Page 1950 - Week 05 - Thursday, 10 May 2018
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(3) Are the insurer profit margins included in the premium filings to the ACT CTP Regulator compared to the actual profit margins of insurers each financial year; if not, can the Treasurer advise why they are not compared, and what processes are in place to verify and monitor insurer profit margins; if so, what was the difference between insurer profit margins included in premium filings and actual profit margins during (a) 2014-15, (b) 2015-16, (c) 2016-17 and (d) 2017-18 to date.
Mr Barr: The answer to the member’s question is as follows:
(1) The compulsory third party (CTP) insurer profit margins are included in the premium filings of each insurer, and in conjunction with claims and various other data, are commercial-in-confidence. This is because various data are proprietary in nature and owned by the relevant insurer.
In addition, given the CTP scheme is privately underwritten, with competition integral to the scheme, individual insurer profit margins and associated underlying data cannot be disclosed as this would contravene competitive neutrality arrangements:
• section 270 (5) of the Road Transport (Third-Party Insurance) Act 2008 (CTP Act) prohibits the CTP Regulator from disclosing any data to the extent that it might affect an insurer’s competitive position.
In this context, the profit margins for the four CTP insurers (AAMI, APIA, GIO and NRMA) are provided annually on a financial year basis in a band covering all insurers, consistent with the requirement to provide reporting about profit margins (section 46 of the CTP Act). The pertinent profit margin bands are:
• 2016-17 - range of 8% to 11%;
• 2015-16 - range of 8% to 12%; and
• 2014-15 - range of 7% to 12%.
(2) As indicated in response to (1) above, consistent with the CTP Act (section 270 (5)), individual insurer profit margins and other data, such as claim costs, cannot be disclosed as it would affect an insurer’s competitive position.
(3) Each CTP premium filing lodged by an insurer is subject to extensive analysis by the CTP Scheme Actuary, who is required, amongst other things, to determine whether the premium ‘fully funds’ the scheme and ‘is not excessive’.
Each premium filing is based on a range of forecast assumptions with regard to the underlying variables that include, for example, claims frequency; average claim cost; and economic assumptions such as superimposed inflation.
In determining whether the premium meets the requirements, due regard is given to the expected profit margin outlined by the insurer, in combination with the other underpinning data provided in the filing.
Following on from the Scheme Actuary’s analysis, the CTP Regulator then determines whether or not to approve the premium filing.
An assessment of an insurer’s actual profit margin requires a comparison of premiums earned in an accident year compared to the expenses related to that accident year.
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