Intro

Amongst the turmoil and changes affecting the Victorian workers’ compensation scheme, the NSW Government has also made changes that will affect premiums in the 2023/24 period. The changes are less impactful for policyholders than affected Victorian businesses, but the news that premiums will be increasing for many employers will place undoubtedly place additional pressure on businesses that are already facing rising costs.

Fresh to office, the Minns Labor government, keen to make changes to the struggling icare model, has confirmed that increases in average rates will be capped at 8% per year for the next three years. Industrial Relations Minister Sophie Cotsis issued a directive to the chairman of icare recently, in which she described the state of the insurer as “dismal” and “deeply disappointing”, reinforcing the position that the Labor government will be taking decisive action in an attempt to rectify the position of the insurer.

Minister Cotsis’ directive to icare came shortly after the Sydney Morning Herald revealed that icare had requested that premiums be increased by hundreds of millions of dollars in an attempt to reverse what the outlet described as a “parlous financial position”.

Labor pushes back

Employers will be relieved to learn that the Labour government rejected the proposed change by icare, which would have seen an eye-watering 22% increase in premiums. However, there is some pain across certain industries and Minister Cotsis “acknowledged that small increases put off over the past seven years have now burdened the public with the need for a large increase.”

Premium rates will increase as a percentage of wages from 1.48% to 1.60%, but the increases are conditional. Of 526 industry classifications, which many have been watching closely, 45 will remain the same. In total, 264 industry classifications will be affected by an increase of less than 8%, with 217 set to increase by more than 8%.

So where will the pain be felt? icare has determined that health and community services (increase expected at 12.5%) and transport and storage industries (14%) require the most significant improvements. As always, we recommend speaking with one of our experienced workers compensation experts to determine how the rate increases will affect your respective industry.

However, this week, it was revealed that some employers will experience premium increases of more than 16% as the insurer released its external premium filing update 2023-24. icare desperately needs funds before the end of the week (EOFY) to continue paying injured workers, which the Treasury has agreed to, with Treasurer Daniel Mookhey explaining that the “investment shows our commitment to backing the men and women who work towards protecting the rest of us.”

Per a spokesperson, icare said that, “Premiums can increase due to business growth, higher wages, changes in industry profile or increases in average premium rates. The scheme average premium rate increase for 2023-24 is 8 per cent, and the industry profile is based on “risk of workplace injury and death”. Riskier industries will pay more. Safer industries will pay less. Taking into account these risk profiles, some increases will be lower than the average and some higher,” the spokesperson said.

The full list of new rates is available here.

What other changes are there?

For those with premiums that are calculated conventionally, there are different changes to consider. The Employer Safety Incentive, which has been in place since 2013, and is made up of a flat rate rebate from premiums based on wages multiplied by an industry rate, is being removed. Originally, the policy was designed for employers to spend that rebate on safety initiatives. Many in the industry consider it to be a hollow commitment to safety and that employers looked only at the final number rather than any concessions.

In it’s place will be the Safe Employer Reward, which will be provided to employers, based on their performance, with the best-performing employers still receiving the previous rebate. However, poorly performing employers who report below the industry average will not receive a rebate at all. Estimates by icare put 35% of experience-rated employers as no longer eligible for the rebate, and those employers represent a massive 91% of claims costs. While the commitment to safety is explicit in the intent of the change, it will mean further financial pain for employers on top of increased premiums, and those critical of icare have earmarked it as a way for the insurer to increase revenue while still remaining below the premium increases imposed by the government.

As part of the changes, icare has also indicated that it is looking to streamline various processes, with an eye to minimising costs and increasing efficiency. Notably, this means that they will be committed to receiving actual wages declarations from employers, and for small employers who don’t submit actual wages, estimate wages for future years will increase by 30%. In addition, icare will no longer send cheques for refunds and will also begin charging interest fees on overdue invoices.

So what can I expect?

The recent statement by the new Premier acknowledging the need for transparency and addressing challenges in the economy resonates with employers who understand the importance of proactive risk management.

The government is actively addressing the management of icare, which has been referred to as “neglect” by the Premier. The rejection of sharp premium increases reflects an understanding of the financial constraints businesses face.

In light of these developments, employers who recognise the significance of workplace safety as a crucial factor in managing workers compensation premiums will likely be in a better position than those who do not. By implementing robust safety measures, businesses can reduce the likelihood of accidents and injuries, leading to fewer claims and, ultimately more favorable premium rates, which is paramount as the rates increase.

To effectively address the forthcoming changes, employers should work closely with experienced workers compensation advisors who can provide valuable guidance and support. These advisors have a deep understanding of the evolving landscape and can help businesses navigate the complexities of the scheme, optimise coverage, and minimise the financial impact of premium increases.

For a review of your workers compensation insurances and management, please feel free to reach out to the Eighteen33 team here.