Catch-22 for workers comp: debt grows to save costs


Catch-22 for workers comp: debt grows to save costs

NSW employers and unions are hailing the second deferral of private underwriting for the State’s workers’ compensation scheme as the only way to keep premiums down and benefits at a reasonable level.


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NSW employers and unions are hailing the second deferral of private underwriting for the State’s workers’ compensation scheme as the only way to keep premiums down and benefits at a reasonable level.

Special Minister of State John Della Bosca was expected to make a ministerial statement on 8 June announcing that private insurers would have to put off underwriting for a second time within 12 months.

In the meantime, workers’ compensation debts will continue to grow at $1 million per day.

Mr Della Bosca met with insurance company chief executives last week to discuss his plans to put on hold the October start date for private underwriting. His main concern was believed to be the cost of the scheme.

At the moment, average workers compensation premiums are capped at 2.8 per cent, although the real cost is believed to be closer to 2.97 per cent. This capping means the premiums collected aren’t enough to pay for liabilities and the Government is carrying the resulting deficit, which at 31 December last year was estimated at $1.8 billion, a figure projected to rise to $2 billion by 30 June.

Legislative changes introduced in 1998 the idea of injury management, which aims to get workers back to the workplace. In the long run, this will bring the cost of the scheme down. At the same time, a deficit strategy has been put in place, by which injured workers are being offered lump sums, instead of pensions, which will cut down on administration and medical fees and the like over the workers’ lifetime until 65 years of age.

Australian Business Ltd, which represents around 5000 employers, says it remains convinced private underwriting provides the best prospects for lower premiums in the long term.

But, says Greg Pattison, ABL’s general manager, special projects, the costs of workers compensation have not been reduced far enough yet to allow private insurers to also pay the cost of capital, plus other statutory charges and levies, and then make a profit.

Pattison also says the deferral was the appropriate response right now, as the 1998 laws need further refining, to address areas like dispute resolution, litigation, the role of medical specialists and so on.

The NSW Labor Council’s OH&S and workers compensation officer, Mary Yaager, agrees that the costs of the scheme haven’t come down far enough yet for private underwriting.

Saying that unions didn’t think the full measures of injury management have been implemented yet, Yaager said the priority was to ensure injured workers' benefits didn’t suffer. Waiting allowed more time for the trends to continue, she said.

But the Insurance Council of NSW’s general manager, Dallas Booth, told WorkplaceInfo this deferral, to a date yet to be decided, had cost insurers 'many millions' in set-up costs.

He said that while he acknowledged and respected Mr Della Bosca’s position, and would continue to work with the Government, employers with a poor attitude to occupational health and safety would have no incentive to improve, as the scheme would continue to subsidise them.

The deferral comes as the Government introduced its new OHS Bill, which requires employers to be more pro-active on workplace safety and to consult with workers. Mr Booth said the Bill was very important, but 'WorkCover can’t be everywhere', so incentives were needed to encourage employers to embrace OHS measures.

The scheme the insurers had worked out would have phased in the removal of cross-subsidies over three years, and allowed for education and risk management for employers which, in the long run, would implement a genuine safety culture and reduce costs, Mr Booth said.

Meanwhile, in Victoria, the Bracks Government is believed to be deferring the introduction of tough new measures including an 'industrial manslaughter' charge in the Crimes Act, so it can take further submissions from alarmed employers.

The Government’s Health and Safety Bill 2000 was to have been introduced in the session of parliament which has just finished, and apart from industrial manslaughter would have introduced another crime, 'negligently causing serious injury'. Corporations would face fines of up to $5 million if found guilty of the crimes, with a jail term of five years and a $180,000 fine possible for directors and executives.

But it is now believed the Government will defer the legislation until the spring session of Parliament, after employer groups complained about lack of time to make submissions.

The Victorian Employers’ Chamber of Commerce and Industry, which represents 7800 members, said it would now have a chance to make submissions calling for further incentives to be included, allowing for education and training.


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