CHAIR (Mrs Petrusma) - The time now being 9 a.m. the scrutiny of Motor Accidents Insurance Board will now begin. The time scheduled for the scrutiny of this GBE is one hour.
I welcome the minister, Chair and CEO to the committee.
I remind members about the practice of seeking additional information for GBEs. The question must be agreed to be taken by the minister or the Chair of the board and the question must be handed in in writing to this committee's secretary.
Minister or Chair, do you want to make as brief opening statement, keeping in mind that this scrutiny only goes for one hour.
Mr FERGUSON - Thanks, Chair. In 2018-19, the MAIB experienced a successful year with sound results across business. Despite challenging financial market conditions at times throughout the year, strong investment returns have been achieved resulting in an operating profit for the board. The board is well positioned in terms of its long-term financial position with a funding ratio of 130.5 per cent well within target range as well as providing consistently strong returns to government.
The general trend of reducing claim frequency and average claim costs reflects the ongoing road safety improvements, including infrastructure works, education campaigns and enforcement activities. Tasmanian motorists have received direct and major benefits from these positive outcomes and they themselves have played a role in this success.
It is with great pleasure that I can announce that the general MAIB premiums will have no increase for the year commencing 1 December 2019. That is a zero percentage increase. It is a zero dollar increase. It is a great result for the motoring public. This means that the premium for a standard motor car will remain at $294 despite the Tasmanian economic regulator's pricing order allowing an increase of 3 per cent, equating to $9 per car. This is the lowest in the country and it is great news for Tasmanian motorists. There was also no general premium increase the previous year so while we do see, unfortunately, some claims being made in the media and media releases, they are false. We present the facts today in print and on registration notices that are being distributed to registered vehicle owners right now. For a standard car the premium freeze translates to the annual premium cost being less than it was 15 years ago.
This is despite the MAIB's scheme providing arguably the best overall no fault benefits to those injured through motor vehicle accidents as well as achieving consistently higher client satisfaction results. That is a great tribute to the current management. It is a great tribute to the Parliament of Tasmania that in previous decades it had the foresight to set up the scheme in the way that it. I know the tripartisan support it has enjoyed throughout all those years.
In other highlights the MAIB continues to work with the Road Safety Advisory Council and Tasmania Police to implement highly effective advertising and public education messages combined with appropriately targeted enforcement activities. I will not go into too much detail unless I am asked for it but the Road Safety Advisory Council is a joint initiative. It is bringing together all the key people to give strong advice about reducing the number and severity of injuries on roads. The council itself has run a range of campaigns that we believe are making a difference. They are doing that often on the support of the MAIB directly which provides annual funding of $3.8 million.
The MAIB's total funding provided to the council and its predecessor groups has amounted to in excess of $50 million. That is a substantial investment in road safety which, of course, the MAIB has a strong interest in contributing to. The MAIB also continues to provide significant contributions to a wide range of community organisations across the state which the committee may wish to ask us about.
In closing, I congratulate and take this opportunity to specifically congratulate the entire organisation of the MAIB on the exceptional service that it provides to the people of our state and a specific thank you to the board and management for strong and capable leadership, particularly under the Chair, Mr Challen, and the CEO, Mr Kingston.
Dr BROAD - Minister, why is the profit down significantly from what was budgeted? I think it's down $27 million.
Mr CHALLEN - You are talking about the profit for the year ended 30 June 2019?
Dr BROAD - Yes, page 4.
Mr CHALLEN - We had two major influences that were driving our profit outcomes for that year. In fact, there is a little story in the Chair and CEO's report at the front of our annual report that might be helpful to look at.
There are two big factors that drive MAIB outcomes in any given year. One is investment returns, for which we are at the mercy of the markets for the various investments we have, and 2018 19 was actually a very good year for investment returns.
There is a little table on page 4 of the annual report that shows relative to budget, our investment income was up about $70 million on the year but offsetting that, we had a big negative variance on our claims expense, which is the other big thing that goes on. Neither of these are things that we can control at all. The claims expense was, in turn, driven by the fact that market interest rates during the year fell substantially. The claims expense reflects the present value of our very long table of liabilities, going out 80 years into the future.
