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.
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.
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 next year.
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 email us on [email protected], or phone us at Lismore on 02 6621 2481, Ballina on 02 6686 2522 or Byron Bay on 02 6680 8525.