Proposed changes to compulsory third party insurance – would they affect you?

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The proposed changes at a glance:

  • more people would be covered as you won’t have to prove another person was at fault
  • it attempts to speed up the process so medical bills and loss of income are paid promptly
  • the benefits payable under the scheme would be less than the current scheme
  • the cost of obtaining legal advice under the no-fault scheme would not be recoverable
  • you will still need your Pedal Power insurance to be covered for crashes that don’t involve a motor vehicle
  • on balance, the proposed limits on benefits and the removal of existing rights for riders injured in crashes with motor vehicles does not outweigh the no-fault aspects of the scheme

A no-fault scheme

The government's proposed changes to the current scheme for compensating people injured in motor vehicle crashes would mean any person injured in a motor vehicle crash is covered. It removes the need to show another driver was at fault, a welcome and obvious change. That brings it closer to other insurance. You don’t have to show someone else was to blame to claim on your home insurance.

A motor vehicle must be involved in the crash - you won't be covered if you simply crash into a tree, fall off your bike or crash into another rider. So you will still need your Pedal Power insurance for that. It also covers you for personal injury and property damage that you cause to others.

Benefits payable

  • Once a claim is accepted, reasonable related medical expenses will be paid and some limited initial expenses should be paid quickly.
  • Lost income, though paid, is capped. The maximum that would be paid is 95% of $2,250 for the first 13 weeks then 80% of that amount.
  • Superannuation is excluded when calculating income replacement.
  • Income replacement and payment of medical expenses cease after five years.

There is an age limit on income payments. They stop at pension age plus 26 weeks, regardless of whether or not you’d be working. Is that compulsory retirement, contrary to broader government efforts to keep people in the workforce?  Insurer IAG (NRMA Insurance) says: ‘This is an unjust outcome for injured people who continue to work past retirement age by choice or need.’[1]  Pedal Power ACT agrees.

Some things currently claimable would go, such as unpaid care by friends or family. This will force people to employ careers who may not have the understanding and empathy with the family.  It will also increase the costs of the scheme.

Basing the level of compensation for permanent injuries on ‘whole person impairment’ (WPI) was criticized in a range of submissions to the ACT Assembly Committee examining the Bill that would introduce the scheme.

The ACT Law Society says people with ‘a WPI of less than 10% will no longer be able to pursue a common law claim. The imposition of a 10% WPI threshold is a significant barrier and its selection is entirely random. About 90% of innocent injured people will not reach this threshold.’[2]

Insurer IAG is ‘particularly concerned’ by aspects of the WPI arrangements, e.g. requiring the injured person to pay an excess to the insurer for the assessment where the insurer considers there is no permanent impairment.  IAG ‘also consider it to be unjust that both physical and psychological injuries are not assessed when an injured person has suffered both, particularly as these are likely to be the more seriously injured people.’[3]

Dr Mehdi Adibi who has a claim under the current scheme says: ‘Why would we create a scheme that places arbitrary mathematical measures on a person's pain and suffering when it fails to account for the myriad of ways in which a life can be devastated by an accident?’[4]

Mr David Mower has a claim under the NSW scheme.  He says ‘because of the 10% WPI cap, in NSW the CTP insurance industry also has a greatly reduced incentive to see that the behaviour of road users actually improves.’[5]

The proposal does provide for limited additional benefits for people who can prove another person was at fault.  However, the impairment threshold to bring a claim could be quite difficult to meet. It is based on a ‘one size fits all' scale that does not allow for individual differences. For example, a highly accomplished musician or sportsperson who can no longer play as well or at all as a result of an accident may not meet the threshold to be compensated for the loss of quality of life.  The Law Society says there would be a ‘reduction in compensation available to about 90% of people injured through the fault of another’[6]

There are also some penny-pinching aspects of the scheme. Claims must be made within 13 weeks of the crash or from when the injury becomes manifest. That's to encourage early notification and minimise fraud. Fair enough. But if you do claim late and the insurer accepts your reason, payments for medical and other defined benefits will only be backdated to 13 weeks prior to the receipt of the claim.

In his submission to the Committee, Mr Bill Browne calculates that compared to the current scheme ‘cyclists stand to lose $5 million in compensation each year’[7].  His submission is well worth reading.  He also recommends a cap on insurer profits of 8%, as has been applied under the NSW scheme in light of the high profits reaped in NSW. Pedal Power ACT agrees.

Unfair provisions

Some aspects of the scheme are weighted in the insurer's favour over the claimant. For example, in a claim lodged outside the 13-week limit, the insurer may (ie at its discretion) back pay to the date of the crash in ‘exceptional’ circumstances.  This should be in ‘reasonable’ circumstances.

A person who is not satisfied with an insurer's decision can seek internal review, but a completely ‘fresh pair of eyes' does not appear to be guaranteed.

The regulator that will oversee insurers should have clearer and more certain powers to hold insurers to account for delay and obfuscation and to impose penalties.

Unjustified limitations to entitlements

If a person commits a serious offence such as drink driving which causes the crash and their injuries, it is reasonable to reduce the person’s income replacement benefits. However, the proposed Bill would reduce by 25% income replacement and quality of life benefits for offences related to the crash.  Take the example of not wearing a bicycle helmet. The wearing or non-wearing of a helmet will in many cases have no bearing on the nature or extent of a person’s injuries (e.g a fractured limb). Having paid the fine for not wearing a helmet, an injured person should not have the additional penalty of reduced benefits where there is no causal connection between the injuries and the infringement notice offence.

The 25% reduction is also arbitrary.  It would apply equally to a person who exceeded the speed limit by 40 km/h as it would to a person who was 10 km/h over the limit.

Oliver Tham in his succinct three-line submission said: ‘I would rather pay more than to save $100 for significantly reduced benefits and for insurers to have much greater say over how and what they pay us.’[8]

Pedal Power ACT agrees.  In our submission to the Committee, we concluded: ‘Pedal Power is not convinced the scheme contained in the Bill gets the balance right. It is hard to justify the removal of fault based on the proposed limits on benefits and the removal of existing rights for riders injured in crashes with motor vehicles.’[9]

While Pedal Power ACT would welcome some changes to the current scheme, e.g. including no-fault coverage, we do not support the Bill in its current form.

What do you think? We welcome you to send your comments and suggestions on the proposal to advocacy@pedalpower.org.au.

View the proposed scheme’s Bill together submissions by Pedal Power and others.

 

Notes:

[1]   www.parliament.act.gov.au/__data/assets/pdf_file/0003/1270704/66-IAG.pdf

[2]   www.parliament.act.gov.au/__data/assets/pdf_file/0017/1270700/62-ACT-Law-Society.pdf

[3]   www.parliament.act.gov.au/__data/assets/pdf_file/0003/1270704/66-IAG.pdf

[4]   www.parliament.act.gov.au/__data/assets/pdf_file/0010/1270693/01-56-Individual-Submissions.pdf

[5]   ibid

[6]   www.parliament.act.gov.au/__data/assets/pdf_file/0017/1270700/62-ACT-Law-Society.pdf

[7]    www.parliament.act.gov.au/__data/assets/pdf_file/0004/1270696/58-Browne.pdf

[8]   www.parliament.act.gov.au/__data/assets/pdf_file/0010/1270693/01-56-Individual-Submissions.pdf

[9]   www.parliament.act.gov.au/__data/assets/pdf_file/0007/1270708/69-Pedal-Power-ACT.pdf

 

Jeff Ibbotson is Pedal Power ACT's Vice President and a member of the Advocacy Team

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