1 October 2000 saw the introduction of the substantive amendments to the MAIA, the principal changes being:
- Restrictions on costs recovery in claims under $50,000.00
- Restrictions on the recovery of G-v-K damages
- Introduction of new pre-court procedures
- Introduction of mandatory pre-court conferences and offers to settle.
- There is very little anecdotal evidence about the effects of the new changes
- Neither of the major insurers has held any great numbers of settlement conferences
- Most insurers are reporting that claims are settling in the course of informal settlement conferences
- Concern has been expressed at an upwards trend in claims particularly the small end whiplash-type claims
- Since the 1997/1998 year, there has been an estimated 32% increase in the costs of settling small end claims
- Actuarial analysis indicates that 50% of all claims are minor whiplash claims and constitute some 30% of claims payments
- The increase in the cost of small claims is what is referred to as the superimposed inflation component of the claims analysis process. The fear is that there is a significant superimposed inflation factor relating to small end whiplash-type claims
- There is arguably a link between claims frequency and superimposed inflation meaning that if people perceive that making a small claim is worthwhile because the damages awards are going up more people are encouraged to make a claim as a consequence. This is perceived by some observers to be a potentially worrying trend in Queensland.
- The bottom line is that it is too early to tell what the effect of the October 2000 amendments has been.
- Very few post-October claims have settled and therefore there is no reliable evidence at all in relation to costs pressures or otherwise arising out of these claims
- There is no doubt that the HIH collapse has put pressure on the scheme as have the events of September 11. Reinsurance costs are likely to increase perhaps to a quite significant degree thus increasing insurers costs and putting pressure on premiums
- At present, the CTP policy does not exclude eg acts of war and acts of terrorism. The September 11 events have highlighted what could be potential problems with insurance if eg a truck loaded with explosives was driven into a Brisbane highrise – arguably this is a CTP claim – with policies of reinsurance excluding acts of war and terrorism this could directly expose a CTP insurer to enormous losses and conceivably send an insurer broke. There is therefore serious talk of excluding acts of war and terrorism from the CTP policy
- The premium set must not exceed 45% of average weekly earnings based upon the last 4 quarters in Queensland – this is the “affordability index” – once the affordability index is exceeded s.15 of the Act requires MAIC to report to the Minister and no doubt more draconian measures will be introduced
Accordingly, there are calls from some quarters for lawyers to show restraint and responsibility in advising clients in small end claims in relation to pursuing such claims
What will happen if claims cannot be reigned in and there is evidence of a significant increase in small end claims despite the October 2000 amendments?
- At the time of the review into the CTP scheme, the review committee gave very serious consideration to the introduction of a “Points-Scale” similar to that in South Australia
- The SA scheme works along the following lines:
- There is a scale from 0 to 60
- Injuries are rated according to the scale with 0 being the least serious and 60 being the most serious injury
- Each point is worth $1,000.00 – this relates to general damages
- A typical whiplash injury rates around 5 to 8 meaning that general damages are assessed in the order of $5,000.00 to $8,000.00.
- The courts have over time become fairly adept at categorising injuries according to the scale and this forms the guide for the legal profession as to the assessment of damages
- It is not unforeseeable that such a scheme might be introduced in Queensland with the very real danger that injuries will be “pigeon-holed” without adequate reference to subjective factors
- The issue of the regulation of lawyer advertising seems to be off the agenda for the time being but no doubt if the scheme comes under pressure, the issue will need to be revisited.
MAIC Guidelines For Direct Contact By Insurers With Claimants
- Issued by MAIC on 18 October 2001-10-23