Page 715 - Week 02 - Thursday, 20 February 2020

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The report emphasised that the estimated achieved profits were ‘indicative only’ and ‘could be different, potentially materially, from actual profits’.

Both NSW and Queensland, with privately underwritten personal injury schemes, have also engaged actuaries to assess estimated actual profits.

(d) The Government, scheme actuary, insurers and legal profession have been consulted in relation to the:

• monitoring, assessment and analysis of proposed or net profits as required (noting the power the MAI commission has to make a regulation regarding net profits) under the MAI Act; and

• assessment of proposed profits for the MAI scheme under the MAI Premium Guidelines.

(e)(i) In NSW the maximum profit margin allowable is currently 8 per cent of the proposed average gross premium (excluding levies and GST).

The NSW State Insurance Regulatory Authority (SIRA) has indicated they will review maximum rates periodically, and insurers may take into account allowances for innovation and efficiency that are forecast to improve scheme and policyholder outcomes to justify any assumption exceeding the maximum rates of assumptions, including profits, used in the determination of premiums.

(ii) Filed profit margins in other CTP schemes are commercial-in-confidence.

(iii) Actual profit margins in other CTP schemes are not available for the reasons outlined in (1) (b).

(f) The MAI commission will assess and monitor profits. A licensed insurer’s net profit may be reviewed if analysis indicates insurer profits might be higher than is reasonable for the industry. The MAI Act provides the MAI commission with the power to make a regulation to determine:

• when a net profit analysis may be prepared;

• the information that may be included in a net profit analysis;

• how the reasonable industry net profit must be worked out; and

• what action may be taken if analysis shows an insurer’s net profit for a year differs from the reasonable industry net profit.

Future premiums could be adjusted down in the event insurers are making higher profits than is normal for the industry. A regulation has not yet been made under this provision.

(g) See response to (1) (f).

(2)(a) Actual profit is difficult to calculate given the constraints on information available and the long-tailed nature of CTP insurance schemes as outlined in the response to 1 (b)

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