State insurer warns of spike in dodgy motor vehicle injury claims.

Written by Sean Smith, The West Australian.

Fri, 2 September 2022 4:28PM

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The State Government insurer has expressed concern about a spike in “claims harvesting” where motor accident victims are encouraged to exaggerate or falsify their injuries.

The predatory practice has been a problem for years, but the Insurance Commission of WA has underlined the State’s vulnerability by revealing that WA was the only State to record an increased number of motor vehicle injury claims last financial year.

In the June half-year alone, 31 per cent of all claims are suspected to have been “harvested”, up from 10 per cent just four years ago.

“Claims harvesting”, which is adding to the cost of third-party vehicle premiums, often involves cold-callers encouraging accident victims to lodge a claim through a specific law firm with the promise of a windfall.

“It’s growing really fast,” ICWA chief executive Rod Whithear said as the insurer announced a reduced $63.6m annual profit that was heavily influenced by weaker investment returns.

“These are low value claims and quite painful for us to deal with, and it often leads the consumer up a garden path,” he said.

“They’re being told, ‘we can get you $100,000’, but the claims may be worth $1000 or even nothing.”

ICWA, which contributed $1 billion to Government coffers over the past 12 months, estimates “harvested claims” will cost $35 million in 2022-23, or 6 per cent of its third-party insurance scheme, up from 2 per cent five years ago.

The issue is one of a number of ongoing concerns at the group, with another being the 20 per cent annual increase in the cost of workers compensation insurance for public servants.

All up, the commission received 37,000 new claims in 2021-22, up 4000 on the earlier year.

ICWA’s net premium revenues jumped $40m to $882m, with collections by its RiskCover workers compensation fund leaping 23 per cent to $389m after insurance costs levied on the Public Service rose 17 per cent.

The Government agencies have been hit with a 26 per cent rise for this financial year and can already expect another 21 per cent hike in 2024.

ICWA says the rising bills are influenced by higher costs and longer-duration claims, with mental stress a growing contributor.

Excluding emergency workers such as police, the Public Service accounts for just 8.5 per cent of the State’s workforce but 55 per cent of its mental stress claims.

ICWA’s profit fell from the previous year’s bumper $1.1b result after equity and fixed-interest investment markets turned south, offsetting strong underwriting earnings recorded by its motor injury insurance funds.

The group’s $6.9b investment portfolio lost 3.5 per cent for the year, having reaped 17.7 per cent a year earlier.

Its funds are invested across various asset classes, largely in line with the investment mandates at Australia’s major super funds.

However, Mr Whithear is concerned that the reducing number of big listed companies on Australia’s “shrinking” stock market is forcing ICWA and other major Australian investors to invest more funds in alternative assets.

“If this trend continues, we are just going to have four banks and a few big miners on our stock exchange, which means to diversify you’ve got to go a bit harder into private equity, which is time consuming and a bit more expensive for us.”

He said ICWA had mandated three US private equity firms to chase down investment opportunities.

Last year, the group for the first time quantified the expected payouts for victims of childhood sexual abuse at about $300m after a 72 per cent jump in claim numbers to 232.

Mr Whithear said on Friday claim numbers had since grown to 318.