Compulsory Third Party Insurance Regulation Bill

Second Reading

The Hon. K.J. MAHER (Minister for Manufacturing and Innovation, Minister for Automotive Transformation, Minister for Aboriginal Affairs and Reconciliation) (13:00): I move:

That this bill be now read a second time.

I seek leave to have the second reading explanation inserted in Hansard without my reading it.

Leave granted.

This Bill is about ensuring a fair and affordable CTP scheme and consumer protections for motorists and CTP insurance claimants by establishing an industry specific and independent CTP Regulator.

The independent CTP Regulator will be responsible for oversight of all insurers, consumer protection, improving CTP insurance scheme outcomes for the injured and setting CTP premiums.

Although this Bill is not required to enable the opening of the provision of CTP insurance to the private sector and the cessation of MAC as the sole provider of CTP insurance in South Australia (which can be done under existing provisions of Part 4 of the Motor Vehicles Act 1959), it will mean that all of the protections of an independent CTP Regulator specifically established by statute are in place.

It is extremely important that the CTP Regulator is an independent specialist with the credibility in the CTP insurance industry and the specific financial services skills to give insurers and members of the public confidence that the CTP insurance market will be objective and fair.

The Bill will reduce bureaucracy by streamlining processes into a standalone office of an independent CTP Regulator and be very similar to what occurs in other states.

The Bill does not introduce new regulatory concepts, other than that of an independent CTP Regulator, and will not change how members of the public obtain their CTP insurance now. What it does do, is provide further detail on the existing legislative concepts that will apply when the CTP insurance market is opened to the private sector from 1 July 2016. The CTP Regulator must have the capacity, skills and credibility to liaise with the Australian Prudential Regulation Authority which will remain responsible for the financial prudential regulation of insurers across Australia.

The Bill will not change MAC’s ongoing role in road safety and as nominal defendant. CTP Regulation cannot be conducted by the Motor Accident Commission due to potential conflicts of interest with private sector insurers. The focus of the Essential Services Commission of South Australia on non-financial energy and water utilities regulation is inconsistent with CTP regulation and strong feedback has been received the CTP insurance industry that it requires an industry-specific CTP Regulator that has a deep understanding of insurance and can devote its full energies to that role.

I commend the Bill to Members.

Explanation of Clauses

Part 1—Preliminary

1—Short title

2—Commencement

These clauses are formal.

3—Interpretation

This clause contains definitions for the purposes of this measure and provides that, in addition, words and expressions used in this measure that are not otherwise defined, have the meaning assigned to them in section 5, or Part 4, of the Motor Vehicles Act 1959 (the Motor Vehicles Act). In particular, the following terms are defined in relation to Part 4 of the Motor Vehicles Act: CTP insurance, CTP insurance business and CTP insurance policy.

Part 2—CTP Regulator

Division 1—Establishment, functions and powers

4—Establishment

This clause provides for the establishment of the CTP Regulator (the Regulator)—

as a body corporate with perpetual succession; and

with a common seal; and

that may sue and be sued in its corporate name.

The Regulator is an instrumentality of the Crown and holds its property on behalf of the Crown.

5—Functions

This clause sets out the functions of the CTP Regulator as follows:

to regulate approved insurers and perform any other function relating to approved insurers conferred on the Regulator under the Motor Vehicles Act;

to determine premium amounts payable in respect of CTP insurance policies;

to determine the minimum terms and conditions of CTP insurance policies;

to monitor, audit and review the operation and efficiency of the CTP insurance business;

to provide, or facilitate the provision of, information to consumers about the CTP insurance business and approved insurers;

to make, monitor the operation of, and review from time to time, binding rules and non-binding guidelines for approved insurers in relation to—

the determination of premiums; and

the management of claims; and

dispute resolution; and

the provision of information to consumers; and

any other relevant matter;

to make recommendations to the Minister in relation to—

eligibility criteria for insurers seeking approval under Part 4 of the Motor Vehicles Act; and

the terms and conditions of any undertaking, agreement or contract entered into between the Minister and an approved insurer relating to the provision of CTP insurance; and

the assessment of an application from an insurer for approval or withdrawal of approval under Part 4 of the Motor Vehicles Act;

to approve the novation of CTP insurance policies between approved insurers;

to regulate such other insurance business as may be prescribed by the regulations;

to administer this measure;

to exercise any other function conferred on the Regulator by or under this measure or any Act.

