Page 26 - Week 01 - Tuesday, 12 February 2008

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This bill effects that necessary change but, more importantly, it presents the citizens of the ACT with a totally modem statutory scheme that is designed to deliver value for money with respect to premiums paid. It is designed to foster competition. Principally, this bill offers a scheme that is purpose designed to take control of cost elements of the scheme over which neither the NRMA nor the government had control under the previous law.

There are three main features of the bill. The first is insurer regulation, including premium regulation. It is no secret that insurers have wanted to enter the CTP market and compete here in the ACT for some time. However, when I asked Treasury to inquire why these desires were not translated into action, the overwhelming response from companies was that the ACT scheme regulatory framework was so old and so porous that insurers simply could not risk their capital in this market.

I asked Treasury to validate these claims with the Australian Prudential Regulation Authority, APRA. APRA advised that the ACT regulatory provisions were so inadequate that it questioned whether the ACT government could effectively regulate its CTP scheme, other than in relation to premiums. In reality, premium regulation occurs by a political mechanism that is not adequately supported by legislative provisions which provide insurers with clear direction or clear expectations.

Consequently, chapters 2, 4, 5 and 6 of the bill offer an extensive array of regulatory provisions. Some members have asked Treasury what a jurisdiction as small as the ACT is doing with such a comprehensive panoply of regulatory provisions. Surely it will take many staff and cost a fortune to administer these provisions, they suggest. The answer is quite simple: it will not. Seven CTP insurers have lived within this identical framework in New South Wales for many years and six of those CTP insurers operate in Queensland under a more or less identical regime.

The ACT has been accorded the benefit of the considerable experience of regulators in Queensland and New South Wales in putting these provisions in the law. Insurers know and recognise these provisions and they live within them. Enforcement is, in a sense, in the negative. Insurers know what not to do, as opposed to regulators having to spend considerable time telling them what to do.

In addition, the ACT has been offered access to all data and information available to regulators in New South Wales and Queensland without the need to develop an immediate base of expertise. Most importantly, the ACT will be able to access APRA’s insurer information previously denied us on account of the shortcomings of the old scheme. This means the ACT will be able to accompany APRA on company inspections and receive alerts and information as well as other pre-emptive data.

On the premium side, the government chose to adopt the premium setting provisions that operate in New South Wales. The government considers that these provisions provide probity and flexibility and will facilitate entrants to the CTP market competing effectively and responding to market opportunities in a timely way. The theme of these regulatory chapters is consistency with the other two open market common law States, Queensland and New South Wales, that is, consistency of regulation and consistency of expectation. Consistency in operation will offer lower

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