The ailing NSW compulsory third party (CTP) motor insurance scheme should be transformed into a no-fault program, according to a new report from Suncorp.

The State Government last month initiated a review after Minister for Better Regulation Victor Dominello slammed the scheme as “inefficient and unsustainable”.

Suncorp’s paper – Chronic Condition: The Need to Reform the NSW CTP Insurance Scheme – says structural issues are affecting customers and injured people.

“Despite steady improvements in vehicle and road safety, premiums continue to rise above inflation,” it says.

“Injured people receive only about 45 cents of every dollar in premiums due to high legal, medico-legal and insurer costs, making it one of the most inefficient CTP schemes in Australia. The practice of paying lump sum compensation provides an incentive for people making claims to exaggerate their injuries and delay their rehabilitation, because it will increase the size of their payout.”

The solution, Suncorp says, is to change to a no-fault, defined benefits scheme – an approach that has worked well in other Australian jurisdictions.

“The result of this reform will be a scheme that is sustainable, affordable and fair,” it says.

Public consultation on the government review closes on Friday, with the state expected to announce its response in the second half of the year.