No-fault crash cover begins in WA

WA’s no-fault compulsory third party insurance scheme is a huge step forward for motorists in our state but some important questions remain about its cost and how it will be administered.

You won’t be able to notice any obvious changes on our roads or highways but from the start of July a major change will take place for all motorists in Western Australia.

That is because from 1 July, Western Australians with a WA-registered motor vehicle will be covered by a new no-fault compulsory third party (CTP) insurance scheme.

This means that people who are catastrophically injured in a motor vehicle crash where no party is at fault or negligent – for instance if a driver suffers a catastrophic injury as a result of an unlucky encounter with a kangaroo, they will receive financial assistance for ongoing medical costs or rehabilitation.

Catastrophic injuries are defined as spinal cord injuries, traumatic brain injuries, multiple amputations, severe burns or permanent, traumatic blindness. An average of 92 people are catastrophically injured on WA roads each year – and around 44 of those were previously left without financial support for their ongoing costs under the old scheme because there was no other party involved who was at fault.

This is an important change and one that RAC welcomes.

However, what motorists are sure to notice is that they will have to pay an additional $99 per year, per car to cover the CTP premiums. Caravans and trailers will be exempt from the increase.

RAC welcomes the scheme’s introduction but three key questions need to be clarified:

Why a $99 increase?

RAC is particularly concerned with how the increase of $99 per vehicle has been determined by the State Government.

Independent expert advice sought by RAC indicates that, in its current form, the scheme is comparatively higher than the premium paid in other states and territories and, importantly, it does not take into account other existing funding sources, such as the public health system through the federal and state governments.

RAC believes the costs associated with a no-fault scheme must accurately reflect the cost of covering people who are catastrophically injured.

In order to do that, the calculations must take a whole of government approach, bejustified and transparent, and not unnecessarily cause financial burden to the wider Western Australian community.

What happens to surplus funds?

In addition to seeking clarification around the cost of the scheme, RAC has sought clarification about how any surpluses in the scheme will be managed.

RAC believes that CTP premiums must be used only in relation to the payment of catastrophic injury claims.

That means a sensible funding policy should be adopted to allow for surpluses to be returned in the form of lower premiums once the cost of the no-fault CTP insurance scheme has been covered.

Also, a long-term and gradual approach should be taken to address any shortfalls and importantly, surpluses must not be paid as cash dividends to government.

Who will govern the scheme?

RAC has sought assurance from the Western Australian government that the CTP scheme will remain publicly owned and managed through the Insurance Commission of Western Australia (ICWA).

Any future possibility of privatising the scheme could have potentially negative outcomes for Western Australians, as their insurance premiums could be affected.

(SOURCE: Horizons, June-July 2016, RAC WA Magazine)