Introduction

Ahead of the end of the financial year, many brokers will be balancing their attention between renewals and the impending changes to the Victorian workers compensation scheme. The limitations of the scheme were widely publicised earlier this year when the Andrews government declared it as dated and “not fit for purpose” and summarised it as “fundamentally broken”.

Various factors dictate the premium prices paid by employers, not only within the insurance market and influences therein but also political factors. The Victorian Labor government is under pressure to match its pre-election promises of prioritising mental health care in the state against increasing mental health claims under the scheme, which have contributed to significant claims costs and have indefinite and often more prolonged timelines than recovery from physical injuries.

The increasing costs of the workers compensation scheme, particularly in regards to mental health claims, are a major concern to the government, with the system primarily designed – and its capacity testing for injured workers – for physical injuries, not mental health injuries.

Changes to Mental Health Benefits

As well as premium increases, the government has also announced that it intends to change a section of the legislation that will result in the limited availability of benefits for those on mental injury claims. Those limits will be placed on workers suffering stress or burnout, who will no longer be able to access weekly benefits. They will instead be eligible for interim payments for up to 13 weeks to cover medical treatment. Enhanced psychosocial support and early intervention programs are likely to play a key role as the changes are implemented.

There has already been significant criticism of this move, with Katrina Norris, the director of the Australian Association of Psychologists, who spoke to the ABC, noting that the changes undermine the “very real and lived experiences of those who have been psychologically injured” at work.

“Taking aim at psychological injury for being the higher cost, longer duration problem child of workers’ compensation claims, simply ignores the fundamental flaws and limitations to the state’s workers’ compensation scheme.”

Premium Numbers

On May 19 this year, new information released by the government highlighted the predicted increases and the pressure that growing claims costs have put on the bottom line of the scheme. On average, the scheme rate will increase from 1.272% to 1.8%, close to a 42% increase.

There is also the potential that premium caps – which will be familiar to NSW-based workers compensation specialists – may also be introduced, in some cases as well as the immediate premium increase. Premium caps, if introduced, would provide a ceiling for premium rates, limiting the amount employers have to pay. This measure aims to ensure that the burden on businesses remains manageable and allows them to budget more effectively. However, the potential introduction of premium caps has also sparked debate and uncertainty among industry experts.

Proponents argue that premium caps can prevent excessive premium hikes and stabilise businesses. They believe that by implementing a maximum limit, the government can strike a balance between adequately compensating injured workers and avoiding the risk of exorbitant premium costs. Also, premium caps have succeeded in other jurisdictions, such as New South Wales, where they have helped stabilise premiums and provide certainty for employers.

On the other hand, critics of premium caps express concerns about the potential consequences of such a policy. They argue that capping premiums may undermine the fundamental purpose of the workers compensation scheme, which is to ensure fair and adequate compensation for injured workers. Imposing limits on premium rates could result in reduced benefits for injured employees, hindering their recovery and adding financial stress during an already challenging time.

How to Best Respond?

One of the most effective ways to prepare for these changes is by prioritising workplace health and safety as a preventative measure. By creating a safe and healthy work environment, businesses can reduce the likelihood of workplace injuries and subsequent workers compensation claims. This proactive approach not only safeguards the well-being of employees but also helps in managing claims costs and maintaining lower premium rates.

Investing in workplace health and safety initiatives demonstrates a commitment to the welfare of employees and can contribute to a positive organisational culture. Employers should regularly review and update their safety protocols, provide comprehensive training programs, and encourage open communication regarding health and safety concerns. By fostering a culture of safety, businesses can prevent accidents, injuries, and subsequent claims, ultimately leading to improved financial outcomes.

In addition to focusing on workplace health and safety, businesses should also seek guidance from specialist workers’ compensation advisors. These experts have a deep understanding of the evolving landscape and can provide valuable insights and strategies to navigate the changes in the workers compensation scheme. Collaborating with advisors allows businesses to explore all available options, optimise their coverage, and minimise the financial impact of premium increases.

The Eighteen33 Approach

Taking proactive action and seeking expert advice will position businesses for the best possible outcomes in the face of rising workers compensation premiums. By prioritising workplace health and safety and leveraging specialist knowledge, employers can mitigate risks, support their employees’ well-being, and ensure the long-term sustainability of their operations.

In this evolving landscape, businesses that adapt and respond effectively to the changing workers compensation scheme will be well-positioned for success. Working with our experienced workers compensation consultants can offer support and guidance in navigating these changes, with our team able to assist in understanding the complex changes, while also working with you to ensure your coverage is optimal and that your business is ideally positioned to adapt to the financial impact of the increases to premiums.