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ROAD TRANSPORT (THIRD-PARTY INSURANCE) REGULATION 2008 (NO 37 OF 2008)
2008
Road Transport (Third Party Insurance) Regulation 2008
SL2008-37
Explanatory Statement
Circulated by authority of
Treasurer
Jon
Stanhope MLA
Overview
The Road Transport (Third Party Insurance) Regulation 2008 provides the
necessary delegated legislative support to the Road Transport (Third Party
Insurance) Act 2008 (the Principal Act). Necessarily, the Regulation
contains both substantive and transitional provisions.
The substantive
provisions address essential elements of insurer regulation and licensing,
premium setting, nominal defendant, early medical treatment for injured motor
accident victims and claims procedures, including controls on legal
costs.
The Principal Act contains many references to regulation making
power. In fact, there are approximately 80 individual areas within which
regulations could be promulgated. Extensive regulation making power is a feature
of modern complulsory third party insurance (CTP) legislation. There is a need
for flexibility in administering or regulating CTP schemes, particularly in view
of the rapid shifts in the market that occurred around the time of the 2001-02
insurance crisis, and, of course the many mergers, takeovers, restructures and
consolidations that have occurred among banks, insurers and financial services
organisations since then.
In addition, it is necessary to be able to
react quickly to shifts in liability and cost patterns, driver behaviour,
accident prevention, vehicle and road safety as the need arises. On the other
hand, the Government has taken a structured approach to making regulations under
the Principal Act, limiting them to 35 provisions (other than transitional)
limited to the areas addressed above and explained in detail, below.
The
Regulation amplifies the Government’s objectives of securing choice of CTP
insurers for ACT citizens, better health outcomes for injured motor accident
victims and necessary controls on the cost of pursuing small claims that are
better resolved utilising modern injury management modalities, as opposed to the
costly and lengthy adversarial process that was the hallmark of a CTP scheme in
place in the ACT that had not changed significantly since
1948.
Detail
Part 1 –
Preliminary
Sections 1 through 5 set out the name of the Regulation,
commencement date, and refer to the dictionary, notes and offences under the
Regulation, including notes that provide cross references to the Criminal
Code.
Part 2 – Industry Deed
Chapter 1 of the
Principal Act introduced a new regulatory concept into the ACT, that of the
Industry Deed. The Deed and subsidiary documents such as a “sharing
agreement” regulate the relationship between competing insurers as
regulated entities in terms of the scheme as a whole. For example, the Deed sets
out the division of responsibility between insurers in cases where multiple
vehicle accidents occur involving different CTP insurers. The Deed provides an
agreed mechanism for division of responsibility that does not require insurers
to sue one another to determine their respective levels of responsibility in a
motor accident. It also provides for the transfer of necessary information
between insurers and indeed the regulator in certain
circumstances.
Section 6 contains the necessary approval trigger that
permits the regulator to determine and approve the contents of the Industry
Deed. Necessarily, the Deed is a Disallowable Instrument. It is expected that
the Industry Deed will be presented to the Assembly towards the end of 2008 in
advance of the commencement of competition.
Part 3 – CTP
premiums
There are 52 different classes and sub-classes of vehicle in
the ACT and each class requires the individual assessment of a CTP premium. This
Part of the Regulation sets out the practical mechanism by which this essential
regulatory function is to be carried out.
Section 7 defines what a CTP
premium is, namely a premium covering a 12 month period.
Section 8
enables the premium to be levied per class of vehicle, by providing a definition
of vehicle class. It is intended that vehicle classes will be consolidated and
standardised, over time to bring them more closely into line with comparable
vehicle classes in NSW. This will reduce costs for new CTP
insurers
Section 9 requires insurers to seek approval for the imposition
of annual CTP premiums, per class of vehicle. The Principal Act requires that
this take place at least once per year. The premium classes are set out in Part
1.2 of Schedule 1.
Section 10 clarifies section 9 by specifying that
where a vehicle might fit into one or more classes, the premium shall be
determined by reference to the higher premium class. This section ensures that
the premium paid reflects the correct risk for the vehicle.
Section 11
provides a detailed formula for calculating premiums for periods of less than
one year in a format that insurers readily comprehend.
Section 12
provides the necessary means of reassessing a CTP premium if the nature of a
vehicle’s use changes. For example, a class 1 vehicle, normally a family
car may at some point be used as a chauffeur driven vehicle. Premiums need to
reflect the additional risk that obtains to such use. The section also deals
with changes to a vehicle’s construction.
Section 13 contains the
main offence provision for this Part, making it an offence to fail to pay any
additional premium due under section 12.
Part 4 – Compulsory
third party insurance
Section 14 defines the circumstances within
which a vehicle can be said to have a sufficient connection with the ACT to
require the payment of a CTP premium. Given the proximity of the ACT to NSW,
this section has particular importance in terms of the administration of the CTP
scheme.
