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Workers' Compensation schemes in Australia continue to report record deficits. In addition to the rise in mental health injury claims, this is driven by the complexity of the schemes and administrative processes that cause delays and disputes. Rising medical and rehabilitation expenses, along with broader socio-economic challenges further strain the schemes.
Workers' Compensation premiums are one of the largest contributors to a business’ insurance expenses. Following on from our Victorian Workers’ Compensation update last month, this article outlines the rates and key updates for Government Workers' Compensation schemes in New South Wales, South Australia, and Queensland.
In NSW, iCare has revealed the premium rates for the 2023-24 fiscal year under the Nominal Insurer Workers' Compensation scheme, which is projected to increase by an average of 8%.
For most workplaces, this means a shift from premium rates of 1.48% of wages to an expected 1.60% for the financial year 2023-24. Alongside this, clients involved in the Loss Prevention and Recovery (LPR) program will also experience an average increase of 8% in the LPR claims adjustment factors.
In setting the new rates, iCare has considered the safety performance of each industry over the past 5 years. As a result, in the fiscal year 2023-24, some businesses might notice an increase that is below the scheme average of 8%, while others may experience a slightly higher rate. The average increase proposed by iCare was not rejected by SIRA. Industries such as aged care and transport & logistics are examples of where rate increases have increased by more than 10%.
Performance discount rates
These discounts will now be scaled based on performance. Essentially, this means no discount will be applied if the business has a poor claims history. To put this in perspective, the discount rate is 7.5% so if your premium is $200k you will pay an additional $15k in premium if the discount is removed due to poor claims history. iCare estimates that 35% of experienced rated employers will no longer receive a rebate, and that those employers represent 91% of claims costs.
Claims Performance Adjustment - Table of Rates
One of the factors that impact premium calculations is the discount or penalty employers pay against their Industry Rate, subject to wage roll size. iCare has modified this table for 2023/24, giving it some additional nuance, which may provide premium relief for employers who are considered poor performers. A Workplace Risk Consultant can assist with any queries you have about the potential impact of this change.
Loss Prevention and Recovery Policies
Loss Prevention and Recovery (LPR) premiums have also been impacted, lifting the adjustment factors by 8% in line with the Industry Rates. The final adjustment factors are now 2.46 if you are subject to the $500k claims cap and 2.61 if you are subject to the $350k claims cap.
Despite these increases, for many very large employers, the LPR is still significantly more cost-effective than the conventional premium methodology.
iCare has indicated that this increase may be enough to make the funding of the LPR scheme sufficient, however, there is no hiding the fact that the fundamental cost of the scheme has increased by nearly 50% since 2017/18.
Wages Declarations
iCare is prioritising accuracy, compliance, and efficiency and part of that involves sourcing actual wages declarations from employers. For small employers that do not submit actual wages, this will increase the estimated wages for future years by 30%. For LPR participants, no premium refunds will be issued until actual wages are submitted.
iCare is further cracking down on outstanding invoices and will charge interest on overdue invoices from 30 June 2023. From 31 December 2023, iCare will no longer send cheques. If an organisation does not supply bank details, refunds will not be issued.
Late Payment Fees
iCare will continue to charge late payment fees for non-payment of premium.
The board of ReturnToWorkSA has announced an increase in the average premium rate for the 2023-24 fiscal year, moving it from 1.80% to 1.85% from the previous. This adjustment is designed to not only cover the estimated liability for new claims to be received in 2023-24 and to contribute to the Scheme's path towards complete funding.
The potential for such increases had been previously flagged while determining the average premium rate for 2022-23, owing to escalating liabilities and forthcoming costs associated with a significant legal case, which concluded in 2021.
Back in June 2022, when the Return to Work (Scheme Sustainability) Amendment Bill 2022 was introduced, the Government projected that the suggested legislative modifications would help minimise future increases within an average premium rate of 1.90%. This prediction was realised with the passing of the Return to Work (Scheme Sustainability) Amendment Act 2022 on July 6, 2022.
In 2023-24, WorkCover Queensland's average net premium rate will move from $1.23 to $1.29 per $100 of wages after discounts. This is the second time in over a decade that the premium rate has been increased.
Despite the modest increase, WorkCover Queensland still offers one of the lowest average premium rates in Australia and some of the best return-to-work rates for a Workers’ Compensation scheme in the country, supporting nine in 10 Queenslanders to return to work after a work-related injury.
Our Honan Workplace Risk team is equipped to pinpoint areas for improving your risk-management strategies and to track the impact of these changes on the regularity of your claims.
We provide an assessment of business risk exposures through our comprehensive gap analysis. Together, we can establish key performance indicators, providing you with increased authority and understanding of your Workers' Compensation performance.
To explore further how Honan can support your Workers’ Compensation program, we invite you to connect with us directly.
Sharon Rutherford
Head of Workplace Risk
