Icare, the operator and provider of the NSW Government’s workers’ compensation scheme, has released premium details for the 2023/2024 period.
Whilst the news is not as catastrophic as in Victoria
there is no hiding the fact that the news will place additional financial pressure on organisations. Premiums will be increasing for many employers.
What the new Labor Government is saying
The Minns Labor Government has dictated to icare that the increase in the average rate will be capped at 8% each year for the next three years. Alternatively, steeper increases were likely to have been implemented.
This means premium rates for 2023-24 will increase from 1.48% of wages to 1.60% of wages. However, the average rate only tells part of the story.
Of the 526 industry classifications, 45 will not have a rate change. 264 will increase by less than 8% and 217 will increase by more than 8%.
The maximum increase sits at 16.7%.
Eyes on Transport & Storage and Health & Community Services
Icare have identified Transport & Storage and Health & Community Services as industries that have the most improvements to make. As a result, the average rate increase across these industries is 14% and 12.5% respectively.
The full list of new rates is available here.
It’s important to work with a worker’ compensation advisor to understand the changes and how they impact you.
Conventional Premium Policies
For employers whose premium is conventionally calculated, there have been some fundamental changes as follows:
- Removal of the Employer Safety Incentive and introduction of the Safe Employer Reward
The Employer Safety Incentive (ESI) has been in place since 2013 and consists of a flat rate rebate of premium based on wages multiplied by industry rate.
The original intent was that the rebate would be spent by employers on safety initiatives. In our view, we suspect that most employers did not look at the break down of their premium and just considered the final number. Since 2013, the rebate has cost icare $1.5bn in premium revenue.
Therefore, the ESI is being replaced with the Safe Employer Reward (SER) which is now provided on a sliding scale based on employer performance.
The best performing employers will still receive the same rebate as the old ESI but claims costs will cause the SER rebate to reduce, and employers performing worse than industry average will receive no rebate.
It is estimated by icare that 35% of experienced rated employers will no longer receive a rebate, and that those employers represent 91% of claims costs.
Whilst the logic of this change can be understood, it will represent a further increase in premiums for many employers on top of the increase in industry rates. It is one of the more stealth ways that icare can increase premium revenue without moving industry rates above the ceiling imposed by the Government.
- Claims Performance Adjustment - Table of Rates
Behind the scenes of the premium calculation is a table that translates each experience rated employer’s claims performance into the discount or penalty they pay against their Industry Rate.
Icare have modified this table for 2023/2024, giving it some additional nuance, which may provide some premium relief for those employers who are considered poor performers. A workers’ compensation advisor can assist with any queries you have about the potential impact of this change to you.
Loss Prevention and Recovery Policies
Given that many Loss Prevention and Recovery (LPR) premiums are not as heavily influenced by the Industry Rates, it comes as no surprise that icare is lifting all the adjustment factors by 8%, in line with the Industry Rates.
This will have a direct and significant impact on all LPR participants, and further the consideration of alternate risk financing initiatives by many eligible employers.
The final adjustment factors are now 2.46 if you are subject to the $500,000 claims cap and 2.61 if you are subject to the $350,000 claims cap.
Despite these increases, our calculations continue to show that for many very large employers, the LPR is still significantly more cost effective than the conventional premium methodology.
Icare has indicated that this increase may be enough to make the funding of the LPR scheme sufficient, however there is no hiding the fact that LPR participants have had the fundamental cost of the scheme increase by nearly 50% since 2017/2018.
Icare is increasing its focus on accuracy, compliance and efficiency:
Icare is focussed on getting actual wages declarations from employers. For small employers who don’t submit actual wages, they will increase the estimated wages for future years by 30%. For LPR participants, no premium refunds will be issued until actual wages are submitted.
Icare is further cracking down on outstanding invoices by beginning to charge interest on overdue invoices from 30 June 2023.
- Electronic Funds Transfer
From 31 December 2023, icare will no longer be sending cheques. So if an organisation does not supply bank details, any refunds will not be issued.
Regardless of the reasons for icare being underfunded, the reality is that they needed to increase premium revenue, and will continue to do so over the next few years.
Someone has to pay the price for this: employers who are already under pressure.
It can be very easy for employers to fall into thinking that workers’ compensation
is like a tax, and therefore surrender to paying whatever the bill is.
However, whilst many of the changes being implemented are unavoidable for employers, claims performance is the key determinant of final premium for many employers.
A trusted workers’ compensation advisor can work with employers to understand their risks, and help strategise, plan and manage workplace injury to help reduce these costs as much as possible to bring workers’ compensation premiums under control.