The Wollongong Law Society has criticised the NSW government's proposed revamp of the Compulsory Third Party scheme, claiming it will see accident victims receiving much smaller payouts.
The government has suggested that CTP premiums are the least affordable in the country and believes its proposed changes could reduce them by as much as 15 per cent.
Finance Minister Greg Pearce said part of the revamp included the introduction of a "no fault" scheme, as it was claimed much of the premiums collected by insurers went to "ambulance-chasing lawyers" during long court cases.
"A no-fault scheme would reduce costs, create a more competitive CTP insurance market, and get money to those who need it most, rather than lawyers, insurers and investigators," Mr Pearce said.
Wollongong Law Society president David Potts said the changes would mean that people injured in motor vehicle accidents would recover far less in benefits.
"The concerns are that it is impossible to extend coverage and reduce premiums without substantially eroding the benefits which injured motorists receive," he said.
"What the initial press release promises is a reduction in premiums of 15 per cent, to extend coverage to at-fault motorists, which at the moment aren't covered under the majority of the scheme benefits."
Mr Potts also spoke out against the claim that high legal costs were to blame for rising policy premiums. He said figures from the Motor Accidents Authority showed that between 2000 and 2010 legal and investigation costs amounted to 12 per cent of the total scheme costs.
"The government's argument is that arguing about fault adds to the costs under the scheme," Mr Potts said.
"Those arguments don't add much to the overall cost of the scheme - but extending coverage to at-fault motorists will add a lot to the cost of the scheme."
Mr Pearce said that introducing a no-fault component would expand the numbers of those covered each year by about 7000.
However he rejected Mr Potts's claim that this increase, coupled with a 15 per cent premium reduction, meant accident victims would receive less money.
"The new CTP scheme will be more efficient and will pay benefits faster, reducing legal and investigation costs and insurer expenses, and reducing the potential for excessive insurer profits," he said.
"These savings will offset any extra costs arising from covering those who were at fault in an accident."