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Most employers are likely aware of the Fair Work employment law changes that have recently come into effect or will take effect in 2023. While these changes aim to enhance equity in the relationship between workers and employers, they could also broaden Workers' Compensation exposures. These changes align with the recent modifications to the Work Health and Safety (WHS) codes of practice, which address psychosocial hazards across most states and territories.
Psychosocial hazards in the workplace refer to certain aspects of work or situations that may trigger a stress response, which can result in psychological or physical harm. The Code of Practice guidelines specifically address bullying, harassment, including sexual harassment, work overload, workplace violence, overwork, and interpersonal conflict to name a few, and the requirement of Employers to identify, mitigate or reduce these exposures.
If employers fail to implement these changes effectively and do not take reasonable management actions, this could lead to an increase in mental health or physical injury claims, which may be more easily accepted in an already no-fault system. Honan, along with our WHS experts, can help employers identify these trends and develop effective strategies to ensure their policies and procedures meet regulatory guidelines while also focusing on risk mitigation.
Industry rate changes have not yet been released for States and Territories; however, an announcement is expected in May. As we approach insurance renewal season, it is crucial for clients to collaborate closely with their broker to understand changes in premiums and potential impacts of industry rate changes. Due to the influence of claims performance on premiums, it's important for clients to collaborate closely with their broker or claims agent. Our team is always ready to help!
Please remember to review your FY23 wage estimates. If the actual wages are projected to exceed 20% of the initial estimate, it is mandatory to revise the estimate before 30 May 2023. Failure to make a declaration may result in a penalty fee for under declaration.
Change to premium calculation:
WorkSafe released their half-yearly results in March 2023, which confirmed a Performance from Insurance Operations (PFIO) deficit of $508 million. It is anticipated that the annual deficit will increase to $1.1 billion by the end of the year.
Despite the Victorian Government's investment in the scheme over the past two years to ensure its financial sustainability, WorkSafe's recent annual report highlighted the presence of risks related to premium inadequacy due to longer claims durations and a rise in mental injury claims.
Clients can rest assured that the three years claims cost window for the calculation of premium will remain unchanged. Year one is paid weekly compensation payments and death lump sum payments, and years two and three will include paid and estimated values in the calculation. Claims costs for the 2023/24 renewal have been locked in as of March 31st, 2023.
As expected, there will be an increase to the capped claim amount from $438,300 to $450,500. An increase to premium capping will also be considered for 2023/24, however this is yet to be confirmed by WorkSafe. This has been driven by the average scheme rate remaining at 1.27% since 2014/15. If WorkSafe increases the average scheme rate this will result in an increase to premium capping. A capping floor has also been considered. If implemented, WorkSafe could change the premium calculation methodology that means poor performing employers have a minimum premium payable of 50% of the value of their True Risk cost of claims.
In March, Safe Work Australia released some key findings exploring the impacts of COVID-19 on workers returning to work after an injury or illness.
Key findings:
As the performance of Workers’ Compensation schemes deteriorates, we expect industry rates will continue to increase by 10-15% and more for clients with a poor claims history. If you have claims developing, it will be important to prepare for these increases.
In Western Australia, discussion around the adoption of the revised Workers' Compensation and Injury Management Bill continues. Debate, for instance, includes the definition of a ‘worker’ when it comes to the commencement of benefits for pending claims. Of greatest potential impact to insureds, is the removal of Principles Indemnity with Waiver of Subrogation extension. This could lead to complicated contract negotiations for clients as the extension is mandatory for most mining or construction sites. We will continue to monitor developments around this Bill and keep you informed.
