The Government will give individual refunds to motorists for the portion of already-paid premiums covering the new scheme period. People will start to receive their refunds from January 2018, with priority given to those receiving the greatest amounts (e.g. taxi owners and business fleets).

Insurers are deep into their implementation work. Besides serious IT changes, it is expected that claim management models and culture will change a lot, with the move in focus from common law to statutory benefits.

Dispute Resolution

The details of the new dispute resolution process are also being defined – there will be a compulsory Internal Review by the insurer, and then a comprehensive Dispute Resolution Service which is a division of the regulator, SIRA.

Legal Costs New legal cost regulations are coming (not yet released), and will be important to the involvement of the legal profession. An early version of these regulations introduced in November 2016 seems to have contributed to a significant drop in the numbers of new claims being lodged in the current scheme.

| Motor injury insights | October 2017 09

Premium reductions for all insurers

Figure 7 shows the insurers’ premium rates for ‘model drivers’, ranked from most expensive to cheapest,

at April 2017 and October 2017.

FIGURE 7 – NSW CLASS 1 METRO PREMIUMS

Since April, all insurers have reduced their premiums – in response to the drop in legally represented minor

injury claims. The average premium reduced by $26 or 4%. CIC Allianz remains the most expensive ‘best price’,

and QBE is now the cheapest.

Policies Incepting 16 APRIL 2017

Policies Incepting 1 OCTOBER 2017

Change

CIC-Allianz $673 CIC-Allianz $663 ($10)

NRMA $640 Allianz $611 ($12)

Allianz $623 NRMA $597 ($43)

AAMI $622 AAMI $595 ($27)

QBE $613 GIO $590 ($16)

GIO $606 QBE $587 ($26)

De

cre

asi

ng

pri

ce

16 arrests for CTP fraud

Strike Force Ravens was established in August 2016 to investigate syndicates who have been targeting

the CTP scheme. By mid-September 2017, Ravens investigators had arrested 16 people (the most recent

three involved a solicitor and two men posing as physiotherapists) and laid more than 120 charges in relation

to total fraud of more than $11 million. This may have dampened claim farming activity, contributing to the

recent drops in claim numbers.

| Motor injury insights | October 2017 10

Queensland

The scheme review committee reports back

In 2016, MAIC appointed a committee to review Queensland’s CTP scheme, focussing on affordability,

efficiency and fairness. While the committee’s overall conclusion was that no major reform is needed in

Queensland, it made 19 recommendations to MAIC.

We have identified seven of these recommendations which could be adopted immediately to improve

affordability and efficiency; see Table 3.

TABLE 3 – THE COMMITTEE RECOMMENDS THAT…

Of the remaining recommendations:

• Seven endorse retaining existing scheme features

• Five require further exploration and would involve legislative changes.

Further information can be found on MAIC’s website.

In the context of an environment where there is mounting evidence of claim farming, we query whether the

scheme review has missed the opportunity to proactively strengthen the sustainability, efficiency and fairness

of the current scheme by tackling claim exaggeration and legal involvement in minor injury claims.

1 As a matter of priority, MAIC take action to address the issue of high insurer profits in the scheme.

2 Action be taken to improve consumer awareness of choice of CTP insurer both at renewal and when purchasing a vehicle.

3 Develop appropriate benchmarks to enable enhanced assessment of scheme performance.

4 MAIC implement a legal fee reporting model to allow for greater transparency of scheme efficiency.

5 Areas of overlap and lack of clarity in the current prudential supervision arrangements be eliminated.

6 Insurer performance monitoring, benchmarking and reporting be strengthened.

7 Information on scheme trends and performance be made more readily available to all stakeholders.

| Motor injury insights | October 2017 11

Evidence of claim farming?

The numbers of new claim reports have continued to increase in the past 12 months, driven by low severity

legally represented claims. Figure 8 shows the number of reports by quarter.

