Who Regulates MVIL?

MVIL is a monopoly. It is the only issuer of a product every vehicle owner must buy, and the only defendant in every motor accident injury claim. The Act deals with the risks of that position by placing the company under two regulators and fixing minimum financial standards in the statute itself.

The ICCC as principal regulator

Part V of the Act, inserted by the Compulsory Third Party Motor Vehicles Insurance Industry Act 2002, declares the compulsory third party motor vehicle insurance industry to be a regulated industry for the purposes of the Independent Consumer and Competition Commission Act 2002 (section 26). Section 28 names the ICCC as “the principal regulatory agency in respect of the provisions of this Act, except those provisions relating to technical regulation”, which belong to the Insurance Commissioner.

Section 27 lists the ICCC’s functions: performing whatever a regulatory contract for the industry contemplates; in consultation with the Commissioner, providing economic monitoring, control, inspection and regulation of the industry; ensuring the Act is implemented with due regard to the public interest; and consulting commercial, industrial and consumer organisations about the supply of compulsory third party insurance. Section 27A gives it power to do all things necessary or convenient for those functions.

The power to take over MVIL’s operations

Sections 27B and 27C are the sanction behind the regulation. If MVIL contravenes a condition of its licence under the Insurance Act or any requirement of either Act, or its licence ceases or is about to cease, and the ICCC considers it necessary to take over its operations “to ensure an adequate supply of compulsory third party motor vehicles insurance to owners and drivers”, the Head of State, acting on advice, may make a takeover order. The ICCC must first give MVIL at least 30 days’ notice of its intention, stating the grounds, and at least 14 days to make written representations. MVIL may appeal to the National Court within 30 days, and the Court’s decision is final. If an order is made, the ICCC appoints an operator to run the relevant operations; MVIL must facilitate the takeover, and anyone who obstructs the operator or disobeys its reasonable directions faces a fine of up to K100,000. The ICCC may later hand the operations back. No takeover order has been reported in the cases on PacLII.

The Insurance Commissioner

“The Commissioner” means the Insurance Commissioner appointed under section 5(1) of the Insurance Act 1995. MVIL holds an insurer’s licence under that Act, and the Commissioner regulates it as he does any licensed insurer: technical standards, licence conditions, deposits and guarantees. Where the ICCC and the Commissioner have concurrent functions they must consult, and if they cannot agree the ICCC’s view prevails (section 29).

For claimants the Commissioner has a second, more immediate role. Under section 54(6) a person who has not given MVIL notice of intention to claim within six months may apply to the Commissioner for an extension of time. The Supreme Court in Motor Vehicles Insurance (PNG) Trust v Viel Kampu [1998] PGSC 49; SC587 described the Commissioner as “the independent administrator of the insurance industry” and held that, although an application to him is administratively straightforward, he must weigh the merits judicially. His decisions are subject to judicial review: in Motor Vehicles Insurance (PNG) Trust v Popo [1992] PGNC 6; N1048 the National Court held that the Commissioner, in exercising the section 54(6) power, is a public authority whose decisions are amenable to review, that he must act judicially, and that natural justice requires him to hear the Trust before granting an extension. The extension process is explained in a later article.

The financial safeguards in section 42

The Act does not leave MVIL’s ability to pay claims to the regulators alone. Section 42 requires MVIL, and any other company nominated under section 72, at all times during its licence to maintain at least K4,000,000 in cash with a licensed bank in Papua New Guinea “to meet its obligation to pay claims” under the Act and the Basic Protection Compensation Act, and to keep on deposit with the Bank of Papua New Guinea the greater of K100,000 or ten per cent of its net premium income for the previous financial year. The deposit remains MVIL’s property and earns interest, but it is security first for claim payment obligations and cannot be applied to other liabilities until those are discharged or provided for to the Commissioner’s satisfaction; nor is it returned after MVIL ceases to be licensed until the Commissioner is satisfied that all liabilities, including contingent liabilities, have been met.

Sections 41, 44 and 46 add the ordinary disciplines of a financial institution: all money must be paid into accounts with a licensed bank; proper accounts must be kept “to recognized international standards”; and the accounts must be audited by a qualified company auditor at least once a year, with the Companies Act audit provisions applying.

The shareholder

Behind both regulators stands the owner. MVIL is wholly owned by the State through its holding entities, a fact the National Court relied on in Timot v Motor Vehicles Insurance Ltd [2019] PGNC 408; N8088 when it classified MVIL as a State entity. The Nominees Niugini litigation showed the shareholder’s own transactions being tested against the Independent Public Business Corporation Act 2002, which requires ministerial approval for contracts exceeding K1,000,000. Regulation of MVIL is therefore layered: the ICCC over price and supply, the Commissioner over solvency and technical matters, and the State’s public-enterprise laws over the shareholder.