Category Archives: Insurance premiums

Prescribed Amounts and other Workers’ Compensation payments for 2014/2015

WorkCover WA releases variations in Prescribed Amounts and other Workers’ Compensation payments for 2014/2015

WorkCover WA today announced the new limits payable under the Act.

Key elements of the revised Prescribed Amounts are:

  • Maximum payment: $212,980.00 (up from $206,742)
  • Medical and hospital expenses: $63,894.00 (up from $62,023)
  • Vocational rehabilitation expenses: $14,909.00 (up from $14,472)
  • Weekly payments: $2,594.20 (up from $2,448.50)

These increases are effective from 1st July, 2014.

Injured employees who are currently in receipt of the maximum weekly compensation of $2,448.50 may be entitled to an increase. You should seek advice from your insurer before making any changes to the approved weekly compensation rate.

The Recommended Prescribed Amount and other Workers’ Compensation Payments for 2014-2015 are available here from the WorkCover WA website.

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Workers’ Compensation Premiums: How do they work?

The cost of workers’ compensation premiums is driven by three primary factors:

  1. The industry you work in (and therefore the gazette rate for your industry);
  2. Your wage roll; and
  3. Your claims costs.

The first two factors are largely set in stone. WorkCover WA estimates the total cost of the scheme for the next year and determines the overall amount of premium that must be collected to cover these costs. The gazette rate for each industry is calculated based on the total amount of premium required and the historical performance of individual industries within the scheme.

Within our current labour environment, the wage roll for many organisations is increasing as a result of both business growth and upward pressure on wages. There is little you can do to impact on this.

Therefore, your understanding of claims costs and how to control them is your only opportunity to impact on the cost of your workers’ compensation premium.

Claims costs are the actual dollars spent by the insurer when an injury occurs, plus the insurer’s estimate of what the total cost will be by the time the injury has resolved and the claim is closed.

Consider the cost of a claim for an injured worker who requires knee surgery:

Claim Cost table

 

As the employer, you can make decisions about and have legislative control over the following areas:

  • Medical treatment – refer injured workers to consultant doctors with excellent communication skills;
  • Wages – you may choose not to recoup wages;
  • Rehabilitation – in many cases, you are capable of overseeing this with internal resources.

Your understanding of these factors, your approach to injury management and your relationship with your insurer to communicate this will impact on outstanding reserves and can ultimately reduce the cost of the claim. However, the establishment of a consistent, proactive support system for your injured workers is critical to achieving the above outcome.

Employer controlled injury management has other results and benefits:

  • Strong relationships with your injured workers;
  • Positive perception and working relationship with your insurer;
  • Close understanding and relationship with your broker; and
  • Significant reductions in overall claims costs.

The combination of these factors, across all claims, may enable your insurer to heavily discount your gazette rate or, conversely, increase it by an unlimited amount if you have very poor performance.

Another factor that may influence the final cost of your workers’ compensation premium is the
premium structure; for instance, you may be eligible for a retrospective discount based on
meeting claims costs targets. A discussion with your insurance broker is essential to ensure
that you understand how your premium cost is calculated and what targets you should be
striving for to obtain future discounts.

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WorkCover WA releases Workers’ Compensation Premium Rates for 2013-2014

WorkCover WA has released the recommended workers’ compensation premium rates for 2013-2014. Although the average rate across the entire workers’ compensation scheme has decreased by 1.36%, this decrease is not applied uniformly across all 480 premium rating classificatons and decreases or increases in specific gazetted premium rates will vary from industry-to-industry.

The important point for employers to understand is that unless their claims history is better than that of their industry peers, they are unlikely to see any significant reductions in their next workers’ compensation premium renewal and in fact may be subject to increases in premium depending on claims performance.

For employers with 30 June renewals, now is the time to act! If you have any concerns about the potential impact of current claims costs on your premium renewal, contact us to discss what opportunities exist to reduce claims costs in the small windows that remains.

Media Statement – 9 April 2013
WorkCover WA announces Recommended Premium Rates for 2013/14

The Chairman of the WorkCover WA Board, Mr Greg Joyce, today announced the 2013/14 recommended premium rates for compulsory workers’ compensation insurance in Western Australia.

Mr Joyce said that the average recommended premium rate would fall slightly to 1.668 per cent of total wages for 2013/14, down from 1.691 per cent of total wages for 2012/13.

The recommended premium rates are based on independent advice by the workers’ compensation scheme actuary, PricewaterhouseCoopers, and take into account the latest available data on claims experience provided by insurers, as well as broader economic factors such as movements in interest rates and wages.

