NSW compulsory third party motor premiums are under pressure from rising claim costs and frequency, a parliamentary review has heard.

Average premiums increased from $510 last year to $557 this year, insurers told the state upper house’s Standing Committee on Law and Justice last week.

“Claims frequency has risen sharply since 2022 … As the scheme matures, it is important to recognise the pressures now emerging,” said Michelle Bain, chair of the Insurance Council of Australia’s personal injuries schemes committee.

“Psychological injury claims continue to grow and the size of statutory benefits claims is increasing year on year.

“These trends are placing upward pressure on premiums … At the same time, insurers are absorbing rising claims handling expenses driven by changing regulatory requirements and service expectations.”

NSW introduced the no-fault CTP scheme in 2017, and it is examined once every parliament. The last review in 2022 led to major changes including an extension of statutory benefits to 52 weeks and the removal of a waiting period for common law claims.

“These changes were supported by industry, but their full impact on claims patterns and scheme costs is still emerging,” Ms Bain said.

“We believe that a period of stability is essential to allow proper evaluation of the significant reforms implemented since 2022 … A stable regulatory environment will support sound, long-term decision-making and help maintain the delicate balance between affordability and the provision of meaningful support to injured people.”

The Insurance Council’s submission to the review says more than 14,000 claims were made last year and “early indications are that claim numbers for 2025 will exceed 2024”.

ICA says that before the current scheme was introduced, the average premium was $915. The decreases since are “commonly seen when legislative reform takes place. The honeymoon period experienced in the early years, where premiums fell from 37% of average weekly earnings in 2017 to 21.9% as at June 2024, reached a floor and since then different trends have been observed as the scheme comes to maturity.”

The scheme is underwritten by five insurers under six licences issued by the State Insurance Regulatory Authority. They are Allianz, NRMA Insurance, QBE, Suncorp (through its AAMI and GIO brands) and Youi.

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