FIGURE 8 – QLD CTP CLAIM REPORTS

Small reduction in the ceiling price

Effective 1 July 2017, MAIC reduced the

Class 1 ceiling premium by just $0.60 to

$352.00. This was the net impact of:

• A $16 increase in the NIISQ levy

(from $69 to $85)

• A $16.60 decrease in the

‘CTP component’ of the premium

(from $283.60 to $267.00).

The four insurers have continued

to file at the ceiling price.

These latest changes mean that over

the year to July 2017, the total Class 1

premium has reduced by $16.60

(as shown earlier in Figure 5). The

reduction is greater however, in the

component of the premium that the

insurers retain (i.e. excluding all levies);

that component has reduced by

$30 or 12%.

A case for lifetime care?

Alan was 14 when he was in a car accident that resulted in

a very severe brain injury, and he now needs 24 hour care.

Alan’s CTP claim against the driver was rejected in the

Queensland Supreme Court. Why?

Alan was out with three teenage friends when they decided

to steal a car for a joyride. Alan was in the front passenger

seat, a 16-year-old was driving, and another two friends

were in the back seat. They had driven less than a kilometre

when the driver lost control at a corner and hit a light pole.

None of the boys was wearing a seatbelt.

In 2013, when Alan’s injury occurred, the Queensland CTP

scheme was purely fault-based. The judge said the boys

were involved together in a criminal activity and that the driver

did not owe any duty of care to Alan – ‘do not pass GO!’

Had Alan’s accident occurred today, he would still have

no entitlement to a common law claim, but he would be

covered by the lifetime care scheme in Queensland (NIISQ),

providing treatment and care for the remainder of his life.

Captain v Wosomo & Anor [2017] QSC 86

Analysis of the delays between accidents and claim reporting suggests that claim farming activity

may be driving some of the higher claim numbers.

2,500

2,250

2,000

1,750

1,500

1,250

1,000

750

500

250

0

Sep

13

Dec

13

Mar

14

Mar

15

Mar

16

Jun

14

Jun

15

Jun

16

Sep

14

Sep

15

Sep

16

Mar

17

Dec

14

Dec

15

Dec

16

Jun

17

Cla

ims

Rep

orte

d

Report QuarterClaims Yearly Average

| Motor injury insights | October 2017 12

Australian Capital Territory

A citizens’ jury to improve CTP

The ACT Government has announced its first citizens’ jury to explore possible improvements to the CTP

scheme. Despite paying comparatively high premiums (see Figure 5), Canberrans often have to wait at least

two years before being paid out, and many injured drivers are not even covered by the scheme (e.g. the

oft-quoted kangaroo-hitting driver, where fault cannot be proven).

In this ‘deliberative democracy’ process, a representative jury of 50 Canberrans will identify the key

priorities of a CTP scheme, balancing the interests of all road users. The jury will be supported by a

Stakeholder Reference Group (legal representatives, healthcare providers, consumers, Government officials,

actuaries and scheme design experts), who will formulate and cost a number of scheme options. The jury

will reconvene in late March 2018 to determine which option best meets the identified priorities.

The jury’s preferred option, which the Government has committed to pursuing, is expected to be

announced in the September quarter of 2018.

Premiums continue to fall

Figure 9 shows the recent history of premiums charged for Class 1 passenger vehicles in the ACT.

Since our April 2017 edition, all insurers bar GIO have reduced their premiums.

FIGURE 9 – ACT PREMIUMS: PRIVATE USE PASSENGER VEHICLE

NRMA

Priv

ate

Pass

enge

r Veh

icle

Pre

miu

m ($

)

580

570

560

550

540

530

520

AAMI

APIA

GIO

May

16

Jun

16

Jul 1

6

Aug

16

Sep

16

Oct

16

Nov

16

Dec

16

Jan

17

Feb

17

Mar

17

Apr

17

May

17

Jun

17

Jul 1

7

Aug

17

Sep

17

Oct

17

Nov

17

| Motor injury insights | October 2017 13

South Australia

The transition to a competitive scheme continues

The SA scheme is currently just over a year into a three year transition phase, during which premiums

of the four approved insurers are set to increase by 3% per annum. From 1 July 2019, the market will be

opened to competition, with approved insurers able to compete on price and other value-adds.

