The Insurance Council of Australia (ICA) has defended claims that NSW compulsory third party (CTP) insurers are reaping super-profits from the scheme.

Allianz GM CTP Technical Tony Mobbs, representing ICA’s Motor Accident Insurance Policy Committee, told a NSW parliamentary inquiry into the motor injury insurance scheme and the state’s Motor Accidents Authority that the scheme is “running reasonably well”.

“There is competition among insurers [and] motorists can freely elect which insurer they would like,” he said. “Increasing amounts of the compensation dollar are being paid to injured parties and the time to resolve claims has been trending down.”

Mr Mobbs agrees that insurers have done well out of the scheme in recent years, adding that “profits over many years have been derived because there has been an unexpected, unexplained and unprecedented reduction in claims frequency over 10 years”.

“That is highly unusual and insurers have benefitted from that.”

Mr Mobbs also told the inquiry that the claims frequency “stopped reducing in about 2008 and has now started increasing”.

The system allows for an 8% profit margin for insurers, but the NSW Bar Association and the Australian Lawyers Alliance told the inquiry insurers have been making profits averaging 24% a year. They say this amounts to profits of more than $1.5 billion over 10 years.

But Mr Mobbs discounted suggestions it should automatically follow that premiums should be reduced.

He says competition between insurers results in premium reductions from time to time, and that in real terms premiums have declined over the past 10 years.

“If anyone could have predicted that claims frequency would have halved, through our competitive process insurers would have responded to that and reduced the premiums,” he told the inquiry.

“No one has been able to pinpoint the reason for the reduction in claims frequency. There is no explanation for it [and] no one can predict where it will go to.”