The actuaries they take the cash flows associated with those liabilities going out 80 years or so, and they discount them back, using market interest rates to a present-day number. The change in that number from one year to the next is our claims expense. During 2018-19, because market interest rates vary substantially, the present-day value of that long table of liabilities went up sharply. That is reflected in our claims expense being much higher than we budgeted because, at the beginning of the year, neither we nor our actuaries had anticipated that big drop in interest rates during the year.
You can see from that little table, two big factors at work, largely offsetting each other, but the outcome was the profit before tax was about $27 million down on our budget.
Dr BROAD - Your actual profit is $38.4 million, yet you are paying the Government almost a $42 million dividend, despite changing your dividend policy. Is this the Government's policy or MAIB's?
Mr FERGUSON - We will both answer that, through you, Chair. Dr Broad, the Government has an appropriate dividends policy in place that has been in place now with the MAIB. It has been a mutually agreeable approach on this so that we can ensure that the organisation continues to have strong financial management and has an adequate capital base to protect both its investment strategy as well as current and future liabilities.
There have been a lot of claims made about dividend policy in relation to the MAIB. They have been unfortunate and false. In relation to profitability, that is something where the organisation and the Government's dividend policy takes a longer-term view, not only an immediate year-by year approach.
Mr CHALLEN - Dr Broad, that's right; that it is a shared policy. But there was a significant change during the year just gone and that was initiated by the MAIB board. The first part of your question about why is the dividend bigger than the profit, that is driven by the fact that for many years, the MAIB has had a dividend regime under which the dividend is based not on the current year's profits but on the average of the current and the previous four years' profit. So, there's a rolling moving average of profits that is used to calculate the dividend. For a number of years, it had been 50 per cent of that average of five years' profits. There were a couple of years, a few years back, where it went up to 60 and then it went back to 50 per cent.
The Board has been looking very carefully at our capital adequacy position. MAIB is a fairly unique business. What is unusual about it is that we have a very long table of liabilities as I mentioned in answer to the last question, going out 80 years into the future. There is a lot of uncertainty about those liabilities. Funding those liabilities, we have a bundle of investments, right here and now. We can make some estimates of what returns we will get on those liabilities, but in the end, the liability number is a much more uncertain number than the pool of investments we have to fund it.
We hold capital to create a buffer between those two things, and the board has been looking at the adequacy of that capital buffer. One of the things that concerned us is that there is a mechanism when we are holding too much capital to hand it back to our shareholder; it is the special dividend. Like all companies, when we have more capital than we need, and we have nothing better to do with it, the correct thing is to hand it back to the shareholder, and we have done that a number of times in the past.
That is easy enough, but there is no mechanism to allow us to recover in circumstances where we have had a few bad years and the capital buffer has dropped. We came up with an idea to deal this, and opened a dialogue with the Treasury and the Treasurer to see if we could get support from Government for this new dividend regime, and I am pleased to say that it has been supported.
We look at the adequacy of that capital buffer in what we call the funding ratio, which is just the ratio of our investments to our liabilities - and because we want a buffer, we want the funding ratio to be more than 100 per cent. On the basis of much modelling and advice by the actuary, we are targeting a funding ratio of investments-to-liabilities of 120 per cent to 145 per cent. We have now put in place a new dividend regime, in which the payout ratio is 50 per cent, when that funding ratio sits in the middle of that sweet spot of 125 per cent to 132.5 per cent.
If we have a few good years, profit goes up, our capital buffer rises, and the funding ratio rises, so that payout ratio rises above 132.5 per cent - and ultimately if it gets good enough, up to 90 per cent. That returns the excess capital to our shareholder. On the other hand, if we have a few bad years and the funding ratio drops below 125 per cent, the dividend payout ratio drops below 50 per cent, and ultimately can go down to zero.
This puts in place a mechanism that allows a more automatic process of allowing our capital base to recover, or come back to that sweet spot, depending on how circumstances prevail. The new dividend regime is designed to deal with that.
Dr BROAD - In effect, this year the Government is taking $3.5 million out of the business.
