According to the Insurance Council of Australia, there is a need to overhaul Australia’s workers’ compensation insurance industry by harmonizing the nine federal, state and territory workers’ compensation schemes and opening the state-run schemes to private insurers.
Insurance Council of Australia Calls for Overhaul of Workers’ Compensation Scheme
Jun 10, 2015
The industry group, citing a commissioned report done by Finity Consulting, is calling for uniform best practices among the different schemes around the country and for the market as whole to be overseen by a new independent regulatory body.
“Australia’s workers’ compensation schemes need an overhaul for reasons of efficiency and equity. At present, employers may need to comply with up to eight state and territory schemes, and each scheme is different. A person injured at work may receive different levels of benefits, depending on the state or territory in which the injury occurred,” ICA chief executive Rob Whelan said in a statement.
“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,” he added.
The best practices suggested in the report include a fair benefit system such that workers with higher earnings have lower benefits than those with low income. It also argued that higher compensation should go to more seriously injured people, while payouts to those less seriously injured should be smaller.
On a bigger scale, the report suggested it is time the workers’ compensation scheme, being mandatory, should be open to private insurers in a competitive market and managed by a specialist scheme regulator.
Premium rates, it added, should be lightly regulated, which is free from interference by government and other stakeholders.
Whelan echoed the report’s recommendations, saying a workers’ compensation scheme based on competitive underwriting by insurers would help avoid financial risk to governments, taxpayers and future policyholders.
“Competitive underwriting of monopoly schemes would reduce scheme volatility and remove political interference with the pricing of risk. It would also remove government reliance on premiums as a source of general revenue,” he said.
On claims assessment and processing, the report suggested a “more inquisitorial tribunal process” would reduce costs that would benefit both the employers, insurers and the claimants. It noted 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.
Whelan said he hoped the report would help renew the conversation about improving the current scheme and come up with a more uniform workers’ compensation system.
At present, several Australian states are examining the sustainability of their schemes while the Senate is considering changes to the Federal Comcare scheme that would benefit some national employers.
“The ICA believes the time is right to take stock of the best scheme model to serve Australians and the national economy,” Whelan said.
(By Ernesto Calucag, Hong Kong news editor: Ernesto.Calucag@ambest.com)
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