Author: Richard

NSW WorkCover recently announced a raft of changes to the way premiums will in future be calculated for Medium to Large Employers (MLEs).  Commencing in 2015 (date is not confirmed but likely to be 30 June) the reforms will affect approximately 15,000 employers who employ 2.6 million NSW workers.

There are currently six main reforms on the table which include:

• Risk rating policies annually. This is likely to involve assessing an employer’s premium using an algorithm similar to the existing arrangements but only at the commencement of a policy.  The algorithm is likely to use the past three years claims and wages as inputs but will be adjusted at the end of the policy, based on actual wages and NOT claims incurred.  This will end the cycle of uncertainty with premium billing typically three months or more after the end of the policy year. This reform will still require that employers assertively manage claims to keep premium charges under control.
• A system of minimum and maximum premiums will be introduced. It is unclear at this time how this reform will operate.  It might be a simple percentage-based factor pegged to basic tariff premiums or it could be linked to experience premiums.
• Making policies easier to understand and reducing administration. It is most unclear what this reform will be although there is a reference to more clarity around the link between a safe workplace and lower premiums.
• An Employer Safety Incentive (ESI) will be provided upfront so employers can continue to invest in promoting safety in the workplace. An Employer Safety Reward (ESR) will be available to those employers who maintain a safe workplace with no claims for four consecutive years.  There are dangers with this sort of reform as those who may remember the Premium Discount Scheme will realise.  Market behaviour is likely to repress claims reporting if the incentive is generous.
• A Return to Work Incentive (RTWI) for each individual claim will be introduced for employers who provide safe recovery at work. It is unclear how this reform will operate and whether it is applied for a claim’s lifetime or for a fixed period.
• Introduction of a scheme performance adjustment. We suspect that this will be a percentage of one of the premium inputs, most likely to be payroll based.

Currently, WorkCover is making no comments about the scheme performance; although it is widely expected that the surplus reported at 30.6.2013 ($308.5 million) has very significantly blown out and by 2016 is likely to be in the order of $6 billion.

WorkCover has committed to consult with interested parties about the upcoming reforms and as soon as we know more we will be publishing further bulletins.

If you have any queries about this issue please feel free to contact us.

29 January 2015

On 30 May 2014, NSW Government gazetted the new workers compensation premiums order (IPO) which was to come into effect for all policies renewing on or after 30.6.2014.

The Gazette neglected to include the Table A which sets out all of the new rates.  This small confusion was subsequently clarified and the rates which had applied since December 30^th 2013 were preserved.

Not widely realised was the fact that several Industry Claims Cost Rates had also been reduced.  The impact of the reduction in ICCRs was to substantially increase premiums for those employers which had claims and whose basic tariff premiums exceeded $30,000.

As soon as we began to organise premium projections for clients it became obvious that the changes would have a very significant adverse effect on a number of larger employers.

There was an outcry which the Government appears to have heard and acted on.

Announced on Tuesday 17^th June, as part of the budget process (Workers Compensation is however off budget) was an average 5% decrease in rates across the scheme.

Whilst we have not been able to confirm the following, this is our current understanding of how the reductions will be implemented:

• 343 rates will reduce by more than 5%
• 111 rates will have no change
• The remaining rates will have a less than 5% reduction

We have no details of how individual rates are to be dealt with.

We also understand that the ICCRs are to be recast so that their impact is not so severe; however ICCRs will still reduce across every premium rate. This change is apparently to reflect the improved performance of the scheme and is applicable to each industry.

This reduction in ICCRs is thought to be 30% of the changes outlined in the May 2014 IPO.  It is likely that throughout the next three years the ICCRs will have continued to decrease to such a level that they reflect the figures outlined in the May 2014 IPO i.e. 30% reduction this year, 60% next year and 100% by June 2016 (in 3 years’ time, ICCRs will be back to the levels set in the May 2014 IPO)

WorkCover’s position is that the ICCR is a true reflection of the scheme’s performance (last three years claims costs divided by last three years wages for the industry) and is not a figure picked at random and that the changes in the May 2014 IPO represent 100% of the scheme improvement.

Changes will apply to both renewal and adjustment premiums’ ICCRs.

It is unlikely that the revised IPO will be released until later in June (we understand it to be 27^th June), so we are not in a position to provide any absolute certainty that this will be the final outcome.

We will of course advise as soon as the situation becomes more transparent.

The NSW Government Gazette for 30 May has published the 2014/15 Insurance Premiums Order but without the table of new rates.

RiskNet has been provided with a copy of the new rates but until this is posted on the WorkCover web site we are reluctant to release them without permission.

If you need to find out what you might be paying in the next year just call or send us an email request.

April 23, 2014.

The FWC has released its first anti bulling report card. Of the 151 applications, 56 have been dealt with in some way or other (32 were withdrawn). The remaining 95 must still be in the pipeline.

Clerical workers lodged the most numbers of applications.

Managers were largest group of employees complained about.

RiskNet is currently conducting management briefings on workplace bullying and its ramifications.

As ever, if you have an questions please contact us.