Home' InDaily : September 18th 2009 Contents Mawson Lakes
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WorkCover, the state-run
insurance and rehabilita-
tion scheme for workers, has
been a political hot potato since its
inception in the mid 1980s.
In the lead-up to the next
state election in March, 2010,
WorkCover s increasing future debt
liabilities of more than $1.3 billion
will no doubt get a mention.
The impact of WorkCover s
deteriorating financial position is
felt mostly by employers who now
pay the highest average levy rate in
Stuck at 3 per cent, compared to
some states where it s half that, it
is a cost added to company wages
WorkCover s critics claim is a
disincentive to doing business in
SA. But is it?
The reality is that many large
employers don t pay the WorkCover
levy rate because they self-insure.
Companies such as Coles,
Woolworths, SA Brewing,
Australian Submarine Corporation
and even SA Water are self-insured,
making SA the state with the
highest number of workers whose
employers are outside the state
More than a third of workers (36
per cent) are covered under their
employer s self-insurance schemes.
"It s a better business solution
for large employers and their
employees," Self Insurers of South
Australia (SISA) manager Robin
"They have a stronger focus
on safety outcomes and injury
management because it delivers
better results and lower premiums.
Mr Shaw is also Chairman of the
National Council of Self Insurers.
But the exodus of big business
from WorkCover is causing
headaches for the organisation as
efficient businesses drive a good
deal with independent insurance
companies. The inefficient
and/or smaller businesses stay
It s one of the reasons why this
year s new legislative reforms to
the scheme included a section that
made exiting WorkCover a very
costly exercise. So costly, it s now
almost impossible to leave.
According to Mr Shaw, the
tensions between self-insurers and
the state have a long history based
on many misconceptions.
"Australia has a culture of
state-managed schemes because
historically, insurance companies
had driven highly discounted rates
in good economic times, but disap-
peared in tougher times," he said.
"State regulators believe they can
operate a fairer long-term operation
and not be subject to external
economic factors, but they are wrong.
"Centrally managed schemes can
get into strife just as effectively as
the private sector."
Mr Shaw s view was
demonstrated clearly when the
international share market
collapse and global financial crisis
ripped tens of millions of dollars
from WorkCover s investment
fund which in previous years had
delivered a quarter of its income.
It led to Industrial Relations
Minister Paul Caica s declaration in
March that WorkCover s ballooning
unfunded liability was "the result
of the global financial crisis".
Mr Shaw told a national
conference of employers in June
that the minister s response was
"Governments take credit
for scheme surpluses, but when
funding is negative, they blame
economic conditions beyond their
control," he said.
"Anyone who believes that they
can totally control the long-term
funding status of a scheme by
administrative or legislative means
is deluding themselves."
But that s just what WorkCover s
political masters intended when
framing the new laws that took
effect this year.
WorkCover CEO Julia Davison
defended the policy, claiming that
past levies had been too low.
"The levies we have collected in
the past have not covered the cost of
claims," Ms Davison said.
"All employers have had the
benefit of rates that were lower than
they should have been and "own"
part of the unfunded liability."
"It makes no sense at all," Mr
"WorkCover s own actuary
analysed the impact of self-insurers
in separate reports in 1999 and 2004.
Both times it concluded that self-
insurers pose no threat to the long
term viability of the central fund.
"WorkCover s headaches are
purely imaginary and it was outra-
geous for parliament to be told that
the huge discontinuance fees were
there to protect the scheme from
adverse financial consequences
when there is no evidence for that,"
Mr Shaw believes that workers
are the big losers, not the employ-
"It s a fact that self-insured
employers achieve better injury
management, better return to
work rates and provide safer work
environments," he said.
He points to one employer that
was all set to exit WorkCover when
the new laws came into effect.
"It was a large private hospital
and they were nine-tenths of the
way. Under the new laws their
discontinuance fee was almost
$2 million. End of story; they
stopped the move immediately."
The exit fees now being charged
by WorkCover are estimated by
SISA as follows:
Petrol wholesaler with 500
employees on average earnings;
Car dealership, 200 employees on
average earnings; $500,353
Hospital with 1000 employees on
average earnings; $4,776,101
"WorkCover has demonised
self-insurance for no good reason,
Mr Shaw said.
"I am aware of at least 12 large
employers who are doing the sums
now and they can t see any way
of paying the huge exit fees and
getting their money back."
A motion to disallow regulations
enforcing the fees is expected to
be debated in parliament s Upper
House next week.
■ Insurance costs set to rise, Page 14
Cost of opting out
Massive exit fees
are being charged
look for a more
efficient way of
insurance for no
Photo: Kate Elmes
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