Suncorp has stepped up a campaign to have state and territory-owned personal injury schemes privatised, with external research showing billions of dollars in national economic benefits are there for the taking.

The macroeconomic analysis gives weight to arguments put forward by insurers in previous government inquiries, and adds to optimism that the case is becoming more compelling.

“I think this has been a really critical missing piece of the pie,” Suncorp Commercial Insurance Statutory Portfolio EGM Chris McHugh told insuranceNEWS.com.au.

“It is an important point of differentiation.”

The research by PricewaterhouseCoopers (PWC) underpins a submission to the Competition Policy Review and features in a Suncorp paper compiled by Mr McHugh.

Suncorp says Australia’s personal injury insurance schemes are a patchwork of private and public underwriting with little consistency, and it is time to improve the situation.

“Insurers that operate across Australia have an advantage over state-owned monopolies in their ability to achieve economies of scale and migrate innovative processes across state boundaries,” Mr McHugh says in his paper.

“The appropriate role for government in today’s personal injury insurance schemes is to be an independent regulator of the private sector, allowing a competitive market to increase productivity and maximise value for the community.”

PWC’s modelling suggests privatising NSW workers’ compensation alone, which accounts for about a quarter of premiums collected by state-owned schemes nationally, would deliver real gross state product benefits of $3.07 billion over 10 years. “Gross state product” is a measure of the market value of goods and services produced in the state.

SA workers’ compensation reform would have a $530 million effect and privatisation of the state’s compulsory third party scheme would have a $308 million impact.

Mr McHugh says these case studies take a fairly conservative approach to estimating potential gains. “Depending on the operating environment and depending on the scheme, the productivity improvement could be much larger,” he says.

The NSW and SA programs were selected as representative case studies, but Suncorp’s submission to the Competition Policy Review says the findings can be extrapolated across Australia to indicate wider benefits of $6-$12 billion.

PWC concludes privatising the NSW and SA schemes would increase economic growth, employment, productivity and tax revenue.

Benefits would mainly flow from improved insurance capital management and workforce participation and a reduced burden on the health system due to faster returns to work.

PWC says it is likely 5% of injured people will return to work faster in a competitive market than in a publicly underwritten scheme.

Competition also tends to improve customer service, with insurers responding more quickly to queries and complaints when there is pressure to protect their brand.

Mr McHugh says concerns that state markets are too small to accommodate several private insurers do not hold weight, given the experience in privately underwritten workers’ compensation schemes in Tasmania and the ACT.

“Despite being small markets, both jurisdictions have seven insurers competing for business, all of which operate in multiple jurisdictions,” he says.

Suncorp says creation of the National Disability Insurance Scheme and National Injury Insurance Scheme should trigger a rethink of the whole personal injury environment.

Those reforms carve out a distinct government role on catastrophic injuries that require care for life, for which private insurers are likely to be less competitive and effective.

Separating out catastrophic injury more clearly defines opportunities for the private sector handling cases that focus on helping people to recover quickly and return to work.

Other factors have fuelled Suncorp’s optimism that the momentum behind privatisation can be restarted after seeming to stall in recent years. Examples of state schemes falling into deficit highlight the risks of governments being both regulator and insurer, while political cycles contribute to a willingness to address market issues.

The Competition Policy Review provides a significant opportunity, and Suncorp is also making its case for change more widely at federal and state levels.

“There are a whole host of aligning considerations, which means the time is right,” Mr McHugh says.

“While monopoly state-owned enterprises are required when the private sector is unable to provide an essential service at an affordable price, that is not the situation in today’s personal injury insurance market.”