Mr FERGUSON - We might both answer that question, Dr Broad. That is a very negative way to cast your question. When it all comes down to it, this is a government-owned business. It means the taxpayers of Tasmania own this business. We want it to succeed and to do well. When there is an appropriate dividend capability, we want that returned to taxpayers so they can enjoy the benefits of their wealth, so it can used for the Budget - the Budget which Dr Broad needs funding to provide services in education, in police, in health and in infrastructure.
Rather than cast a dividend policy as taking money out of the business, it sounds like you are more interested in the money staying in the business than going into the state Budget, where it can provide services to Tasmanians. I am not sure that is what you wish to present, but that is how it sounds.
What we are actually doing though as the chair has comprehensively unpacked, and we can explore further - is that the policy is being improved in such a way that it can have a more self-moderating effect over the course of years, knowing that in some years you will have very strong investment returns because of external factors in the marketplace. In years where those returns are poorer you will be seeing a situation where a smaller dividend will be payable, compared to the traditional 90 per cent of net profit after tax.
I am not sure whether you would welcome that, but it seems to us a more appropriate way of striking a balance for how dividends are paid - not in terms of taking money out of the business, but providing a return to taxpayers.
CHAIR - Dr Broad, the call does need to pass. The microphone in front of Mr Challen doesn't seem to be working.
Mr FERGUSON - We do apologise for that and we will speak up.
CHAIR - We will replace the microphone at lunchtime.
Mr FERGUSON - If I might, I welcome Ms O'Connor's question and your lead, Chair, but I was wishing to throw to the Chair to respond to that earlier question.
Mr CHALLEN - The minister has answered it adequately, so I do not think I can add anything more.
Ms O'CONNOR - Minister, I wanted to talk to you about the Vehicle and Traffic (Driver Licensing and Vehicle Registration) Regulations of 2010. As you are aware, during the past 12 months, your Government has been collecting facial recognition data about Tasmanian citizens in anticipation of a federal Identity-matching Services Bill 2018, and the Australian Passports Amendment (Identity-matching Services) Bill 2018.
As you are also aware, minister, those bills were shelved after a Parliamentary Joint Committee on Intelligence and Security recommended they be rejected and rewritten to protect privacy. However, on 8 October this year, it was revealed in the upper House that your Government has been collecting biometric data from all those applying for or renewing their driver licence.
Can you tell us, and every Tasmanian who is concerned about their privacy, under what authority the Tasmanian Government has collected biometric data, where it is being stored, and where it will go from here, given that the federal joint committee has recommended the legislation be rewritten?
Mr FERGUSON - I am in the committee's hands on this; it is entirely out of scope from the point of view of the MAIB. I am happy to answer it if the Chair would like, and if my answer would require some supplementation I am also happy for it to be taken on notice.
CHAIR - If the minister is happy to answer, that's fine.
Mr FERGUSON - The Government is cracking down on identity fraud, which is what this is all about, and protecting Tasmanians and their data through the use of new identity-matching technology. This has been the subject of considerable discussion between First Ministers at the Council of Australian Governments, and parties have agreed across all jurisdictions - reflected by Liberal and Labor governments - that this is an initiative that will help combat the growing scourge of identity fraud, which is a major issue for our community. It affects many Australians and Tasmanians. In fact it impacts around one in every 20 Australians, and is estimated to cost about $2.2 billion per year.
Unfortunately, many people have been the victims of identity fraud. I know some people who have been, and it has resulted in them being ripped off and having their credit history ruined. One of the particular areas of exposure has been the use of falsified driver licences.
Tasmanians would rightly expect their government to be prepared to take the action that would protect their most important -
Ms O'CONNOR - They would also expect their government to protect their privacy.
CHAIR - Order, Ms O'Connor, I ask that you do not interrupt the minister while he is talking, thank you. You will allow the minister to finish and then you can ask another question, but allow the minister to complete his answer, please.
Ms O'CONNOR - With respect, there is a conversation at the Estimates table -
Mr FERGUSON - Tasmanians would rightly expect their government to be prepared to take action to protect their most important identity documents and their privacy.
The service is intended to stop serious and sophisticated criminal activity. It is specifically in relation to the question that I have been asked that Tasmanian data is being uploaded to a segregated and protected area. Victoria has also uploaded its driver licence data into the national system, and all other states and territory governments have committed to do the same.
