Modest increase in Compulsory Third Party (CTP) insurance premium

8/5/03 The State Government has announced a 2.

8/5/03
The State Government has announced a 2.8 per cent increase in Compulsory Third Party Insurance premiums on family motor vehicles, the first in two years.
Government Enterprises Minister Nick Griffiths said the decision to increase premiums by 2.8 per cent took into account uncertainty surrounding changes in economic conditions such as inflation and investment returns as well as current and future trends in claims frequency.
"This is a prudent approach to managing the Third Party Insurance Fund and was reached after receiving advice from the Insurance Commission of Western Australia," the Minister said.
A dual premium system will be introduced for three major classes of vehicles, differentiating between vehicles registered for private and business use.
The three vehicle categories affected by the decision are: Class 1A Motor Cars and Station Wagons, Class 2 Goods Carrying Vehicles and Class 4 Motorcycles.
Premiums for Class 1A, private use motor cars and station wagons will increase by $6.41 to $227.50 per year (excluding GST), representing an increase of 2.8 per cent and well below the inflation rate.
Despite the premium increase, Western Australia will continue to have the cheapest private motor vehicle premiums in Australia.
The last increase to the Third Party Insurance Fund pool was 3.6 per cent which came into effect on July 1, 2001. Private motor cars however, increased by only two per cent on that occasion.
There were no premium increases in 2000-03.
The premium rates for private motor cars set out in the table below show that WA will remain the lowest third party insurance provider in Australia.
The premium rates quoted are the current rates (excl. GST) for private motor vehicles. Other States and Territories are expected to increase their rates from July 1, making the Western Australian premium even more competitive.

States$
Western Australia 227.50 (from July 1)
Tasmania284.55
Victoria 286.35
South Australia 304.55
New South Wales*313.60
Queensland*314.55
Northern Territory338.20
Australian Capital Territory354.55
*Average premium on offer among the private insurers

Premiums for private use Class Two (goods vehicles) and Class Four (motorcycles) will increase by 0.4 per cent and 3.8 per cent respectively.
The percentage increase between the three dual premium vehicle classes varies comparatively due to the number of vehicles used for business or private in each class.
Dual premiums have been introduced as a result of provisions in the GST legislation relating to CTP insurance which for the first time will allow GST registered businesses to claim back all or part of the GST paid on compulsory third party premiums, as an input tax credit (ITC) for those policies commencing on or after July 1, 2003.
When the Federal Government introduced the Goods and Services Tax (GST) on July 1, 2000, CTP insurers Australia-wide were allowed transitional arrangements for three years. Under these arrangements, GST registered motorists were denied the ability to claim an Input Tax Credit (ITC) on their CTP insurance premium.
The benefit of this was that CTP insurers, such as the Insurance Commission, were able to claim maximum GST tax credits from the Australian Taxation Office, on all qualifying claim payments made after July 1, 2000.
Consequently, there was no need to price differentiate between Standard (business) and Private rates of CTP insurance premiums.
Notwithstanding prolonged lobbying by CTP insurers Australia-wide, the Federal Treasury remains opposed to a permanent extension of the transitional arrangements beyond June 30, 2003.
As a direct result of Federal Treasury's decision, commencing July 1, 2003, the overall cost of funding motor vehicle personal injury claims for vehicles used for business purposes will rise due to CTP insurers no longer being able to claim maximum GST tax credits, on claims made against business use vehicles.
The premium for Class 1A vehicles registered for business use will rise by $20.41 to $241.50 (excluding GST). The 9.2 per cent increase covers the impact of both the GST and general claims experience.
When allowing for the fact that GST registered businesses will now be able to claim an input tax credit on the GST, the net cost to the owner is likely to be cheaper than the previous year.
Premiums for business use Class Two and Class Four vehicles will increase by $14.00(6.6 per cent) to $223.00 and $12.59 (10.2 per cent) to $137.00 respectively.
"The Government has given careful consideration to the effect these increases will have on motorists before making a financially responsible and fair decision," Mr Griffiths said.
Minister's office: 9222 8950


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