Mr Joyce said the decrease in 2013/14 is largely due to continued wages growth in Western Australia. However, the positive impact of wages growth is offset by other factors, including increases in claim numbers and associated costs, and reductions in real rates of return for approved insurers.

The decrease is not applied uniformly across all 480 premium rating classifications.

The Recommended Premium Rates for 2013-2014 are available here from the WorkCover WA website.

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Past-Present-Future: The Actual Impact of Claims Costs on Workers’ Compensation Premiums

A common scenario when we at Aurenda first meet a prospective client is that a poor claims history has led to a whopping increase in the organisation’s workers’ compensation premium. Sure, the immediate consequences of a poor year are often apparent in the direct increase in premium – but have you considered the past and future cost implications as well?

Past

Contrary to popular belief, it only takes one bad year of workers’ compensation costs to have an impact on your workers’ compensation premium, particularly in a hardening insurance market.

  • Higher workers’ compensation costs can be attributed to one or many variables, including:
  • Increase in the frequency and/or severity of injuries
  • Increase in the number of claims as a result of changing business conditions
  • Lack of control over the injury and claims management process
  • Lack of internal responsibility and/or accountability for managing and supervising the recovery of injured workers
  • Failure to provide suitable/ alternate duties in every instance
  • Lack of understanding of the implications of poor injury management
  • Poor communication between the injured worker, employer, medical treatment providers and insurer
  • Poor organisational morale
  • A single claim that blows out because of severity of injury and/or complexity of the issues surrounding the claim

Whilst the primary concern with a premium increase is centred on the immediate financial impact on the bottom line of the organisation, there are very good reasons to remain focussed on the past.

  1. Is there a Claims Experience Discount (CED) for the previous policy period?CEDs can be worth as much as 25% of premium – do you know what your CED is worth? CEDs are paid on a sliding scale – what are the minimum and maximum thresholds for achieving all or part of the CED on the previous policy period? Depending on the actual severity of claims in the previous period, and ratio of paid costs to outstanding estimates, you may still be in a position to obtain some CED from your previous premium at the next insurance renewal.
  2. Future premiums will be calculated on the basis of past claims history.Workers’ compensation is a long-tail insurance product so you need to continue to manage all open claims to achieve the best possible outcome for both the injured worker and your future premium. Outstanding estimates are just that: “estimates”. Anything that can be done to get a better ‘picture’ of the final outcome of the claim in terms of actual paid costs will assist your broker to negotiate the next premium. Finalisation of outstanding claims is obviously the goal, but other strategies can also result in far lower estimates for claims that will remain open over a longer period.

Present

As Tony Robbins says, “If you do what you’ve always done, you’ll get what you’ve always gotten”. Now that you’ve absorbed a massive hit to your premium, what are you going to do about it?

Understanding the reasons for the escalation in claims costs is a good starting point. They could be the consequence of one or many of the reasons outlined above. A note of caution: don’t lay (all) the blame on third parties. The Western Australian workers’ compensation system allows for an incredible amount of employer input and direction into the management of workplace injuries and claims. If, as a business, you are not aware of this or you are not exercising your rights and responsibilities in this area, then you need to understand what they are and how to use them to reduce claims costs – and achieve better outcomes for your injured employees.

In addition, there’s the potential CED on the new premium – likely to be worth much more than last year, now that your premium has increased. Do you know what the financial targets are to achieve the CED? What strategies will you put in place to do something different this year?

Future

Future premiums are affected by past and present claims costs – pure and simple. You may be reeling from a premium increase right now, but if you do nothing to change how you control claims costs going forward, you haven’t seen the worst of it. It can take up to five years of good claims history to counter the impact of one bad year on premiums.

Not only will you face an immediate increase in premium, but the recurring impact means that you may be paying the price for years to come – even without consideration for increases due to the growth of the business.

Of course, the greater the impact you make on reducing claims costs immediately, the lower the potential long-term recurring impact on premiums.

What Now?

Consider the scenario of a company with a gazetted premium rate equating to $250,000. With a 50% loading due to a poor claims history, the actual premium cost is $375,000 in the first year. Assuming that it takes this company five years to get back to their Gazette Rate, the total additional premium paid over that period is $375,000. What could you do with that money?

There are three key factors to address the impact of claims costs on premiums:

  1. Understand which drivers are determining your claims costs – it may be any or all of those outlined above.
  2. Implement specific strategies to counter the individual cost drivers that are impacting your business.
  3. Establish financial targets to reduce claims costs and achieve CEDs – and monitor these targets in conjunction with the people who have responsibility for injury management in your workplace.

As Einstein said, “Insanity is doing the same thing, over and over again, but expecting different results”. Contact Deb Macksy at Aurenda on (08) 6389 8900 or email dmacksy@aurenda.com to discuss how Aurenda can assist you to stop the insanity.

