Insurer profits from the NSW compulsory third party (CTP) scheme will be capped at 10%, while losses will be limited under rules confirmed last week.

The State Insurance Regulatory Authority (SIRA) monitors insurance performance on a yearly basis and makes adjustments through the Transitional Excess Profit and Loss (TEPL) mechanism.

Customer Services Minister Victor Dominello says SIRA oversight will prevent insurers from making excessive profits through the revised scheme, which started in December 2017.

“Under the old CTP scheme insurer profits were in excess of 30% and resulted in motorists paying some of the highest premiums in the country,” he said. “Those days are over, and the sun has completely set on insurer super-profits.”

A fact sheet says it’s likely to take between five and seven years from the relevant accident year to gain some certainty on profitability levels, given long claim timeframes.

Funds will be returned to motorists through a reduction in the Motor Accidents Operational Fund levy, where excess profits have been made, while the levy may rise if there is a need to reimburse losses.

“SIRA will not subsidise losses in the event of poor insurer behaviours, such as uncontrolled spending or undercutting the market by offering significantly reduced premiums,” the fact sheet says.

Insurers with approved innovation programs can retain an extra 3% profit as an incentive to improve injury prevention and recovery.

The NSW CTP reforms introduced defined benefits for injuries regardless of fault, helping to speed payments and reduce claims fraud.

“The new scheme is fairer and more affordable, with motorists paying $490 on average for their Green Slips, the most affordable since 2011,” Mr Dominello said.

The Insurance Council of Australia says the 2017 reforms included provisions for the profit monitoring measures outlined last week.

“SIRA has consulted extensively with insurers, so there are no surprises for the industry,” spokesman Campbell Fuller told insuranceNEWS.com.au.