A question on the minds of an increasing number of organisations is whether they would benefit from switching to a self-insurance model for workers insurance. Some of this interest can be attributed to major changes that took place almost two years ago in the management of workers compensation premiums and claims in Australia’s most populous state, New South Wales.
In 2015, the functions of WorkCover NSW were broken up between three distinct organisations: SafeWork NSW, the State Insurance Regulatory Authority (SIRA) and Insurance & Care NSW (iCare). Currently, premiums and claims are shared by insurers CGU, Alliance, GIO, QBE and EML. But as part of the new regulatory environment, from 1 January 2018, EML will be the last one standing. It will be the sole insurer in NSW managing workers compensation claims, and iCare will take charge of premiums.
With an absence of workers insurance choices, deteriorating levels of service are likely to result. This is refocusing larger companies, councils and employer industry groups on whether self-insurance is a better way to go.
Why switch to self-insurance?
If managed well, self-insurance lets an organisation control its liabilities and workers compensation costs in a more predictable way than participating in a scheme and instead of paying a premium each year costs are incurred over time.
Additionally, as a self-insurer, an organisation can manage its claims more effectively and efficiently, as it’s closer to its workers than an insurance agent would be. For instance, if an employee is injured, the organisation will be better placed than an insurance agent to offer suitable duties because claims and injury management services are integrated in the business.
Weekly benefit payments to injured personnel should be lower than if the organisation had a policy through a conventional workers compensation scheme because claims development have shorter durations. With self-insurance, you’re less at the whim of regulators, who are predisposed to changing insurance premiums on a seemingly annual basis. In combination, these factors enable organisations with self-insurance to more successfully forecast their compensation budget and improve cashflow..
Better outcomes for workers
A self-insurer can determine outcomes more rapidly and efficiently than an insurance agent. This means it’s likely an organisation with a self-insurance program will have a more contented and productive workforce. Employees may take the view, “Hey, we’re self-insured now – they care more about us because they’re taking more of an interest in our health and wellbeing and getting injured people back to work.”
By using a self-insurance approach, an organisation can also reduce the possible tension points for injured workers. No longer will they need to deal with a myriad of parties, including your HR department, their direct managers, sundry claims managers and those exasperating insurance company representatives who fail to respond to their compensation inquiries. With self-insurance, your employees will be collaborating with people, potentially co-workers, who are actively looking after them and expediting their claims.
Barriers to self-insurance
In NSW, barriers to establishing or withdrawing from a self-insurance arrangement were lowered, but unless you have 500 employees or more, you won’t be able to apply for a self-insurance license for your firm. Queensland requires a minimum of 2,000 employees unless you operate two or more licenses in other jursidictions. The multiple OHS and workers compensation acts and ordinances across Australia confuse the issue, Comcare, which looks after the Commonwealth workers compensation scheme is available to new entrants, that can demonstrate competition with current or former government entities, such as Australia Post. Legislation is in the wings that may open up the jurisdiction to National employers however the current government does not have the number to pass the proposed 2014 SRC Act amendment bill.
Do the numbers stack up?
It’s all well and good that self-insurance provides your workers with a positive experience, but it’s crucial to do your research and make sure the business case stacks up for your organisation.
If you’re weighing whether to apply for a self-insurance license, it could be worthwhile to take advantage of the expertise of a design and implementation specialist such as the HIMS Group. We can conduct feasibility studies to assess whether a self-insurance program will be financially viable for you. The HIMS Group is an Australian-based company, we’re owned and operated by a team of dedicated workforce risk specialists who are focused on client partnerships, and delivering high-quality services and financial predictability.
We look at the financials, corporate structure and past safety performance to determine the feasibility of self-insurance against a conventional workers compensation programme – or even a Loss Prevention and Recovery programme, which is a halfway point between self-insurance and a conventional scheme.
If the best choice for your organisation is self-insurance, we map out the compliance processes for you, coordinate the project with the regulators, and manage the application process and compliance. Once we’ve established a self-insurance program with you, HIMS can also manage the claims processes though our claims departments in New South Wales and Victoria and regional Australia.
To find out more about transitioning to an outsourced workers compensation solution, contact HIMS Group on 02 8378 2127. Email: team@HimsGroup.com.au
