Workers Compensation:
Market Update September 2020

Executive Summary

This document prepared by Austbrokers Corporate’s specialist workers compensation division provides an important and comprehensive update for all major jurisdictional, regulatory, legislative and COVID-19 related amendments impacting workers compensation markets across all states and territories throughout Australia as at 01 September, 2020.

The impact of COVID-19, as well as recent well-publicised reviews of the performance of major workers compensation schemes across Australia, has been immense. In this report we provide a summary of key updates and changes. Please reach out to our dedicated workers compensation specialists if this report highlights any issues or concerns you may have in relation to this complex subject.

New South Wales

• The State Insurance Regulatory Authority (SIRA)’s review into the operation and sustainability of the ‘Nominal Insurer’ concluded in December 2019 with the report recommending significant steps for improvement, featuring a 21 point action plan with further audits in 2020 to assess impact of ongoing changes and whether recommended actions have been addressed. The main areas to be addressed include:

Mandatory Changes

– Improved governance practices between SIRA and icare
– Focus on setting and achieving appropriate Return To Work (RTW) targeted outcomes including agent remuneration
– Improve claims management capability (skills, resources, culture)
– Improve data management across the scheme
– Better stakeholder engagement is required (both icare and SIRA)
– Review into the long term impacts on employer’s premiums and assessing viability for alternative options moving forward.

• Further public scrutiny has fallen upon icare prompting the resignation of icare’s CEO John Nagle, and another parliamentary enquiry is underway to examine the governance and effectiveness of icare’s operation and overall NSW scheme performance.
• In the first half of 2020, icare has re-introduced new providers into the market (GIO, Allianz and QBE) as “Authorised Providers”. EML will remain the default provider, however larger employers paying more than $500k will be given their choice of agent moving forward.
• There has been a shortfall of premium and capital investment return over the previous 12 months which will place pressure on the scheme in years to come. In addition, weekly benefits paid, have increased by $25m per month from Dec 17 to Sep 19 (translating to a 50% increase). These combined with rising medical expenditure have seen the scheme fall into deficit based on actuarial estimates.
• The average premium rate at present in NSW for 2020/21 is 1.40% (no change from 2019 – rates have been put on hold due to COVID-19). With the expected deficit financial position, it is anticipated that premiums will have to rise in the future.

Victoria

• On 28th July 2020, the Occupational Health and Safety (COVID-19 Incident Notification) Regulations 2020 (OHS COVID-19 Regulations) came into effect in Victoria. Changes now require employers to notify WorkSafe Victoria of any employee/s or contractor/s that have received a confirmed diagnosis of COVID-19, and had attended the workplace during the infectious period (14 days). Failure to comply carries hefty penalties for both employer and individuals. Further information can be found “here”. This change is expected to be in place for 12 months.
• Following the 2016 Ombudsman’s review into Victoria’s workers compensation scheme, a follow up report 18 months in the making has been delivered, finding the system has been failing long-term injured workers in “downright immoral and unethical” circumstances (report link). Issues revolve around;

– Case management behaviours due to agent incentive schemes
– Cherry picking” medical advice to have compensation rejected
– Often ignoring medical evidence
– Lack of transparency regarding surveillance activity

All 15 recommendations from the report have been accepted. Recommendations include;

– Greater focus on management of complex claims
– Improve dispute resolution and complaints handling practices
– Case management development
– Increase WorkSafe oversight via audits
– Review utilisation of Independent Medical Examinations (IMEs), quality of IME reporting, and training for IMEs

• WorkSafe’s 2030 strategy will be key to responding to the these recommendations. The strategy is based on a prevention-led transformation which will involve a significant technology investment and a greater focus on customer experience. A Customer Experience Blueprint will be used to ensure a strategic client-centric vision is driving decisions about technology and business design.
• In addition, Insurer licences expire 30 June 2021 with an option to extend for one year. The new license period will be a chance for WorkSafe Victoria to revise the scheme. Early indications suggest agents are likely to remain in place, however amendments to the claims operating model are expected. This will help sharpen focus on WorkSafe’s 2030 strategy to improve customer experience and introduce technology centric self service functions.
• WorkSafe has introduced changes to the Victorian Workers Compensation premium calculation for the 2020/21 renewal. Essentially the changes have extended the claims impacting window from the current 2.5 year period, to 3 years.
• WorkSafe is introducing a free service for injured workers labelled The Workers Compensation Independent Review Service (WCIRS), which will provide workers with the opportunity to seek a quick and impartial review of genuine disputed decisions made by agents prior to conciliation (effective post 3rd Dec 2019). It covers liability, weekly and medical decisions.
• The Victorian Parliament has also passed a new Workplace Manslaughter Law on 26 November 2019. The law came into effect 1st July 2020. Under this law employers who negligently cause a workplace death may be found guilty of workplace manslaughter. If found guilty, companies, associations and partnerships will face fines of up to $16.5 million and sole traders and officeholders of employers could face up to 20 years in jail. The offences will fall under the Occupational Health and Safety Act 2004 (OHS Act). The law also extends to the death of a non-employee.
• A transfer freeze on policy movement has been put in place from 1st July 2020 to 31st December 2020. This is to help provide some continuity for all stakeholders given the challenges of COVID-19.
• The average premium rate in VIC for 2020/21 remains at 1.272% – unchanged in 6years. This is the second lowest rate nationally.