In determining premium amounts, the Regulator may not fix differential premiums except on the basis of 1 or more of the following:

vehicle type;

vehicle use;

garaging location;

entitlement under the GST law to an input tax credit in respect of compulsory third party insurance premiums.

The Regulator is required to publish the rules and guidelines for approved insurers on its website.

For the purposes of this clause, the Minister is defined as the Minister with responsibility for approving insurers under Part 4 of the Motor Vehicles Act.

6—Powers

This clause provides that the CTP Regulator has all the powers of a natural person and, in particular, may—

enter into any form of contract or arrangement; and

engage experts and consultants; and

acquire, hold, deal with or dispose of real or personal property; and

establish and operate ADI accounts and invest money; and

do anything necessary or convenient to be done in the exercise of its functions.

7—Independence

This clause provides that, except as provided under this measure or any Act, the CTP Regulator is not subject to Ministerial direction in the exercise of its functions or powers.

Division 2—Constitution of CTP Regulator

8—Constitution of CTP Regulator

This clause provides that the CTP Regulator will be constituted of the Chief Executive Officer (CEO) of the Regulator who will be appointed by the Governor, on the recommendation of the Minister, on terms and conditions determined by the Governor. The CEO is a senior official for the purposes of the Public Sector (Honesty and Accountability) Act 1995.

9—Acting CEO

This clause provides for an Acting CEO to be appointed by the Minister in the event the CEO is temporarily absent or unable to perform official functions.

Division 3—CEO

10—Conditions of appointment

This clause makes provision in the usual terms for the conditions of appointment of the CEO.

11—Functions of CEO

This clause provides that the functions of the CEO include—

being the chief executive officer of the Regulator; and

exercising the functions of the Regulator conferred on the Regulator or the CEO under this measure or any Act; and

otherwise acting on behalf of the Regulator in appropriate cases.

It therefore follows that an act of the CEO will be taken to be an act of the Regulator.

12—Saving provision

This clause provides that an act of the CTP Regulator is not invalid by reason only of a defect in the appointment of the CEO (or Acting CEO).

13—Delegation

This clause provides that the CEO may delegate any of the Regulator's or CEO's functions or powers under this measure or any Act.

14—Conflict of interest

This clause makes provision as to how a conflict of interest that may arise may be resolved.

Division 4—Staff and resources

15—Staff and resources

This clause gives the CTP Regulator power to engage persons to be members of its staff on terms and conditions determined by the Regulator.

The Regulator may also—

by arrangement with the appropriate authority, make use of the services, facilities or staff of a government department, agency or instrumentality; or

with the approval of the Minister, make use of the services, facilities or staff of any other entity.

The CEO is responsible for managing the staff and resources of the Regulator.

Part 3—Collection and use of information

16—Regulator's power to require information

The clause empowers the CTP Regulator, by written notice, to require a person to give to the Regulator, within a time and in a manner stated in the notice (which must be reasonable), information in the person's possession that the Regulator reasonably requires for the performance of the Regulator's functions, including (for example) such evidence of the person's financial position and capacity to meet existing and future liabilities under CTP insurance policies as may be required in the notice. A person who fails to comply with a requirement under this proposed section may be guilty of an offence and liable to a penalty of $20,000 or imprisonment for 2 years. However, a person cannot be compelled to give information under this proposed section if the information might tend to incriminate the person of an offence.

17—Obligation to preserve confidentiality

This clause makes provision for preserving the confidentiality of information gained by the Regulator under this measure.

18—Statutory declarations

This clause allows the Regulator to require information provided to the Regulator to be verified by statutory declaration.

Part 4—Miscellaneous

19—Annual report

This clause makes provision for the Regulator to prepare for the Minister (for tabling in the Parliament) an annual report on the Regulator's operations in respect of each financial year.

20—False or misleading information

This clause makes it an offence for a person to provide false or misleading information for the purposes of this measure, the penalty in respect of which is a fine of $20,000 or imprisonment for 2 years.

21—Service

This clause makes provision for serving notices and other documents under the measure.

