NSW CTP and Lifetime Care Andrew Nicholls – General Manager

© Motor Accidents Authority of New South Wales

Don Ferguson – General Manager © Lifetime Care and Support Authority of New South Wales

This presentation has been prepared for the Actuaries Institute 2013 Injury Schemes Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute

and the Council is not responsible for those opinions.

NSW CTP Update

Andrew Nicholls – General Manager © Motor Accidents Authority of New South Wales

This presentation has been prepared for the Actuaries Institute 2013 Injury Schemes Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute

and the Council is not responsible for those opinions.

Outline Proposed reform: Motor Accident Injuries Amendment Bill 2013 CTP Roundtable - Withdrawn from Parliament

The show must go on

Challenges: Increasing Green Slip prices Scheme efficiency and affordability Claim frequency and propensity are increasing Delayed payment of benefits Realised profit continues to be higher than filed profit

3

Emerging trends Average claims size, claims frequency and propensity continues to rise –

mainly driven by low severity, legally represented claims • More is spent on care now than before, particularly gratuitous care

Efficiency over last 10 years is poor:

• More is spent on lawyers than on medical and related treatment costs • Insurer profit continues to be higher than estimated at the time of filing

The majority of payments in the scheme are made 3 – 5 years after the date

of accident

Low yield rates are biting

4

CTP Insurance Market Market share by insurer group

for quarter ending 30 June 2013 (based on premium volume)

21.8% (Suncorp Group - AAMI &

GIO)

16.7% (Allianz Group - Allianz &

CIC Allianz)

35.3% (Insurance Australia Group -

NRMA)

19.9% (QBE)

6.2% (Zurich)

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Green slip components Three main components:

– Insurer premium

– Medical Care and Injury

Services (MCIS) Levy

– GST

6

Medical Care and Injury Services (MCIS) Levy • Review • Change in mix

• Over collection being addressed

• Reduced rates for motor vehicles and a number of other vehicles

7

Premium Affordability Premium as a proportion of NSW Average Weekly Earnings

22.0%

24.0%

26.0%

28.0%

30.0%

32.0%

34.0%

36.0%

38.0%

40.0%

42.0%

44.0%

$200

$250

$300

$350

$400

$450

$500

$550

$600

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013Measurement at 30 June

Average premium - all passenger vehicles (LHS) Average premium - all passenger vehicles as % of Average Weekly Earnings (RHS)8

Number of claims

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Accident year ending 30 JuneMinor non-rep Minor rep Moderate Serious s151z * ANFs

* s151z claims refer to workers compensat ion recovery 9

Claim frequency Claim frequency per 10,000 vehicles and the propensity to claim

since 2000 for full claims only (excluding ANF’s).

0

10

20

30

40

50

60

70

0

10

20

30

40

50

60

70

Prop

ensit

y to

clai

m

Clai

ms p

er 1

0,00

0 ve

hicle

s

Accident Year ending 30 September

Claims frequency = Number of full claims / registered vehicles (LHS)

Propensity to claim = Number of full claims / Road casualties (RHS)

Claim frequency per 10,000 vehicles and propensity to claim since 2000 for ANF’s.

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Average claim size (in 30 June 2012 values) for minor

severity injuries legally represented

$60,000

$70,000

$80,000

$90,000

$100,000

$110,000

$120,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

2012

Accident year ending June11

Distribution of Scheme funds 2000 - 2012

50%

12%

16%

3%

19% Direct claimant benefits

Legal and investigation expenses

Insurers' expenses

MAA and RMS expenses

Insurers' Profit

12

Heads of damage - Care has dramatically

increased as a benefit

- Other payment types have remained relatively stable

Notes: 1. Claim payments shown in the chart above are actuarial estimates derived from averages across underwriting years 2000 to 2010. 2. Claim payments include just compensation payments which make up 50% of the premium components. Non compensation payments (Legal and investigation) which make up 12% of premium components, are excluded from the chart.

14.0%

40.0% 20.0%

18.0%

6.0% 2.0% Claim payments

NELEconomic lossMedicalCareBulk billingOther (incl. ANF)

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Claims costs paid out by year post injury

0%

5%

10%

15%

20%

25%

0 1 2 3 4 5 6 7 8 9

Development YearNSW Victoria

Percentage of claims costs paid out by year post-injury (excluding LTCS claims)

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Scheme improvement projects NSW Government committed to designing an efficient and affordable Scheme

– Enhancing MAA regulatory role

– Improving the claimant experience

– Simplifying and improving the purchase of Green Slips

– Reducing friction and other Scheme costs

– Improving the dispute resolution processes

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NSW Lifetime Care

Don Ferguson – General Manager © Lifetime Care and Support Authority of New South Wales

This presentation has been prepared for the Actuaries Institute 2013 Injury Schemes Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute

and the Council is not responsible for those opinions.

