A Modern Day Farce

According to web site Vocabulary.com, a farce is a broad satire or comedy, though nowadays it’s used to describe something that is supposed to be serious but has turned ridiculous.  Farce is thus an apt description of what NSW WorkCover has become.

At the time of writing (1 September 2015), workers compensation premium notices have just started to be posted out by Agents/insurers.  We understand that the lateness in the date for dispatch of the notices is due to instructions from NSW WorkCover to its Agents, forbidding any correspondence with employers over premium matters.

What was WorkCover seeking to hide you might ask?  Why did Minister Perrottet not intervene, given his commercial and legal background, and his understanding of the budgeting process?

The answer to both these questions lies in the newly minted premium system introduced by WorkCover in June.

First came a period of confusion whereby no-one was able to clearly enunciate what the changes would mean in terms of premium charges.  Even though WorkCover took the view that it had adequately consulted with industry, there was a growing suspicion that premiums would be on the increase.

Then there came a period where advisers and insurers began to prepare premium projections which showed that there were some very big shocks in store for many employers.

WorkCover responded by suggesting that everyone take a cold shower and then a lie down (Bex was mentioned), because there was no problem and if there was, then WorkCover had the answer.

The answer it seems, lies in the application of Schedule 13 of the Insurance Premiums Order whereby employers are entitled to a discount in their premiums at the whim of WorkCover.  There are no details yet of which lucky employers will receive a discount but regardless, this will only be applied at the adjustment of their policies.  In other words no answer at all.

The next couple of months will be very difficult for the WorkCover and Ministerial Spin Doctors when premium notices are finally delivered to employers.  They will need to have answers to some perplexing questions such as “How many jobs opportunities will be lost because of the massive premium increases some 4,000 odd employers will be forced to pay?” and “Why was it necessary to fix a system that was not broken?”

At the same time that the farce over the new premium system was unfolding, Minister Perrottet declared that he had listened to injured workers.  He had indeed and appeared fresh faced and gushing in a video production saying just that.  He then announced a $1 billion reform package to the workers compensation system.

At the last election, the Government committed that every dollar above the minimum surplus needed to keep the scheme sustainable would be returned to injured workers and business in a two third, one third split.

On 2 February 2015, the CEO of WorkCover stated that “WorkCover Insurance writes $2.5 billion in premiums, manages more than $16.9 billion in assets and manages claims liabilities of $14.4 billion”.  This admission that the surplus of assets over liabilities then stood at $2.5 billion, has more than likely blown out to more than $3.5 billion at the time of writing (some observers reckon that it is considerably more).

Nevertheless, the surplus is a finite resource and has already been eroded in the order of $1 billion by Perrottet’s reform package.  The reforms are not in the form of a rebate, they are ongoing changes to the way that benefits are paid and premiums collected.

Changing the scheme in the way that the reform package operates, will completely erode the surplus in a scant three years and NSW employers will back where they were when the Labor Government was in power; i.e. facing another massive deficit.

Obvious alternatives to Perrottet’s imprudent financial management of the WorkCover scheme involve slashing benefits again or increasing premiums again.

Somewhere along the track, the Baird Government seems to have lost its way, particularly when it comes to Workers Compensation.  As the pundits say, history has a way of repeating itself.  Perhaps now is the time to start rolling some heads in WorkCover and in Minister Perrottet’s office.

2 September 2015