Australia: National Disability Insurance Scheme: no premium funding spells good news for insurers

Last Updated: 7 April 2013
Article by Kerry Hogan-Ross

The National Disability Insurance Scheme Bill 2012 (Cth) was introduced into Federal Parliament late last year.1 The Bill sets up the legal framework for the National Disability Insurance Scheme (NDIS) and what will be known as the National Disability Insurance Scheme Launch Transition Agency (the Agency). Once the Bill has been passed, the NDIS will be launched in five sites across Australia starting in July 2013, which is earlier than envisaged. The launch will be phased in over three years.

The funding for the Scheme looks very different from the one recommended in the Productivity Commission's 2011 report.2 The Productivity Commission recommended that the Scheme be partly "premium funded" from various sources, including compulsory third-party premiums, transport levies and surcharges, increases in council rates, and contributions from the insurance (including self-insurance) arrangements of hospitals and the medical indemnity premiums of physicians for medical treatment.

For now, at least, premium funding is on the back burner as the federal and state governments enter into long-term funding arrangements.

The Scheme will support the independence and social and economic participation of people who meet certain "disability requirements". This includes intellectual, physical and psychiatric disability (s 24). The disability must be permanent, or likely to be permanent, and severe. The NDIS is not a compensation scheme and does not replace existing compensation schemes such as workers compensation or compulsory third-party insurance.

A person entitled to support from the Scheme is described as a "participant" in the Bill (s 28).

The defining feature of the Scheme is that people with serious disability will no longer be in a lucky draw to get support. Regardless of cause or fault, a seriously disabled person will obtain future care and support under the NDIS. This is a welcome contrast to the present inequitable system, where the level of support depends on where people live and how they became disabled. This lack of support can lead seriously disabled people to bring desperate but legally difficult claims in court. A case in point took place in the Australian Capital Territory and involved the police shooting a mentally ill man while he was experiencing a psychotic episode. The man was rendered quadriplegic and, in late 2012, the ACT Court of Appeal reversed the previous award of $8 million in his favour, leaving him without compensation.3 The Scheme is likely to reduce the number of such claims being brought, once people's basic needs for care and support are provided for.

The Agency will be an independent body corporate that will deliver the Scheme (s 117(2)). Its board members will be appointed by the Minister (s 127(1)). It will also manage the Scheme's financial sustainability and conduct research. According to the Bill, the Scheme (and therefore the Agency) will adopt an "insurancebased approach" (s 3(2)(b)).

The scheme will not be a supplier of disability services. "Insurance-based approach" means that, like many insurers, the scheme will be responsible for functions such as assessing needs, providing funding, coordinating services at a high level, researching, and collecting and managing data.

Some of these functions may be outsourced to other organisations, but the Agency will retain responsibility for them.

The Productivity Commission recommended that the Agency be conducted on the model and management of an insurance scheme to maximise efficiency. The concern of course is to prevent the Scheme from becoming bureaucratically bloated and inefficient.

Existing entitlements will not be affected by the Scheme. In fact, one of the functions of the Agency will be to consider whether a participant may be entitled to compensation from a third party in respect of personal injury. The Agency will have the power to require participants to take action to obtain such compensation (s 104).

This is a marked deviation from the Productivity Commission's recommendation that a catastrophically injured person would lose their right to sue for future care and support, thereby transferring that risk from insurers to the Scheme. Awards for future care and support can be the most valuable head of damage in a catastrophic injury claim. Given the abandonment of premium funding, it makes sense that this benefit will not be on offer.

In the absence of premium funding, the Scheme may have a relatively low impact on insurers.

But there is one practical issue: if a participant makes a claim for compensation on a third party, the Scheme will have the power to recover payments from the insurer (s 109). This will work in much the same way as paybacks to Medicare and Centrelink, in that the onus will be on the insurer and it will be an offence to not repay the Scheme if notice has been given.

The Scheme is not at like the New Zealand no-fault compensation scheme. Anyone thinking that it lessens the need for liability insurance is wholly mistaken.


1 See

2 Productivity Commission, Disability Care and Support: Productivity Commission Inquiry Report (2 vols), Report No 54, 31 July 2011, available at

3 Australian Capital Territory v Crowley (2012) Aust Torts Reports 82-122; [2012] ACTCA 52; BC201209848, following the decision in Crowley v Commonwealth (2011) 251 FLR 1; [2011] ACTSC 89; BC201103407.

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