Lifetime Care and Support Scheme NSW

• No fault scheme for people seriously injured in motor accidents in NSW

• Provides reasonable and necessary treatment, rehabilitation and care

• Commenced October 2006 for children and October 2007 for adults

• Administered by the Lifetime Care and Support Authority (LTCSA) - An Agency of Safety, Return to Work and Support Division (SRWSD)

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Lifetime Care and Support Scheme NSW • 965 participants accepted into Scheme since 1 October 2006

– 142 interim participants who recovered and not lifetime – 27 deceased – 796 current participants of which 438 are lifetime participants – Now approximately 185 participants a year (originally 160)

• 71% participants are male

• 76% participants have a brain injury

• 11 participants with amputations, 4 burns and 1 vision loss

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Reported participants

Deceased

Interim

Lapsed

0

50

100

150

200

Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13

Inactive participants

0

200

400

600

800

1,000

1,200

Sep-11 Dec-11 Mar-12 Jun-12 Sep-12 Dec-12 Mar-13 Jun-13Point in time (as at the end of)

Reported participants

Active participants

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• Mean term of liabilities is 25 years – Plateau of cash flow and liability in approx 60 years

• Outstanding claims liability of $2.07 billion

• Latest annual incurred cost is $410 million

• Overall average cost per participant is $2.23 million

– (range $500,000 to $10,000,000)

• Funded by a levy on CTP motorists, calculated as a percentage of premium

Scheme Liabilities

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Scheme Risks • Still small

– Long tail (size of liability compared to annual revenue cash flow– currently

5:1 but will increase to 25:1 – Solvency

• Movement of eligibility threshold

• Investment return

21

Scheme Risks • Superimposed inflation

– Escalation of what services are “reasonable and necessary” – Attendant care

• Gratuitous care legal challenge • paying family as carers • cost and availability of attendant care workers

22

Scheme Volatility • Very high quarter to quarter volatility with average claim cost per quarter

varying from $1.5m to $3m or quarterly liability varying from $40m to $140m

• Participant numbers – Volatility quarterly, but reasonable stable on annual basis

• Severity of injuries

– Severity distribution of brain injury important as 76% participants have a brain injury.

– Recovery pattern, service usage over time and impact of aging still uncertain. 23

Severity of brain injury • Care and Needs Scale (CANS)

– Levels 1 to 7 – Level 7 – most severely injured, 24 hours of care a day – Level 6 – 20 to 23 hours of care a day – Level 5 – 12 to 19 hours of care a day – Level 4 – up to 11 hours of care a day, can be left alone overnight – Level 3 – can be left alone a few days a week

• Changing CANS score as participant improves

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Development years for CANS

0

10

20

30

40

50

60

0 1 2 3 4 5Development year

Number of CANS 7 - by accident year cohort

2007/08 (annualised)

2008/09

2008/09

2010/112011/12

2012/13

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Payments per motor vehicle – brain injury

2010/11

$0

$1

$2

$3

$4

$5

$6

$7

$8

$9

$10

0 2 4 6 8 10 12 14 16 18 20 22Development Quarter

Brain injuries

2007/08 (annualised)

2008/092009/10

2012/13

2011/12

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Current expenditure

38%

18%7%

17%

6%

7%7%

Attendant care

Case management

Equipment

Home modifications

Rehabilitation

MedicalHospital

$62.1m paid in the past 12

months

6%

7%

7%

7%

17%

18%

38%

6%

6%

7%

7%

16%

23%

34%

0% 5% 10% 15% 20% 25% 30% 35% 40%

Home Modification

Case Management

Equipment

Medical

Rehabilitation

Hospital

Attendant Care

2012 FY

2013 FY

$56.8m paid in total

$62.1m paid in total

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Attendant Care • Will ultimately make up around 75% of full cost model

• Approximately 38% of current participants receiving attendant care services

• Approximately 73% of lifetime participants have receive attendant care

services at any one time

• Participants are requesting approximately 60% of care they are assessed as requiring 28

Trends • Spinal cord injury numbers as expected, but number of incomplete injuries

increasing compared with complete

• Slightly older cohort of participants – Slight increase in % of participants with a brain injury over 35 – Slight increase in % of participants with a spinal cord injury over 55

• Increasing complexity of “eligibility” decisions

– Causation issues e.g. did stroke cause mva or stroke result from mva – Co-morbidities of mental health, drug and alcohol, dementia – Complex late applications

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LTCS Initiatives • Person-centred approaches

– Move to increasing participants’ choice and control over their life and services

– Increasing focus on assisting participants to set their own goals – Direct funding pilots

• Improving employment outcomes for participants with brain and spinal cord injury

• Increasing opportunities for participants to have a say • Increasing links with other disability programs

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LTCS Focus next 3 years • Continued focus on scheme solvency

• Increase alignment of SRWSD schemes

• National Injury Insurance Scheme (NIIS)

• Greater focus on health and social outcomes

• Continued focus on developing a more person centred approach

• Growing internal and industry capacity to support expected growth

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Questions?

• www.maa.nsw.gov.au

• www.lifetimecare.nsw.gov.au