The new NSW Insurance Premiums Order was released Friday 5th June and WorkCover have gone through with changes that are the biggest since 1987. Below is a list of the major changes and some commentary based on our interpretations:
- Claims estimates, and many paid costs are now excluded from calculation. The only paid amounts included are lost wages, permanent impairment, common law payments and death benefits.
- Comparison to industry rates is gone, instead your claims costs will be compared to ‘base tariff premium’ in your premium. Whilst we understand why this has been done, it is unfortunate as it will make it more difficult for employers to benchmark themselves against their industry peers.
- Tariff rates are unchanged from last year.
- For almost all employers there will only be one ‘rate’ calculation per year, with an adjustment done at the end of the year changing only due to your wages, but with a potential further reduction if scheme performance is good. The only exception to this is if your final wages cause you to change ‘categories’ within the calculation.
- There is an Employer Safety Incentive which will provide a discount equating to 10% of your base tariff premium. The inclusion of this should mean that most employers experience a reduction in the new scheme.
- There is a safety net for employers worse off under the new scheme, with capping put in place.
- WorkCover has done away with the size factor, and instead created a matrix with categories for different sized employer groups. Unfortunately that means that some employer groups may end up either just under or just over a certain group, which could fundamentally alter their premium either up or down. Whilst the new matrix might be simpler to understand, it sacrifices the smoothing of increases and decreases under the old system.
- The much vaunted ‘Return to Work Incentive’ will apply only to claims occurring after 30 June 2015, and thus will not begin to impact upon premiums until the 2016/2017 year. We will have further information for you shortly on how WorkCover defines return to work.
WorkCover have done what they said they’d do and are trying to change the incentives in the scheme so that Return to Work is effectively THE focus. However, WorkCover still needs to collect enough premium to pay for all types of claims costs, whilst only using some costs as part of premium calculation. Unfortunately what this means is that the weighting of the claims costs in the new system is much higher than it was in the old system. In some of the examples we have run the weighting is more than three times higher. Therefore WorkCover is effectively robbing Peter to pay Paul. Whilst employers may be pleased that medical costs, estimates and such like are no longer included, the sting in the tail is that the impact of the remaining costs is much higher. Our greatest concern is that the incentive that this provides may lead to behaviours and strategies that WorkCover does not want.
From our perspective this model marries well with the WCD way of managing incidents and claims, that is early intervention through triage, strategy and contacts, with the aim of a durable return to work on pre-injury duties as soon as is practicable. WCD are the experts when it comes to working with injured workers, employers, medical providers and insurers to achieve the best outcomes.