22—Regulations

This clause empowers the Governor to make regulations for the purposes of the measure.

Schedule 1—Related amendments and transitional provisions

Part 1—Preliminary

1—Interpretation

This clause provides that, in this Schedule, a provision under a heading referring to the amendment of a specified Act amends the Act so specified.

Part 2—Amendment of Motor Accident Commission Act 1992

2—Amendment of section 3—Interpretation

This clause inserts a definition of CTP Regulator and inserts a definition of the MAC Fund (formerly the Compulsory Third Party Fund).

3—Amendment of section 13A—Sufficient level of solvency

This proposed amendment is consequential on renaming the Fund as the MAC Fund.

4—Amendment of section 14—Functions and objectives of Commission

These proposed amendments are consequential on the amendments to be effected by the amendments proposed in Schedule 1 Part 3 to the Motor Vehicles Act whereby the Commission will cease to be the sole approved insurer for the purposes of Part 4 of that Act, and the renaming of the Fund. Once Part 4 of this Schedule commences, a CTP insurance policy in existence under Part 4 of the Motor Vehicles Act will, by force of clause 23 of this Schedule, be transferred from the Commission to an approved insurer in accordance with a scheme determined by the Minister. The functions of the Commission are to be altered so as to clarify that the Commission will carry on any residual insurance business arising from its operations as the sole approved insurer under Part 4 of the Motor Vehicles Act 1959 (but until it divests itself of that business or winds up that business, whichever occurs earlier).

5—Amendment of section 18—Commission's charter

This proposed amendment is consequential on the renaming of the Fund.

6—Amendment of section 25—MAC Fund

The first proposed amendment provides that the special fund for compulsory third party insurance formerly established by the Commission continues in existence as the MAC Fund, while other amendments are consequential.

7—Amendment of section 26—Requirement by Treasurer for payment from surplus

8—Amendment of section 29—Annual report

The amendments proposed in this clause and the preceding clause are consequential.

9—Amendment of section 29B—Prosecution of offences under Part 4 of Motor Vehicles Act 1959

This proposed amendment provides that the Commission may, with the approval of the Minister responsible for the administration of Part 4 of the Motor Vehicles Act, commence proceedings for an offence against Part 4 of that Act.

Part 3—Amendment of Motor Vehicles Act 1959

10—Amendment of section 5—Interpretation

These proposed amendments insert the definition of the CTP Regulator in section 5 and clarify the definition of insurance premium in light of other proposed amendments to Part 4 of the principal Act.

11—Amendment of section 99—Interpretation

It is proposed to delete Schedule 4 of the principal Act and the insurance premium committee. The amendments proposed to this section achieve that and also insert a definition of transitional period (which has the same meaning as in Schedule 1 Part 4 of this measure). Other amendments are consequential on the deletion of Schedule 4 from the principal Act.

12—Amendment of section 99A—Insurance premium to be paid on applications for registration

The proposed amendments will provide that the premium for a policy of insurance under Part 4 of the principal Act will be as determined by the CTP Regulator. New subsection (2) will provide that the approved insurer for a motor vehicle in respect of which an application for registration is made will be—

in the case of an application made during the transitional period—the approved insurer selected by the CTP Regulator in accordance with a scheme determined by the Minister; or

in any other case—the approved insurer selected by the applicant for registration.

Other amendments proposed to the section are consequential on and relate to—

the Regulator being given certain functions relating to the regulation of compulsory third party insurance and approved insurers; and

the regulation and management of approved insurers and insurance premiums during the transitional period.

13—Amendment of section 101—Approved insurers

The proposed amendments relate to the fact that, after the commencement of the amendments, the Motor Accident Commission will no longer be the sole approved insurer and, instead, any person or body (whether incorporated or unincorporated) that carries on, or intends to carry on, the business of insurance in this State, may apply to the Minister for approval as an insurer under Part 4 of the principal Act. During the transitional period, however, an application for approval may only be made on an invitation by the Minister. An application for approval must be made in a manner and form approved by the CTP Regulator, lodged with the Regulator, and then referred to the Minister (with any recommendation of the Regulator) for determination by the Minister. Other proposed amendments are related to the functions of the CTP Regulator under the measure in relation to the approval or withdrawal of approval for an insurer for the purposes of this Part of the principal Act.