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Workers’ Compensation Payment Amendments for 2012

The annual review of workers’ compensation rates, fees and payments in Western Australia have been published by WorkCover WA. Variations to the Prescribed Amount come into effect on 1 July 2012.

Some of the notable changes include:

The capped amount for weekly earnings has increased from $2,156.60 to $2,351.80 ($112,293.60)

The maximum payment of the prescribed amount (100%) has increased from $190,701 to $198,365.

The amount allocated for capped Common Law has increased from $400,475 to $416,569.

What does this mean for you? If you have workers who are currently on the ‘capped amount’ for weekly earnings, their rates of pay should be reviewed to ensure you are paying them their correct entitlement after 1 July. If in doubt, check with your insurer.

Increases to other entitlements will have an impact on claims costs as they flow through the claims management process, making it more important than ever to ensure that you are managing each and every claim as effectively as possible to mitigate your cost exposures.

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WOP/WOL Payment of Wages while a Claim is Pended

In the Western Australian workers’ compensation system, it is generally accepted that entitlements such as medical investigations and treatment, and even vocational rehabilitation, can be funded on a Without Prejudice/ Without Admission of Liability (WOP/WOL) basis while liability on a claim is being determined.

A recent situation experienced by one of our clients has caused us to consider WOP/WOL issues in greater depth.

An insurer advised an employer – a client of both Aurenda and the insurer – to pay wages to an injured worker on a WOP/WOL basis even though the claim was pended and the worker was not at work.

When queried on this advice, the insurer stated that they sometimes advise employers to pay wages when in all probability the claim will be accepted. The insurer believes that paying wages will negate the need for the employee to lodge an application at Conciliation and Arbitration Services (CAS), where an order to pay wages may be granted anyway. The insurer also feels that by paying wages in these circumstances, the employee may be deterred from seeking legal advice.

In our experienced opinion, under NO circumstances should wages be paid – even on a WOP/WOL basis – until the claim has been accepted.

Our reasons for this are as follows:

  • If you’re going to pay wages – why pend the claim?
  • If you think in all probability the claim will be accepted – why not just accept the claim, why bother with the investigations?
  • Paying the wages gives no incentive for the employee to make any attempt to return to work – especially in circumstances when the workers’ compensation rate of pay is greater than their base rate of pay.
  • There is no evidence that the employee will not seek legal advice while the claim remains pended.
  • If an application is made at WorkCover for wages to be paid (when the claim is pended) an order is not always granted in favour of the employee.
  • Once wages payments have commenced, it is difficult to stop them – this would no doubt require a visit to CAS at WorkCover in any case. This could also be an incentive for workers to drag out the resolution process.
  • A worker could justifiably assume their employer has accepted liability for their injury if wages are paid prior to investigations taking place.
  • It doesn’t set a great precedent for other workers if everyone who lodges a claim is paid, regardless of whether their claim is accepted.
  • If the claim is accepted, the employer will be obliged to back-pay wages. If the claim is declined, however, and the employer has paid wages on a WOP/WOL basis, it is not possible to recoup these wages from the worker.

We believe that all workers who suffer a legitimate workplace injury are entitled to fair compensation for their injury. Sometimes, however, claims are pended because more information is required to assess the injury and determine liability – and sometimes injuries are not compensable. A very small percentage of workers fall into this situation. The fact that the employer has identified significant cause for concern, in our opinion, means that they should not bear the additional onus of paying wages when there is no legal obligation to do so. The best interests of all parties are served by everyone, including the worker, focusing on a fast determination of liability. A focus on a solution is always Aurenda’s preference.

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May 6, 2012 · 6:55 am

What expenses am I liable for when someone has a workplace injury?

Q. What expenses am I liable for when someone has a workplace injury?

Managing Director:  The insurance company that underwrites your workers’ compensation policy is liable for wages up to $190,000 and medical expenses up to $50,000 (which can be extended by another $50,000 for a worker with a severe injury). These expenses can be extended by another $100,000 in serious cases, if the worker chooses to take the $100,000 and forego their Common Law entitlement. Rehabilitation can add another $12,000 and there are additional minor expenses, such as travel, that can also be reimbursed.  The consequence of these expenses is that it only takes one significant injury to add significant costs to your claims history. 

Client Service Manager:  A particularly important reminder for businesses with a monthly payroll is that employers must pay an injured worker their wage entitlements within 14 days of the insurer approving the claim. There is a $2,000 fine for failure to do so.

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Filed under Aurenda, Injury Management, Insurance premiums, Workers Compensation, Workplace Injury