Currently, because of the discussion that is occurring in Canberra about the correct and best legislation that would be fit for purpose going forward, there is no access to Tasmanian data for face-matching services by any agency. Access will only be granted where there is the legislative basis to do so.
If there are further questions on this, I am more than happy to listen to them and respond if I am able to, but it may be a circumstance where I may need to take it on notice.
Ms O'CONNOR - Thank you, minister. You talked about how further legislative access may be enabled by further legislation. Why did your Government decide to, without the knowledge or consent of Tasmanians who renewed their licence or obtained a licence, collect this data without community consultation on it, or the need for or desirability of it? Why did your Government decide to capture Tasmanians' data without consent, and send it to a biometric database through a regulation through the Tasmanian parliament thereby guaranteeing it wasn't properly scrutinised.
Mr FERGUSON - Chair, I find that a very unusual question. Ms O'Connor, with respect, you have just said that the Government acted in a way that guaranteed a lack of consultation when you also indicated correctly that it had been through the Tasmanian parliament.
Ms O'CONNOR - It went through the Subordinate Legislation Committee and was dropped on the table, along with a bundle of other bills and regulations. You know what has happened here.
Mr FERGUSON - Can I answer the question?
Ms O'CONNOR - Can you respond to Professor Terese Henning's concerns about the way this was done? Dr Brendan Gogarty and Richard Griggs from Civil Liberties Australia have questioned your Government's decision to take biometric data for storage and unknown uses through regulation?
Mr FERGUSON - The Registrar of Motor Vehicles is legally required to collect and store photographs and other identifying information for the system in relation to driver licences. This personal information is specifically protected by regulations which were amended in December 2017 by legislation in the Tasmanian parliament. It was a regulation considered by the Subordinate Legislation Committee which is empowered to query, to make inquiries into and potentially even recommend a disallowance, which it did not choose to do.
Ms O'CONNOR - They just waived it through. I am not on the Subordinate Legislation Committee. As you know, the Greens aren't invited onto that committee. Regrettably.
Mr FERGUSON - I can't speak for that committee other than to say that that committee is provided with that information. Equally, every member of parliament, including those who are not a member of that committee, receives a copy of the regulation, and is entitled to.
Ms O'CONNOR - No explanatory memoranda on what the regulations meant.
Mr FERGUSON - I am simply pointing out that any member, even those who are not on that committee, are entitled to move a disallowance during private members' time. I will continue. The changes to the regulations followed the national agreement at COAG in October of that year for the new national bio-facial fraud prevention initiative.
Ms O'CONNOR - Was there a public statement about that?
CHAIR - Ms O'Connor, that will be your last question. You have now asked five questions in a row. Don't interrupt the minister when he is talking.
Mr FERGUSON - I am happy to take that on notice because I am not aware at the moment as to whether the first minister has made an announcement of that. I will take it on notice if you wish to write to me. The amended regulations were published in late December 2017, tabled in both Houses of Parliament in May 2018, which was after the state election and considered by the Subordinate Legislation Committee in June 2018. The committee can speak for itself.
Ms O'CONNOR - It didn't consult on them though.
Mr FERGUSON - I know of your genuine interest in this. The Personal Information Protection Act 2004 allows for the disclosure of personal information if the disclosure is reasonably necessary for law enforcement purposes.
Mrs RYLAH - Minister, I would like to come back to MAIB. As we know, MAIB is an insurer. Therefore, it has a collective, cooperative, long-term averaging arrangement on premiums to enable claims to be made. I congratulate MAIB on its positive outcomes regarding claims. You have mentioned there is no increase in premiums. How do these premiums compare to similar schemes interstate?
Mr FERGUSON - Thank you for the question, Ms Rylah. I invite the CEO or the Chair to respond as well. MAIB premiums are subject to review by the Tasmanian Economic Regulator each four years. At the last review, the regulator recommended no general increase for premiums at 1 December 2017 and for each of the subsequent three premium years the premiums be indexed by a maximum of average weekly ordinary time earnings. Since the issuing of the regulator's order, the Tasmanian Government and the MAIB, each have complementary roles in setting premiums, have not applied a general premium increase. The MAIB premiums for a private motor car have previously received premium decreases.
