RACQ responds to Queensland CTP Scheme Review

As outlined in the Club’s submission to the CTP Scheme Review 2023, led by the Motor Accident Insurance Commission (MAIC), RACQ believes premium equalisation is the fairest solution for all parties involved in the scheme. 

Club CEO David Carter said the role of CTP in Queensland is essential, and as one of four providers RACQ is committed to working with MAIC and the Queensland Government to ensure the ongoing stability of the scheme. 

“For the most part, Queensland has a good CTP scheme that runs well,” Mr Carter said.

“Motorists pay one of the lowest CTP premiums in Australia and Queenslanders are likely to experience fair and reasonable outcomes should they get injured on our roads and need to lodge an insurance claim under the CTP scheme.

“But we need to address a key issue that’s eroding fairness and stability and that is the unbalanced risk that RACQ members are forced to carry in the scheme even though only 470,000 of our 1.2 million CTP policy holders are members. 

“Premium equalisation is a fair solution and is the best way forward for the scheme with minimal disruption to those involved. 

“This model would allow for premiums to be re-distributed across insurers based on the risk profile of their portfolio. 

“This means for every dollar of CTP risk an insurer holds in the scheme, they would receive the appropriate level of premium, and if an insurer holds less risk, they receive less premium – a fair outcome for everyone.

“It would not impact motorists or the annual premium they pay, nor would it impact any other associated professionals who work in the scheme, including legal and health practitioners.  

“Importantly, it would not impede the care or benefits available to injured persons, and community-rated pricing would also be retained to ensure affordability for motorists.”  

Under the scheme’s current model, an insurer cannot choose what risks to underwrite and cannot refuse a motorist who selects them for their CTP. All drivers with the same vehicle class pay the same CTP premium, regardless of their individual risk. 

According to industry research, RACQ’s strong brand reputation has attracted a larger share of riskier vehicles and drivers. This means, RACQ’s portfolio has a greater proportion of older vehicles, young or inexperienced drivers, shorter policy terms and re-registered vehicles compared to other insurers, yet we can’t charge more for this risk, and we can’t turn these motorists away.

This imbalance has resulted in the Club’s portfolio experiencing higher claims frequencies (which is the number of claims received per policy, ranging from 6% to 20%¹ greater than the industry average (according to independent actuarial analysis). At the same time, RACQ’s brand strength in Queensland has led to significant market growth further exacerbating the Club’s elevated risk and claim frequency. This in turn has led to greater claims costs despite the fact the Club’s claim management performance is on par with industry. 

“Put simply, the larger the market share for RACQ, the greater the unfairnesses as we do not receive the appropriate premium to cover our level of risk,” Mr Carter said. 

“A premium equalisation model would not change how motorists choose their CTP insurer, nor would we want it to. It would create a level playing field across all insurers by matching the level of premium to the level of risk.”

If a premium equalisation model was adopted, an actuarially developed risked model would calculate an insurer’s portfolio risk based on various agreed attributes. Premium would be equalised by debiting insurers with a better than average risk mix, and crediting insurers with a below-average risk mix. 

As part of its submission, RACQ reinforced the need for a swift review given the scheme requires urgent action from the Queensland Government. 

“RACQ has a strong reputation for looking after people injured in road collisions and supporting their recovery. We’re proud of our participation the scheme, and the outcomes of this review will be critical to future-proof Queensland’s CTP insurance scheme and ensure trusted insurers, like RACQ, can continue to be there for Queenslanders when they need us most,” Mr Carter said. 

To read RACQ's full submission click here.

_{[1] Based on independent analysis of data between accident years 2016 to 2022}