[sr71]

It seems the other driver could be in the wrong. But the rules might go against you.
5 seconds of indicator required before changing lanes. (what I was told at a driver education course this year. I always thought it was 3sec, as tapping the indicator stalk gives a 3 second signal)
Lane change requires giving way to cars on your right.

Regarding insurance. If you end up being at fault, even with a protected 'no claim bonus', Compulsory Third Party Insurance (CPT Greenslip in NSW) will be higher for the next 3 years.(they always ask " have you had an at-fault claim in the last 3 years"). So handing over the $1000 excess could end up amounting to $1200-1500 (after paying a bit extra on CPT).
If, after legal advice, it looks to be going against you. Declare that you will settle (pay the other driver) without Insurance involvement. Then you technically haven't had an 'at fault claim'.

Good luck.