Sections 15 through 18 deals with payments of various types to
the nominal defendant. Previously, the ACT nominal defendant was a named
individual, but the “real” administration of the nominal
defendant’s affairs was performed by NRMA. In 2005, the whole claims
function was transferred to NRMA and claims against the nominal defendant were
treated by NRMA as simply part of its overall claims portfolio, at least in
terms of claims administration, litigation and settlement. The prospect of
competition means that the nominal defendant claims can not be administered by
NRMA because it would mean that NRMA would potentially have access to its
competitors’ claims procedures and internal business
affairs.
Consequently, part 2.7 of the Principal Act provides that the
ACT nominal defendant will be the ACT Insurance Authority (ACTIA). ACTIA is
already the default insurer under the workers compensation scheme, which means
that its claims staff already deal with accident claims arising out of uninsured
circumstances. The addition of the nominal defendant role is regarded as an
essential, cost effective and transparent way of providing a ‘clean
break” for incoming CTP competitors in the ACT market for
CTP.
Section 15 sets out the bodies that are responsible for funding the
nominal defendant.
Section 16 sets out the arrangements by which the
nominal defendant can secure its funding and the formula for determining the
respective share to be paid by each responsible body.
Section 17 provides
the practical mechanism by which the nominal defendant may seek its funding,
through the provision of collection notices.
Section 18 makes it an
offence not to pay the nominal defendant if a section 17 notice has been
provided to one of the licensed insurers, but no payment is
forthcoming.
Part 5 – early payment for treatment of motor
accident injuries
This part provides the mechanism for persons
injured as a result of a motor accident, in accordance with Chapter 3 of the
Principal Act.
Section 19 outlines the necessary level of accounting
detail that enables claimants to secure the early payment for medical expenses.
It also ensures that licensed insurers can make the payment in the knowledge
that the invoice is valid and their GST compliance requirements are properly
addressed.
Part 6 – Motor accident claims
This Part
provides the detailed regulatory structure behind Chapter 4 of the Principal Act
which deals with claims and claims procedures following a motor
accident.
Section 20 addresses a problem that existed under the
“old” CTP law wherein there was confusion around whether particular
communications from lawyers or potential claimants under the Civil Law (Wrongs)
Act 2002 were actually notified claims. Compulsory, statutory compensation
schemes require certainty in terms of procedure, disclosure and intent,
otherwise unnecessary legal and investigation costs can emerge. Chapter 4 of the
Principal Act invokes a full array of procedural mechanisms that deal with
problems such as this, and section 20 offers a clear determination of
legislative intent in relation to claims notification. The regulator will
provide an appropriate claim notification form under the Principal Act
(concomitant with its commencement) that will constitute sufficient notice of
intent to claim.
Section 21 provides the necessary rigour around the
addition of a later respondent to a claim, with respect to the circumstances
contained in section 91 (2) (a) of the Principal Act.
Section 22 requires
claimants exercising their rights under section 21 to notify other
respondents.
Section 23 is the corollary provision to section 21, and
imposes the same obligation upon a respondent with respect to those entities or
persons the respondent alleges are contributors.
Section 24 is likewise,
a corollary provision to section 22, in this regard. It is to be noted that the
respondent’s duty extends to notifying all parties.
Section 25
amplifies the provisions in Part 4.5 of the Principal Act. This section requires
the regulator to consult with a wide array of relevant bodies prior to and in
connection with any decision the regulator makes under section 117 (1) of the
Principal Act, that is to say, if the regulator decides to establish a panel of
recognised experts with respect for reporting on the medical condition of
claimants and their prospects of rehabilitation.
Section 26 outlines the
necessary level of accounting detail that enables claimants to secure payment
for medical expenses under Part 4.6 of the Principal Act. It also ensures that
licensed insurers can make the payment in the knowledge that the invoice is
valid and their GST compliance requirements are properly
addressed.
Sections 27 though 30 deal with a particular issue, addressed
in Part 4.8 of the Principal Act. Part 4.8 of the Principal Act contains
detailed provisions that address the problem that emerged from the
“old” CTP scheme over the years, but which accelerated in intensity
and cost pressure from 2004.
All recent, relevant, recognised research
points to the fact that people who suffer minor injury in motor accidents are
far better off being properly treated promptly and made well.
In this
regard, insurers in Queensland and NSW offer effective early intervention,
treatment, and rehabilitation and occupational therapy modalities. Between 30
and 45% of motor accident victims in NSW and Queensland have their claims and
treatment dealt with direct with a licensed CTP insurer. In Queensland (Chapter
4 of the principal Act is based on its Queensland equivalent), lawyers
representing injured claimants generally trust insurers to provide such
facilities to their clients. The capacity for this now to occur in the ACT is
contained in legislative provisions, now reflected in Chapters 3 and 4 of the
Principal Act.
Small claims represent an important first cost pressure
benchmark the Government has seen fit to address in relation to Chapters 3 and 4
of the principal Act.
