Lawyers’ concerns over the removal of some lump sum payments in reforms to NSW compulsory third party (CTP) motor insurance are rebutted in a new report.

Under the plan, defined benefits would be introduced for low-severity injuries but lump sum compensation would be retained for the most seriously injured.

Legal groups including the NSW Law Society say most injured motorists will be forced to rely on their families or welfare once benefits stop after five years.

But a draft report by the CTP Reference Panel – set up to analyse whether the proposed reforms are in the best interests of injured people and those paying premiums – finds there are “significant problems” with lump sum payments.

“These include ongoing health issues because people are often discouraged from returning to their normal life until the claim is settled and [due to] the failure of claimants to properly invest lump sum payments so the money is available when it is needed, often many years after they receive the payment.

“When this occurs, the person may become reliant on government safety nets such as Medicare and Centrelink.”

The panel concludes lump sums “create perverse incentives for behaviour by all parties and create uncertainty”.

However, the report recognises the importance of common law claims for the more seriously injured.