As I mentioned in my opening statement, the premium for a private motor car of $294, effective from last Sunday, is lower than the equivalent premium as at 1 December 2003. It is lower in dollar amount, even given that passage of time of 16 years where you would have expected some CPI increase - I would estimate around a 30 per cent to 50 per cent increase. In 2003 it was $324. In real terms, relative to average wage earnings, the MAIB premium for a standard motor car has reduced by about 50 per cent over the past decade. Pensioners will continue to be eligible for a 20 per cent discount on their premium on a motor car or light goods vehicles. That equates to about $59 a year. It is a no-fault scheme.
I was asked about other states and territories. They also have compulsory third party schemes which are funded in different ways but usually through compulsory premiums. Our MAIB has the lowest premiums in Australia. The most comparable scheme to ours is the Transport Accident Commission in Victoria, which also offers lifetime care and restricted access to common law. It is, however, a higher premium with a motor car premium of $532 compared to our figure of $294. The highest premiums are in the ACT, with car premiums of $569. The ACT does not provide the full no-fault coverage that we do.
I hope that is of assistance. Mr Kingston, is there anything worth adding?
Mr KINGSTON - The only other issue is that the MAIB has operated a lifetime care scheme for 28 years. Most other states only introduced that three years ago. That is for the catastrophically injured who need care 24/7 in some cases for the rest of lives. Given we have had that funding for that time the premiums have stayed quite low.
Mrs RYLAH - Yes, I have seen the benefit of that to some Tasmanians. Well done.
Dr BROAD - Minister, how does your dividend policy fit with MAIB's purpose statements, values statements, or your statement of corporate intent? It does not mention paying dividends to government in any of those statements.
Mr FERGUSON - Do you not want the Tasmanian budget to receive any dividends from the MAIB, Dr Broad?
Dr BROAD - What I am asking is -
Mr FERGUSON - What is Labor's policy on this?
Dr BROAD - Can you answer? What is the purpose of this business. Is it another TasCorp? Is it something that can be raided periodically, or is it set out as its purpose statement says?
Mr FERGUSON - The Tasmanian Government has achieved an agreement with the MAIB board as to the best balance for dividend policy, which works for the board's long-term interests. It has long term liabilities and a long-term investment strategy, so it is appropriate. The MAIB is essentially a financial organisation which also has the care needs of a number of Tasmanians in its charge. In setting the policy I do not know if there needs to be a link in the statement of corporate intent for the dividend policy. Chair, I am happy for you to answer it further.
Mr CHALLEN - Thanks, minister. We are required under the GBE Act to operate commercially and we try to do that. It is in the interests of people who are injured in motor vehicle incidents that we act commercially. They are our first concern. That's what we're there for, but we can only serve them if we operate sensibly and commercially. One of the consequences of operating commercially is that we should provide a sensible return on the capital that's employed in the business. It is important to remember that the government has $520 million of taxpayers' money wrapped up in capital in this business. What we are trying to do when we pay a dividend to government is to provide a reasonable return to the taxpayer for that investment in the business through our capital.
Dr BROAD - How much could premiums be reduced if MAIB did not pay a dividend to government?
Mr CHALLEN - Premiums are not driven by our dividend policy or capital adequacy. Premiums are driven by the underlying costs of the scheme, what it costs to rehabilitate people who are injured in motor vehicle incidents, and to look after people who need future long-term care, and by the incidents of those motor vehicle incidents. They are the two big drivers of premium costs. There are other underlying things such as assumptions about long-term investment returns, but very little that happens in the here and now affects premiums. Premiums are set on the basis of actuarial advice about the long-term features of the scheme. There is no link between dividend payouts and premiums.
Dr BROAD - With your life-time care, you are going to have some clients for the rest of their lives. You will have rehabilitation and some people's needs will reduce over time. With that in mind, why don't you survey long-term care clients and their families to gauge their customer satisfaction scores?
Mr CHALLEN - We do, but perhaps Paul is best placed to answer that.
Mr KINGSTON - We survey clients as they settle their claims, including common law claims, so some future care clients would actually end up being surveyed as part of that process. Annually we do a survey and that covers every claim that was closed in that year, so we've taken the whole journey for that claimant from when they started to when they are hopefully better and back to their way of pre-injury life. That is when we decide to survey people rather than throughout.
