Insurance industry wants bigger slice of workers compensation pie in overhaul

Insurance Council of Australia chief executive Rob Whelan wants more market-based competition in workers compensation. Photo: Sahlan Hayes

Rich workers would have their benefits slashed and superannuation would be paid to those on extended injury leave under a radical overhaul of Australia's multi-billion dollar workers compensation system being pushed by the insurance industry.

The Insurance Council of Australia also wants state-run monopoly workers compensation schemes opened up to market competition from general insurance companies, an idea previously endorsed by the National Commission of Audit and the Productivity Commission as a way to drive efficiency. The various schemes around the country process hundreds of thousands of claims each year.

"Australia's workers compensation schemes need an overhaul for reasons of efficiency and equity. The differences between the schemes and the compliance burden on businesses are detrimental to efficiency and costs, and are a drag on employment and the economy," Insurance Council of Australia (ICA) chief executive Rob Whelan said.

A new report – commissioned by the ICA and produced by actuarial advisers Finity Consulting, to be released on Wednesday – outlines a vision for what a best practice workers compensation system would look like. It calls for the nine workers compensation schemes around the country to be harmonised and overseen by a new independent regulatory body.

Advertisement

Combining the work health and safety regulator with the workers compensation regulator, as has happened in NSW and Victoria, should also be banned.

The authors also want politicians and unions to settle on a best practise model and stop tinkering with workers compensation rules.

Competitive underwriting basis

"A co-ordinated national approach should be based on competitive underwriting by APRA-regulated general insurers to help avoid financial risk to governments, taxpayers and future policyholders," Mr Whelan said.

At its most basic level harmonisation would mean a common definition of a worker as anyone paying income tax under the Pay As You Earn system, thereby extending coverage to all contractors nationally.

The report comes amid regulatory reforms to the patchwork of schemes around the country after some fell into large financial deficits. Those financial difficulties had forced a balancing act between increasing the cost to employers of paying for workers compensation insurance and cutting the benefits provided to those injured at work.

Finity have argued that the system would be fairer and more sustainable if more money went to more seriously injured people, while conversely payouts to those less seriously injured should be smaller.

To reduce the financial strain placed on the system by wealthy workers claiming for workplace injuries, the authors proposed a maximum weekly benefit of of 2½ times average weekly earnings.

One of the most radical proposals in the report is that all workers compensation recipients should also continue receiving superannuation payments at the guarantee rate, which is currently 9.5 per cent. This would ensure that the permanent disability and death insurance coverage that most people receive through their superannuation continued while they are off work.

Inquisitorial process sought

The report also raises concerns that the "adversarial judicial nature of dispute resolution" under the current framework means a large amount of money is being wasted paying lawyers and medical specialists. The authors suggest that a "more inquisitorial tribunal process" to assessing medical claims would reduce costs leaving more money to payout to claimants.

Recognition is also needed that claims for workers suffering mental harm need to be processed differently to those with physical injuries.

Finity and the ICA have both stopped short of calling for a national workers compensation scheme, due to the constitutional issues that would make it impractical, but want more consistency between the state based systems and an easier solution for employers with workers in multiple jurisdictions.

A bill is currently before parliament to increase the ability of "national employers" that can afford to manage their own insurance to access the government's Comcare scheme for federal public servants. The ICA supports this move but wants its scope extended so the insurance companies it represents, are allowed to sell smaller employers national Comcare coverage.