The CTP Insurance Regulator is currently working through several proposals for the insurer and pricing

arrangements after transition, drawing on experience in other jurisdictions in Australia and overseas.

These proposals are expected to be announced in the coming months.

Tasmania

Review of MAIB’s pricing policies

The Office of the Tasmanian Economic Regulator recently completed a review of the motor injury

insurance pricing policies of the Motor Accidents Insurance Board (MAIB). Overall, the results were

uncontroversial. The recommendations to the Tasmanian Government included:

• No indexation of premiums for the 2017/18 year

• For the subsequent three premium years, indexation of premiums should not exceed Average

Weekly Ordinary Time Earnings

• A new vehicle class should be created for ride sourcing vehicles, with an initial premium relativity

of 1.00 and the same recommended maximum premium as Class 1 vehicles.

Various other changes to premium relativities were recommended, to be phased in over four years.

| Motor injury insights | October 2017 14

Western Australia

First year results for WA’s lifetime care scheme

WA’s Catastrophic Injuries Support (CIS) scheme commenced on 1 July 2016, providing lifetime care and

support to people catastrophically injured in motor accidents where fault cannot be attributed to another

driver. Where fault can be attributed, claimants remain within the existing CTP scheme, though they can

elect to have their treatment and care funded by periodic payments.

By 30 June 2017, 48 injured people had been assessed as having catastrophic injuries, with a further

13 undergoing eligibility assessment. Figure 10 summarises information on the 48 participants/claimants.

FIGURE 10 – CHARACTERISTICS OF 2016/17’S 48 PARTICIPANTS/CLAIMANTS

75% Male

25% Female

58% CIS Scheme

42% CTP Scheme

69% Traumatic Brain Injury

29% Spinal Injury 2% Other

Gender Scheme Injury Type

Age Band12

10

8

6

4

2

00-14 15-24 25-34 35-44 45-54 55-64 65+

Num

ber o

f Par

ticip

ants

Overall, fewer people have been

catastrophically injured on WA roads

than expected in the first year, though

they have been younger and more

severely injured than expectations.

ICWA cracks down on fraud

Following a rear-end collision in September 2015, an

individual reporting neck, shoulder and knee injuries

lodged a CTP claim. The claim was investigated by the

Insurance Commission of WA (ICWA) after fraud indicators

highlighted areas of suspicion. After pleading guilty in

June 2017 to two offences relating to providing false or

misleading information, the claimant was fined, ordered to

pay legal costs and a criminal conviction was recorded.

| Motor injury insights | October 2017 15

John Jeaitani

+61 2 8252 3316

john.jeaitani@finity.com.au

Sydney Office

Kane Boulton +61 2 8252 3348

kane.boulton@finity.com.au

Sydney Office

Contact the author

AUSTRALIA

Sydney

Level 7, 68 Harrington StreetThe Rocks NSW 2000+61 2 8252 3300

Melbourne

Level 3, 30 Collins StreetMelbourne VIC 3000

+61 3 8080 0900

Adelaide

Level 30, Westpac House 91 King William Street Adelaide SA 5000+61 8 8233 5817

NEW ZEALAND

Auckland

Level 5, 79 Queen Street Auckland 1010+64 9 306 7700

Finity’s Motor Injury TeamFinity’s motor injury team prides itself on looking beyond the pure

analytics to gain a deeper understanding of the cost drivers for schemes.

This means we can respond appropriately in valuations, premium setting

and scheme design.

In addition to our actuaries, Finity has a dedicated group of claims and

operational insurance experts in our management consulting practice,

who can assist with claims and expense management.

If you would like to receive future editions of Motor Injury Insights,

please contact Rebecca Dalleywater on +61 2 8252 3458 or at

rebecca.dalleywater@finity.com.au.

This article does not constitute either actuarial or investment advice. While Finity has taken reasonable care in compiling the information presented, Finity does not warrant that the information is correct.

Copyright © 2017 Finity Consulting Pty Limited.

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