Private insurers will be able to offer compulsory third party (CTP) motor insurance in SA from July 1 2016.

Treasurer Tom Koutsantonis announced the move in last week’s budget, arguing that writing CTP “is not an essential service that should be delivered by government”.

He says the state must reduce debt and prepare for future Commonwealth budget cuts in addition to the $898 million being cut from the state over the next four years.

The Motor Accident Commission, currently the sole CTP provider, will put its CTP business into run-off and pay $500 million in 2016/17 to the state’s highways fund for road improvement.

Mr Koutsantonis also says WorkCover reforms will save businesses about $180 million a year through improved claims management, earlier claim intervention and return-to-work strategies.

Insurance Council of Australia CEO Rob Whelan says SA’s CTP move will bring the state into line with NSW, Queensland and the ACT.

The WA, Victorian, Tasmanian and NT governments should follow suit, he says.

“This is good for consumers, who will have greater choice, not just on price but also on product features.

“Privatisation also benefits governments and the taxpayer by removing huge liabilities from state balance sheets.”

The SA budget papers show general insurance stamp duties are expected to raise $315 million in 2013/14 and in 2014/15.

CTP premiums will fall 9% this financial year under reforms announced previously.