The Queensland Parliament has moved to ban the payment of commissions by compulsory third-party (CTP) insurers to motor dealers.

A prime state budget pledge, Treasurer Andrew Fraser says the reform – which will become active on October 1 – will ease the burden on motorists and generate competition in the insurance industry.

“Already one insurer has set its CTP premium for a typical family car at $5 less than the ceiling – the first time since 1 October 2009 that an insurer has filed lower than the ceiling for a Class 1vehicle,” he said.

“This legislation, combined with an insurer filing lower than the ceiling, could see motorists gain as much as a $29 reduction in their CTP bill.”

The $24 cut consists of $20 in scheme delivery reduction costs and the abolition of the $4 HIH surcharge.

An earlier review found the commission system hindered competition by shutting out new insurers and made it hard for other insurers to gain market share.

Motor dealers’ commissions were particularly prevalent in the lucrative new car market.

Mr Fraser committed to preserving the commission situation for registered charities. Opposition Treasury spokesman Tim Nicholls says the legislation has been “dressed up to look like a magnanimous gesture to motorists, but is nothing of the sort”.

“We know, Queensland motorists… know and Queensland businesses also know that it is another dodge by an increasingly dodgy government,” he said.