The policy of many state governments to continue underwriting personal injury insurance schemes is surrendering the opportunity to realise a number of public benefits.
Private underwriting can improve efficiency and health outcomes for injured people, and remove the potential for the public to be exposed to billions of dollars in liabilities.
A Suncorp “Insurance Insights” white paper released today observes that many Workers Compensation and Compulsory Third Party (CTP) schemes around Australia remain on the balance sheets of state and territory governments.
Despite the Productivity Commission concluding in 2004 that private underwriting of Workers Compensation schemes is preferable to government underwriting, no personal injury schemes have transitioned from public to private underwriting in the years since.
“Private underwriting is preferable because it can be more efficient and remove from state governments – and ultimately taxpayers – exposure to the significant liabilities that accrue when public schemes fall into deficit,” said Mr Anthony Day, CEO Suncorp Commercial Insurance and author of white paper.
“With no independent regulator requiring government schemes to remain fully funded, arguably there will always be a temptation for a government to allow a scheme to go into deficit,” writes Mr Day.
“The experience to date has been that it’s when a scheme is in crisis – such as the NSW CTP scheme in the late 1990s – that governments are motivated to transition to private underwriting,” said Mr Day.
“Ideally these transitions would occur when the scheme is relatively healthy and stable.
“Having a privately underwritten scheme allows the government to focus on the crucial role they have to play in delivering an effective and sustainable scheme, which is to regulate and provide oversight,” said Mr Day.
The white paper examines the issues of liabilities, investment in claims management, efficiency, rehabilitation monitoring and the relationship between risk, behaviour and premium rates.
“As Australia’s largest personal injury insurer, Suncorp understands the strengths and weaknesses of the various scheme designs currently operating,” said Mr Day.
“A strength of privately underwritten schemes is that they can be more flexible and responsive, which ultimately means lower costs for policy holders and better outcomes for injured people.”