RACQ Insurance has announced that it is withdrawing from Queensland’s compulsory third party scheme as it’s no longer viable to continue participating.

“The scheme’s design allows for all participating insurers to be profitable, however, this assumes an equitable distribution of risk,” Group CEO David Carter said today. 

“In recent years, RACQ’s risk profile has worsened through no fault of our own, resulting in significant losses for the club.” 

RACQ has formally requested its licence be withdrawn ahead of ceasing offering CTP cover from October 1. The decision is pending approval from the Motor Accident Insurance Commission (MAIC), which oversees the scheme and which is currently completing a review.

All existing RACQ CTP policies remain in place, and a claims management service will continue to be provided to existing claimants, but over the following 12 months, motorists with RACQ CTP cover will be transitioned to another insurer on renewal of their registration.

RACQ has been urging the Queensland Government to consider introducing “premium equalisation” to the scheme, given that under current arrangements an insurer can’t choose which risks to underwrite or refuse a motorist who selects them for the cover.

The insurer has argued it’s disadvantaged by a portfolio that has a greater portion of older vehicles, young or inexperienced drivers, shorter policy terms and re-registered vehicles compared to other insurers.

RACQ says analysis shows that over the past five years, there is a significant difference between the most profitable and least profitable insurers in the scheme.

Mr Carter says in fiscal 2022, for every $100 of premium RACQ received, it paid $123 in claims and expenses due to the increased frequency and severity of those that the club received relative to the scheme average, there’s been little change in fiscal 2023 and in the absence of change the outlook shows no signs of material improvement.

“Following several years of raising concerns with the State Government and MAIC, it’s clear that even the most recent scheme review is unlikely to achieve a level playing field or restore fairness across the insurers,” he said. 

“The unfortunate reality is despite the extensive steps we have taken over many years to improve our position, including support provided by our reinsurance partners, it is no longer viable for us to continue participating in the scheme.”

Mr Carter says analysis by MAIC actuary Taylor Fry showed that claims management performance was comparable across the four scheme insurers, and that RACQ’s departure is not a reflection on the premiums paid, which he said were fair and should not increase as a result of the firm’s exit.

CTP cover is also provided in Queensland by Suncorp, Allianz and QBE.