CTP Changes - Road to Ruin?

Big changes came into force this week in the area of motor accidents. The Motor Accidents Injuries Act 2017 came into force on 1 December 2017.

Much of the news coverage has focussed on the savings we will all see in terms of green slip prices. It's hard to feel too upset about getting some money back in your pocket – I'm sure we are all familiar with the belt tightening that has to go on around renewal time.

There is, however, no such thing as a free lunch in this world. Green slip premiums are used to fund compensation payments to those injured in motor vehicle accidents, so are compensation amounts going to be reduced?

A clue can be gleaned from the government's own website. Under the heading "How prices were reduced" the statement is made that "Fraudulent behaviour and exaggeration of claims were also estimated to add up to $75 to the cost of every Green Slip premium".

I'm sure that the statement is made with data to back it up (government's never make unsubstantiated claims, do they?), but this sort of statement does have more than a whiff of victim bashing about it.

There is a perception in some quarters that being on compensation of one kind or another is almost a profession for some. This of course ignores the basic principle that compensation is only paid to "compensate" for a loss that has been suffered, and that in order to receive compensation it is necessary to prove that loss. The number of people receiving compensation without meriting it can only be minimal.

Nonetheless the NSW Government decided that reform was needed to better balance the awarding of compensation for motor accidents.

What we have for accidents that occur after 1 December 2017 is a quite different regime. Previously it scheme was entirely fault based. The new Act provides for statutory benefits (being a percentage of the difference between the pre and post accident earnings) for those who have suffered wage loss regardless of whether or not they were at fault. The statutory benefits also include medical expenses and commercial care.

So far so good, but the devil is as always is in the detail. The weekly payments don't continue indefinitely. For those mostly at fault, or with an injury that fits the Act's definition of "minor" end after six months. Regardless of the seriousness of the injury, the longest period that a person can receive the statutory benefits is 5 years.

Where the Act does differentiate itself is the restrictions it puts on damages claims outside the defined statutory benefits. Those with what is defined as a "minor injury" are again hit with their entitlement to claim general law damages extinguished.

Even for those who's claims aren't extinguished, their claims for economic loss are restricted to the defined heads of damages set out in the Act, being lost earnings, travel and accommodation expenses, the costs of financial management of the damages, and reimbursement of income tax paid on damages. This is arguable more restrictive than at common law.

For non-economic loss (what is more colloquially known as "pain and suffering") even more people have been excluded. Only those with a "degree of permanent impairment" in excess of 10% will be entitled to claim non-economic loss. It is possible to have an injury that has a profoundly negative impact on an injured person's life and their degree of permanent impairment be less than 10%.

In summary then, more people will be entitled to shorter periods and smaller amounts of compensation, but the overall amount of compensation paid out will be less. It's difficult to know exactly how this will play out, but it's likely that those with injuries that are more than "minor" but less than catastrophic will be the biggest losers out of these changes.

It is to be hoped that the vast majority of people will never be involved in a motor accident and that therefore they will only notice the change in CTP price (and call me a cynic but I wonder how long the savings will stay around), because if they are in accident these changes may ending up costing at lot more than the $100 a year saved.