2. Limit insurance companies’ profits
DRIVE contends that if insurer profits were curtailed to reasonable levels, the CTP scheme could continue in its present form without premium increases.
The central problem of the CTP scheme revolves around insurance companies over-estimating forward predictions. This is a flawed principle that leads to excessive profits.
For example, road safety campaigns, random breath testing, double demerit points, improved road maintenance and signage have reduced the rate of increase in accidents that was predicted by insurers constantly each year as they applied for premium increases, which the government accepted.
The insurers have constantly over-predicted accident rates, thereby collecting more annual premiums than they have needed, and which the insurers have not refunded back into the system, and which the government has not forced them to refund.
The government’s own data shows that insurance companies have ripped-off the public with super-profits for shareholders every year for the past 14 years. The profits levels have ranged between 19% and 30% from 2000-2011. And even in the years since 2011, the profit rates are still in double figures.
This greatly exceeds the 8% profit margin that the government and the insurers considered was a reasonable profit margin over each of those years. DRIVE does not consider that there is any proper basis to increase the 8% benchmark for the future.
The public should have a right to make representations in an open and transparent way to force insurers to justify their premiums. The premium setting process should be reformed to allow the public to know what premium increases are proposed by the insurers to the government, to be set for the following year before they are approved. In addition, a mechanism needs to be put in place that requires insurers are obliged to refund profits that exceed the specified profit margin.
The Government’s data indicates that in real inflation adjusted terms, green slip premium prices have been fairly stable.