Queensland

• The Workers’ Compensation and Rehabilitation and Other Legislation Amendment Act 2019 was passed by the Queensland Parliament on 22 October 2019. The Act implemented key recommendations from the five year review of the scheme which was finalised in 2018. The new legislation amends the Act by enhancing the workers compensation claims experience for injured workers, and provides more support for vulnerable workers, particularly those with psychological injuries, to recover from their injury, rehabilitate and return to work.

Amendments taking effect 30th October 2019 (claims made)

– Enhanced psychological support
> Insurers are now required to take all reasonable steps to provide reasonable support services to workers suffering from psychological injuries before their workers compensation claim is decided to assist in reducing the severity, duration and recurrence of mental illness.
> The definition of psychological injury now requires a worker’s employment to be a ‘significant’ contributing factor to the injury, rather than ‘the major’ significant factor.

– Insurer discretion to waive the time limit to accept a claim outside of the 6 month legislated timeframe if a worker is certified with an incapacity. This is to ensure workers who attempt to manage their injury at work are not disadvantaged.
– Apologies and expressions of regret will be exempt from consideration in common law claims to encourage employers to “reach out” and help manage any distress from proceedings.
– The Act now clarifies that WorkCover Queensland can fund and provide programs and incentives that support employers improving health and safety performance (conditions apply).

Amendments taking effect 1st July 2020 (claims made)

– Rehabilitation and Return to Work – coordinator details, qualifications and courses
> Employers will be required to provide the details of their rehabilitation and return to work coordinators (RRTWCs) to their insurer, including a statement of how the coordinator is appropriately qualified. Employers will be required to provide the details of all appointed coordinators within 12 months of this date.
> As an additional option outside of existing training facilities, the Office of Industrial Relations (OIR) can approve training courses for RRTWCs.
> Existing RRTWCs will not need to do any additional training unless the employer is not satisfied they are appropriately qualified to fulfil the functions of a RRTWC.
Guidance material on the qualifications, skills and experience considered appropriate for RRTWCs is now available here.
– Workers compensation scheme coverage of unpaid interns
– Requirement for self-insured employers to report injuries and payments to their insurer

• The average premium rate in QLD for 2020/21 remains at 1.20% – unchanged in 7-years. This is the lowest rate nationally.

Western Australia

• WorkCover WA is in the middle of their 3 year strategic plan designed to deliver 3 goals;
  – Goal 1: Strategic Scheme Management
  – Goal 2: Digital Transformation
  – Goal 3: People, Culture and Systems.
• Goal 1 is linked to the recommendations of the “Review of the Workers’ Compensation and Injury Management Act 1981”, which found the current Act is outdated and complex. A new statute will be released for public consultation aiming to modernise the Act making it clear, accessible and understandable. Some proposed changes include:
  – amending the definition of ‘worker’
  – updating the list of diseases and occupational cancers
  – improving insurer liability decision timeframes
  – simplifying the method for calculating weekly compensation payments
  – clarifying settlement pathways
• It is also believed that the regulator will have an increased liability and RTW focus this coming year, with any settlements being heavily scrutinised.
• WorkCover has also released Insurer “Standards of Practice” to help set cohesive service expectations that ensure a high quality service to injured workers and employers.
  
•  The average premium (suggested) rate in WA for 2020/21 is 1.638% (down less than 0.5% from 2019/20).

Australian Capital Territory

• Recommendations from “The Work Health and Safety Amendment Bill 2019” proposed changes to the ACT’s work safety compliance infrastructure, policies and procedures. Under these changes, WorkSafe ACT will be established as a separate and independent entity to continue enforcing health and safety and workers compensation laws through a mixture of education and compliance activities. It is seen as integral to establishing an effective regulator for the Territory, ensuring transparency, scrutiny, role clarity and accountability in the exercise of the regulator’s functions. Key aspects include:

– A new Work Health and Safety Commissioner to be appointed to lead WorkSafe ACT. The Commissioner will be the regulator as prescribed in the amended legislation
– The Commissioner will enforce compliance with the obligations and duties to be applied to both the private sector and the ACT Government as employers
– To support its independence in carrying out these functions, WorkSafe ACT and the Commissioner will be independent entities when carrying out the regulatory functions under the work health and safety legislation.

