The Insurance Council of Australia (ICA) and major insurers Suncorp, IAG and QBE have called for significant reform of the NSW compulsory third party (CTP) scheme and a move to a hybrid no-fault model.

The State Government issued an options paper earlier this year as part of a review in response to increasing levels of exaggerated claims and fraud.

The review aims to increase the proportion of benefits going to the most seriously injured; reduce the time taken to resolve claims; cut fraud; and reduce the cost of premiums.

Four options were presented as potential ways forward:

1. Retain the current common law, fault-based scheme with process improvements;
2. As above, but with additional adjustments to benefit levels;
3. Move to a hybrid no-fault defined benefits scheme, with common law benefits retained in parallel;
4. Move to a fully no-fault defined benefits scheme, with no common law.

Following actuarial analysis ICA and its members have backed the third option.

“The need to determine fault for all claims, and the extent to which individuals may have contributed to an accident, takes up significant resources, time and expense,” the council’s submission says.

“Nonetheless, ICA also recognises many of the benefits of the common law and we acknowledge that it can play an important role in compulsory accident compensation schemes. This is especially so for people with more serious injuries.”

It makes a strong call for a competitive insurance market in its answer to an options paper question on whether the NSW scheme should retain competitive underwriting or return to a state-run model.

ICA says government monopolies in the provision of statutory insurance schemes are contrary to national competition principles, and are also not subject to consistent regulatory oversight.

The NSW Government is expected to respond to submissions later this year.