In terms of the future care of people and specifically how we gauge the feedback, after 28 years of operation we have a little over 100 people in our scheme - it is not a massive number - and we have a dedicated team who look after those 100 people. So there are up to five or six people in that team who are individually talking to claimants and their families, in some cases daily. We tend to get the feedback directly from them as we are providing care to them and assess where they are going. We also have a range of external service providers, so we do not provide the care directly. We fund the care to relevant allied health and health professionals and other needs they have around community integration and going back to work. We engage with those people to get independent feedback of how our claimants are going as well.
The future care scheme is really one-to-one management for a very long period and in some cases, we are talking to those families and people daily about how their claim has gone when we can have them for potentially 50 more years.
Dr BROAD - What about the service they're receiving, rather than the claim?
Mr KINGSTON - That is what is the future care scheme is all about. Our lifetime care is based on the service. We take feedback on what they are doing day to day and make sure we adjust the care they are getting to meet their needs. That is the whole basis of that lifetime care scheme.
Dr BROAD - Families of significantly impaired clients I have spoken to have suggested that they have to ask if MAIB will pay for a particular service, and then they get a response of either yes or no. It seems to those families that they have to seek that information and ask those questions because the information is not necessarily offered up freely. Instead of going to the family and saying, 'This is what you can receive, these are your options, these are all the things you can claim', it is 'Can we have this?', 'Yes', and 'Can we have this?', 'No'. How do you respond to those claims?
Mr KINGSTON - Our feedback from clients is generally very positive. However, there are always clients where we aim to improve and provide better service and they may not be 100 per cent happy with the way the services are getting to them. We are always looking for ways to try to improve that and how we go about in dealing with them. Some of the clients we deal with, particularly our lifetime care clients - in fact, the vast majority of them - have significant brain injuries, so there is a lot of work to try to understand their needs, in some cases through guardians and some cases through loved ones who are looking after them.
The primary way we try to improve their knowledge of what they can access, particularly in lifetime care, is through our partners who provide the service supports, bodies such as Anglicare, who provide the attendant care providers on the ground. We work with them to make sure they are fully briefed on what we can do. We have a support needs assessor who is like a total case manager who looks at all the services being provided to a lifetime care claimant and we make sure they are armed with everything that can be provided as well.
In some cases, it is some of our partners who are providing the services that are helping those people understand that. In some cases, it is difficult to consistently get that message across to people about what they can provide. I am not saying we are perfect. We can always find ways of trying to make it better for people, but sometimes we are struggling with communication issues with the claimant and the family.
We also have three purpose-built facilities across the state which house people who cannot live with their families for whatever reason. In some of those cases those people do not have any family support, so trying to make sure we are conveying what we can provide to a claimant who might have a significant brain injury without any family support becomes quite difficult to do on a consistent basis. We are always trying to make sure we provide that clear message as best as we can and where a claimant is not happy with what we do, we actively try to improve that situation for them.
Ms O'CONNOR - Minister, 15 years ago the Tasmanian parliament passed the Personal Information Protection Act 2004. The then Attorney-General said in the parliament that the key objective was to ensure the way in which the state and local government sectors collect and use and disclose personal information is fully transparent. Do you believe the way the Government has collected biometric data on licensed drivers in Tasmania has been fully transparent?
Mrs RYLAH - Point of order, Chair, this is a GBE hearing about MAIB. I question whether this is in order.
Ms O'CONNOR - Do you need cover to be run here? This is about licensed drivers and the personal information of licensed drivers. Regrettably for you on the point of order, Mrs Rylah, the minister has already set the precedent by answering the first question,
CHAIR - The minister has the right to say that it is out of order for this committee; it is up to the minister as to whether he is going to take each question.
Ms O'CONNOR - Chair, on the point of order, in the interest of Tasmanians who are concerned about their privacy, further secrecy on this issue is not going to help ease public concern.
Mr FERGUSON - Look, there is a fair bit of posturing going on that side of the table -
Ms O'CONNOR - Don't talk about Mrs Rylah like that, it's not fair.
Mr FERGUSON - The fact is it is really up to the committee if you wish to use your time on this matter when we are here for MAIB. I am happy to answer the question and will do so. The answer to the