• In line with increased focus on compliance activities, WorkSafe ACT received a mid-year budget funding boost ($8.7m over 4 years) to increase inspectors and staff at the work health and safety regulator.
• In addition, a crack down on construction worksites across ACT with recent fatalities and breaches of WHS laws have forced a number of site closures by the regulator. Calls for Construction Industry bodies to enforce greater compliance with laws that are designed to protect the safety of their workers.
• The suggested average premium rate in ACT for 2020/21 is 2.33%, (down 6% from 2019/20).

Tasmania

• WorkCover TAS is presently 2 years into a 5 year strategic plan to conclude in 2023. The plan focuses on healthier, safer and productive workplaces, embracing the following strategies:

– Targeted harm reduction: aiming for zero workplace fatalities
– Building culture and capability for all stakeholders
– Ensuring regulatory frameworks are contemporary and effective

• A particular focus for WorkSafe TAS is their Quad Bike Safety program – over 8 years, there have been 128 deaths nationwide from Quad Bike use. This new campaign continues recent initiatives, including regional safety sessions, new guidance material, and a quad bike safety rebate scheme for eligible farmers to subsidise the purchase of rollover protection devices.
• The regulator is also modifying license renewals to include complaints reporting and further highlight injury management programs as a key element in the scheme.
• The suggested average premium rate in TAS for 2020/21 is 2.22% (up 4% from 2019/20). That is now two consecutive periods of increases. This follows increases from claims frequency and average claims size in recent years.

South Australia

• The recent SafeWork SA Annual Report for 2018/19 showed that despite pressures in rising costs and low investment returns, the SA scheme has been able to weather the current challenging economic environment.
• Goals RTWSA have set through to 2022 include:

– Realising the health benefits of work – promoting through resources, education and awareness
– Ensuring the effective and economic operation of the Return to Work scheme.

SafeWork SA began auditing of high risk construction in Feb 2020 to review compliance against WHS laws. Besides SA’s own statistics showing a high number of claims and fatalities within the industry, this focus is also in recognition of the construction industry being identified as a priority industry in the 2012-22 national work health and safety strategy.

• The average premium rate in SA for 2020/21 is 1.65% (no change from 2019/20 which was a historical low for the state’s schemes across its history).

Northern Territory

• Main legislative amendments to the NT Act effective 29th July 2020 are:

– Meaning of a worker has been clarified to ensure any PAYG worker is covered (ABN status not to be a determinant).
– Reversal of “Journey” provisions. This will allow those walking, and cycling to work to be covered. Motor Vehicle accidents are already covered through the Motor Accidents Compensation Scheme. Note that journeys in vehicles to or from a different workplace (not the normal workplace) will be covered, as well as when workers travelling from home as a result of a call out from their employer.
– Amendments to clarify who is a labour hire employer, and who is a worker of the labour hire employer.
– Overpayments to workers due to incorrect calculations from the employer or insurer cannot be recovered (unless ordered by the Court).
– Changes to settlement provisions;
> Relating to “catastrophic” injuries, effectively meaning insurers will no longer be able to settle the medical and care component of claims post 1 July 2020. This is being seen as an attempt to stop injured workers taking settlements from insurers and then looking to become eligible for NDIS programs. Weekly benefit (wages) settlements are still permitted.
> Settlements can be reached before a court proceeding.
> Where liability is disputed by the employer, the “Cooling Off” period of 6 months from settlement date for disputed claims also applies, allowing for repayment of any amount if the worker withdraws from the settlement.

– The removal of the 250% cap on normal weekly earnings after 26 weeks of paid incapacity.

• Another major change being considered is the creation of a new offence of Industrial Manslaughter with a maximum penalty of life imprisonment for an individual or a fine of up to $10 million for a body corporate (at present only sole traders or partners can be charged). This has been introduced in VIC and QLD.
• The suggested average premium rate for 2019 accident year in NT was 2.2% (PWC estimated break even premium rate). This is higher than the average rate insurers have been charging for the prior year at 1.9%. Monitoring of the wage drop with the wind down of the Impex project and economic impacts of COVID-19 will influence future rates and insurer behaviour. The 2020 suggested average has not yet been published.

Job Keeper

The following table provides a high-level overview of what employers need to consider when completing Wages Declarations and how Job Keeper Payments should be included.

For further information view the National Job Keeper Payments Summary here.