South Australia’s fault-based compulsory third party (CTP) scheme is to be overhauled amid claims it is unfair and increasingly unaffordable.

The state’s premiums have grown by 5.3% per year, more than anywhere else, according to the Motor Accident Commission (MAC), SA’s CTP insurer.

The MAC says legal fees associated with the scheme are also “spiralling” – rising about 50% since 2005, with payments that are “overly generous for less-significant injuries”.

Minor claims have made the system financially unviable, with about 40% of compensation payments – more than $100 million a year – going to claimants who need little or no time off work and minimal medical treatment, the commission says.

The SA Government has now released draft legislation on the move to a no-fault scheme.

The Insurance Council of Australia (ICA) has previously stated its support for private sector provision of insurance services for the SA CTP scheme – currently managed by sole provider Allianz – but maintains “it is for governments to determine whether a compulsory compensation scheme is fault-based or no-fault”.

“ICA is currently reviewing the details of the recent announcement by the SA Government,” a spokesman told insuranceNEWS.com.au.

The first set of reforms will be introduced on July 1, resulting in a $110 drop in premiums, while the second phase, introducing universal care for the catastrophically injured and a catastrophic injury levy, will take effect from July 1 2014.

The $105-a-year catastrophic injury levy will fund the expanded scheme but premiums will decrease again – by about $45 – as it takes effect, meaning an overall saving of about $50 for most motorists.

Injuries that are less than catastrophic will continue to be managed through the MAC on an at-fault basis, with claims operating under a new points system.

Compensation will be paid at 80% of past and future economic loss, with damages for future loss available when the injury is moderate or serious (above 15 points on a 100-point scale).

Legal costs will not be reimbursed for minor injuries or claims below $30,000; a maximum of $2500 will be repaid for claims ranging from $30,000 to $50,000.

Under the proposals, drink-drivers would be catered for in terms of injuries but would not receive compensation for lost income, pain and suffering and many other expenses.

Allianz declined to comment on the reforms.

“Due to Allianz’s role in the current scheme we are unable to comment on proposed changes,” spokesman Nicholas Schofield told insuranceNEWS.com.au.