14—Substitution of section 104

104—Requirements if policy is to comply with this Part

Substituted section 104 provides that, in order to comply with Part 4 of the principal Act , a policy of insurance must—

(a) insure the owner of the motor vehicle to which the policy relates, and any other person who at any time drives or is a passenger in or on the vehicle, whether with or without the consent of the owner, in respect of all liability that may be incurred by the owner or other person in respect of the death of, or bodily injury to, any person caused by, or arising out of the use of, the vehicle in any part of the Commonwealth; and

(b) be in the terms, and contain the conditions and warranties, determined by the CTP Regulator from time to time.

However, a policy of insurance complies with this Part even though it does not extend to liability arising from the death of, or bodily injury to, a participant in a road race caused by the act or omission of another participant in the road race.

15—Amendment of section 116—Claim against nominal defendant where vehicle uninsured

The proposed amendment redefines uninsured motor vehicle for the purposes of section 116 of the principal Act to ensure that a motor vehicle that is exempted from registration and insurance under Part 4 of the principal Act by section 12 or 12B of the Act, or by the regulations, but is required to be insured against liability for bodily injury caused by, or arising out of, the use of the vehicle, is not treated as an uninsured motor vehicle for the purposes of section 116.

16—Amendment of section 124AA—Limitation of liability in respect of foreign awards

The proposed amendment is consequential on the repeal of Schedule 4 of the principal Act which sets out the terms, conditions, warranties and exclusions of policies of insurance under Part 4 of the principal Act.

17—Repeal of section 129

The proposed amendment repeals section 129 of the principal Act which provides for the appointment of a committee to inquire into and determine premiums in respect of insurance under Part 4 of the Act. This amendment is consequential on the establishment of the CTP Regulator.

18—Repeal of section 134A

The proposed amendment repeals section 134A which requires a review of Part 4 of the principal Act to be undertaken by the Minister if Class 1 premiums exceed, in relation to a particular financial year, the prescribed percentage of State average weekly earnings that is current at 1 July of that financial year. This amendment is consequential on the establishment of the CTP Regulator.

19—Repeal of Schedule 4

The proposed amendment repeals Schedule 4 of the principal Act which sets out the terms, conditions, warranties and exclusions of policies of insurance under Part 4 of the principal Act. This amendment is consequential on the establishment of the CTP Regulator.

20—Transitional provision—Saving of existing policies of insurance under Part 4

This clause provides for policies of insurance in existence when the clause comes into operation to continue in force until they expire or are cancelled, subject to the terms, conditions, warranties and exclusions set out in the table (identical to those currently in Schedule 4 of the principal Act).

Part 4—Transitional provisions

21—Interpretation

This clause provides for the following definitions for the purposes of this Part of Schedule 1:

commencement day means the day on which this Part comes into operation;

declared day means the day declared by proclamation to be the day on which the transitional period ends;

Minister means the Minister with responsibility for approving insurers under Part 4 of the Motor Vehicles Act.

transitional period means the period commencing on the commencement day and ending on the declared day.

22—Ministerial control

This clause provides that, during the transitional period, the CTP Regulator is subject to the directions of the Minister as to the exercise of the following of the Regulator's functions:

determining premium amounts payable in respect of CTP insurance policies;

determining the minimum terms and conditions of CTP insurance policies;

making, monitoring the operation of, and reviewing from time to time, rules and guidelines in relation to—

the determination of premiums; and

the management of claims; and

dispute resolution; and

the provision of information to consumers; and

any other relevant matter.

23—Transfer of CTP insurance policies

Subclause (1) of this clause provides that, on the commencement day, a CTP insurance policy in existence under Part 4 of the Motor Vehicles Act will, by force of this subclause, be transferred from the Motor Accident Commission to an approved insurer in accordance with a scheme determined by the Minister.

Subclause (2) provides that, during the transitional period, the CTP Regulator may transfer a CTP insurance policy relating to a motor vehicle from 1 approved insurer to another approved insurer in accordance with a scheme determined by the Minister (in which case, the approved insurer to whom the policy of insurance is transferred becomes the insurer under the policy of insurance relating to that motor vehicle).

Debate adjourned on motion of Hon. J.M.A. Lensink.