Therefore, section 27 offers lawyers the
opportunity to earn up to $5,000 in costs if their clients accept mandatory
final offers in cases involving damages, other than general damages, between
$30,000 and $50,000.
If their clients choose to litigate small claims
under $30,000, section 28 provides that no costs shall be awarded. If their
clients choose to litigate claims between $30,000 and $50,000, costs amounting
to $2,500 may be awarded (for instance, section 155 (3) (b) (i) of the Principal
Act refers).
Section 28 provides that in a small claim up to $30,000
(exclusive of general damages) as previously outlined, that the plaintiff wins,
an award reflecting a disparity of 15% or more in the mandatory final offers in
favour of the plaintiff will result in uplift costs amounting to
$10,000.
Likewise, if the same situation occurs in relation to claims
between $30,000 and $50,000 (exclusive of general damages) section 30 provides
for uplift costs to $15,000.
Section 29 provides that in a case involving
a claim between $30,000 and $50,000 (exclusive of general damages), an award
reflecting a disparity of 15% or more in the mandatory final offers in favour
of the respondent will result in a costs award of $2,500 to the
respondent.
Part 7 – Licensing of insurers
Section 31
offers new entrants the opportunity to seek licenses in the ACT by proffering
current or most recent federal and State regulatory reports, in support of their
applications.
Part 8 – Information collection and
secrecy
Part 8 replicates, almost exactly the equivalent Queensland
regulations that detail the level and extent of reporting required under their
scheme. Given that the ACT claims structure (Chapter 4 of the Principal Act) is
likewise based on its Queensland equivalent, the solution represents the lowest
barrier to entry option available.
Sections 32 through 35 provide this
necessary reporting link.
Section 32 addresses monthly
reports.
Section 33 deals with reports that are normally provided
quarterly.
Section 34 deals with the position, such as previously
outlined in relation to the Industry Deed, under which a claims manager
appointed by multiple respondents is able to provide necessary reports, to avoid
duplication.
Section 35 deals with the essential link between an
insurer’s federal responsibilities under the Insurance Act 1973,
the Corporations Act 2001 and the necessity to report on significant
issues affecting its structure, financial status or the management of its
insurance business.
Part 20 – Transitional
Section
100 defines terms for this part.
Section 101 is a transitional provision
continuing the former provisions in relation to trader’s
plates.
Section 102 is a transitional provision continuing the former
provisions in relation to unregistered vehicle permits.
Section 103 is a
transitional provision that has the effect of modifying the Road Transport
(Public Passenger Services) Act 2001 by inserting new Part 8A, which is set out
in Schedule 20 of the Regulation.
The purpose of this section is to
include in the Road Transport (Public Passenger Services) Act 2001 provisions to
require the accredited operator of a public passenger vehicle to maintain an
insurance policy, known as a public passenger vehicle policy.
These
provisions were formerly contained in Division 10.12 of the Road Transport
(General) Act 1999, and were omitted when Part 10 of that Act was repealed
by the principal Act.
Section 104 provides for this part to expire one
year after the commencement of the Act.
Schedule 1 CTP premium
classes
Schedule 1, Part 1.1 defines terms in relation to CTP premium
classes.
Schedule 1, Part 1.2 sets out the CTP premium classes for the
purposes of section 9. These are divided into 20 kinds of vehicle, with further
sub-classification into 52 sub-classes according to whether the vehicle is used
for business or private purposes and, where applicable, according to the seating
capacity, unladen weight or engine capacity of the vehicle.
Schedule
20 Modification – Road Transport (Public Passenger Services) Act
2001
Item 20.1 New part 8A
New Part 8A deals with the
requirements for accredited operators of public passenger vehicles to hold a
public passenger vehicle policy.
New section 110 is based on former
sections 261A and 218 of the Road Transport (General) Act 1999 and defines the
terms “accredited operator” and “public passenger vehicle
policy.”
New section 111 requires an accredited operator of a
public passenger vehicle to hold an insurance policy for property damage (known
as a “public passenger vehicle policy”) for at least $5 million. A
failure to comply with this requirement is an offence. This provision is based
on former section 117 of the Road Transport (General) Act 1999.
New
section 112 requires accredited operators to provide evidence of the public
passenger vehicle policy when required by a police officer or authorised person
to do so. A failure to comply with this requirement is an offence. This
provision is based on former section 224 of the Road Transport (General) Act
1999.
New section 113 is a consequential amendment that makes it clear
that the Road Transport (Offences) Regulation 2005 applies in relation to
offences under new Part 8A as though schedule 1, part 1.10 of that Regulation
included references to the offences contained in new sections 111 and 112. The
purpose of this amendment is to ensure that the provisions in the road transport
legislation for dealing with offences, including provisions relating to
infringement notices, will apply to the new
offences.
Dictionary
The Dictionary contains definitions of
terms relevant to the Regulation.