On 30 May 2014, NSW Government gazetted the new workers compensation premiums order (IPO) which was to come into effect for all policies renewing on or after 30.6.2014.
The Gazette neglected to include the Table A which sets out all of the new rates. This small confusion was subsequently clarified and the rates which had applied since December 30th 2013 were preserved.
Not widely realised was the fact that several Industry Claims Cost Rates had also been reduced. The impact of the reduction in ICCRs was to substantially increase premiums for those employers which had claims and whose basic tariff premiums exceeded $30,000.
As soon as we began to organise premium projections for clients it became obvious that the changes would have a very significant adverse effect on a number of larger employers.
There was an outcry which the Government appears to have heard and acted on.
Announced on Tuesday 17th June, as part of the budget process (Workers Compensation is however off budget) was an average 5% decrease in rates across the scheme.
Whilst we have not been able to confirm the following, this is our current understanding of how the reductions will be implemented:
- 343 rates will reduce by more than 5%
- 111 rates will have no change
- The remaining rates will have a less than 5% reduction
We have no details of how individual rates are to be dealt with.
We also understand that the ICCRs are to be recast so that their impact is not so severe; however ICCRs will still reduce across every premium rate. This change is apparently to reflect the improved performance of the scheme and is applicable to each industry.
This reduction in ICCRs is thought to be 30% of the changes outlined in the May 2014 IPO. It is likely that throughout the next three years the ICCRs will have continued to decrease to such a level that they reflect the figures outlined in the May 2014 IPO i.e. 30% reduction this year, 60% next year and 100% by June 2016 (in 3 years’ time, ICCRs will be back to the levels set in the May 2014 IPO)
WorkCover’s position is that the ICCR is a true reflection of the scheme’s performance (last three years claims costs divided by last three years wages for the industry) and is not a figure picked at random and that the changes in the May 2014 IPO represent 100% of the scheme improvement.
Changes will apply to both renewal and adjustment premiums’ ICCRs.
It is unlikely that the revised IPO will be released until later in June (we understand it to be 27th June), so we are not in a position to provide any absolute certainty that this will be the final outcome.
We will of course advise as soon as the situation becomes more transparent.