Today, I introduce a bill to amend the Motor Vehicles (Compulsory Third Party Insurance) Amendment Bill 2019. The bill is about maximising benefits for South Australian motorists by providing a fair and competitive compulsory third-party (CTP) insurance scheme.
In 2016, the former government approved four private insurers to underwrite the CTP scheme and establish an independent CTP regulator to oversee insurers and the scheme. The CTP scheme is in a period of transition to a market-based competition model. The competition model will begin 1 July 2019 and apply to CTP insurance policies that commence from 1 July 2019.
Since 1 July 2016, motorists' CTP insurance policies have been automatically allocated to approved insurers. This auto-allocation will no longer apply after the expiry of the transitional period on 30 June 2019. The bill will enable the continuation of all auto-allocation for new vehicle CTP policies after the commencement of the competition model. The auto-allocation will occur based on a scheme determined by the minister, rather than enshrined in the legislation.
The proposed scheme will allocate new vehicle policies according to improved insurer market share at the lowest premium price offered for the premium class by any of the approved insurers at the time of allocation. Auto-allocation will not apply to renewal of CTP insurance policies. The continuation of auto-allocation for new vehicle policies will remove the possibility of commissions and inducements being offered by insurers to motor vehicle dealers to acquire CTP business where there is no direct befit to the motorist.
Experience from other jurisdictions is that commissions paid by insurers to intermediaries, such as motor vehicle dealers, hinder competition by providing a barrier to new entrants or insurers wanting to increase market share. The commissions are passed on in premium costs and offer no value to the motorist. Motorists will not be disadvantaged by the removal of choice at point of sale, as they will be able to nominate an alternate insurer within the first three months of the new policy, with that nomination taking effect at the fourth month of the policy.
One element of the CTP scheme established by the former government was to allow CTP insurers to compete for customers through offering value-added goods and services. The bill therefore enables approved insurers to offer direct policy holder benefits (inducements) as approved by the minister. However, these inducements cannot be a charge against the CTP business. In other words, if an insurer offers some form of inducement, like a multipolicy discount, the associated costs will not be borne by all South Australian motorists through their CTP premiums.
The minister will approve the types of inducements to be offered by the insurer to ensure they benefit motorists. This will give the market flexibility and promote innovation, rather than prescribing all types of allowed inducements in law. Common inducements offered in other jurisdictions include at-fault driver protection policy, multipolicy discount, rewards program membership or a gift card. This change aligns SA to the other privately underwritten schemes in New South Wales, Queensland and the ACT. I seek leave to insert the explanation of clauses into Hansard without my reading them. I do not seem to have them here actually. Accordingly, an explanation will be provided shortly.