In recent years, workers’ compensation schemes around the country have faced stiff challenges from budget blowouts, rising premiums and increasing claims numbers. According to a Deloitte report, worker injuries are costing the economy more than $28 billion annually.
Insurance brokers are moving into this sector with risk management offerings that can reduce claims numbers and make workplaces safer and more productive. State governments are also changing legislation and modifying workers’ comp rules, impacting stakeholders including insurance firms.
For example, in July, the Western Australia government implemented what it called a complete rewrite of its Workers’ Compensation Act. In March, changes to Victoria’s legislation modernised its WorkCover scheme.
However, one major hurdle is the rise of mental health claims.
A February report from WorkSafe Australia found that mental health claims have risen by more than 35% since 2017. While still only accounting for about 10% of all serious workers’ comp claims, businesses lost four times more time from employees with these injuries compared to those injured physically. More surprising: WorkSafe also found that the median compensation paid for mental health conditions was more than three times greater than that of all physical injuries and illnesses.
Jason Lardelli (pictured above), executive director of Return to Work Victoria, an agency set up this year to support WorkSafe, said these challenges are reflected across the country.
“The scheme [in Victoria] was designed many years ago, primarily to deal with physical injuries,” said Lardelli. “However, workplace injuries today are very different.”
He said the ongoing growth in mental health claims and the trend of more people staying longer on compensation “have significantly impacted the financial sustainability of the WorkCover scheme.”
A media release from Lardelli’s agency said the recent WorkCover changes “significantly” modify how GPs and medical professionals evaluate and assess patient eligibility for workers’ compensation claims.
“With the rise in mental injuries, change was needed to ensure the scheme remains sustainable and includes eligibility and assessment measures to align with both physical and mental injuries,” he said. “These changes are designed to ensure injured workers continue to receive the support they deserve into the future.”
Lardelli said some of the key changes include a redefinition of mental injury and the exclusion of stress or burnout as eligible for workers’ comp.
Mental injury now refers to an injury that causes significant behavioural, cognitive, or psychological dysfunction, and is diagnosed by a medical practitioner according to the DSM.
Mental injuries must meet the new definition to qualify for compensation.
Employment must be the single greatest cause for compensation eligibility in primary mental injury claims.
Compensation is not granted for mental injuries primarily caused by stress or burnout from usual activities.
Workers must have a whole person impairment (WPI) of 21% or more, in addition to the existing work capacity test.
Lardelli said apart from the changed eligibility criteria, these changes won’t result in a reduction of benefits.
“Our scheme will still provide compensation to support injured workers in their recovery which may include weekly payments for time lost from work, treatment expenses, and support with rehabilitation and return to work,” he said.
However, some stakeholders, including unions, have expressed concerns about the new restrictions on mental health claims.
Insurance firms play a central role in many state schemes, including in Victoria.
“WorkSafe Victoria appoints dedicated agents to oversee employers’ WorkCover insurance and handle compensation claims with expert guidance and support,” said Lardelli.
The agents include Allianz Australia Workers’’ Compensation (Victoria), EML VIC, Gallagher Bassett Services Workers’ Compensation and DXC Claims Management Services. “Employers must select one of these agents when applying for or renewing WorkCover insurance and are obligated to stay with their chosen agent for a minimum of 12 months,” he said.
The premiums paid by Victorian employers through these agents fund the scheme. The Victorian Chamber of Commerce and Industry has strongly criticised recent sharp increases in premiums.
“We know the cost of insurance premiums are an issue for every business and just like every household, they want their bills to be as low as possible,” said Lardelli. “That’s why WorkSafe is committed to delivering enhanced injury prevention and recovery services to reduce the financial burden on Victorian businesses and provide them with maximum value for money.”
Public concern over rising premiums, he suggested, was a reason for the establishment of his Return to Work agency.
The challenges facing workers’ comp schemes in Victoria and across the country could be an opportunity for brokers.
Last year, Sydney-based Bellrock Broking launched an offering to help businesses bring down workers’ compensation costs.
“I think our fear is that we know that costs are increasing across workers’ compensation schemes,” said Sydney-based Andrew Jamieson, the manager of Bellrock’s new service. “For most employers, workers’ comp premium is either their largest premium spend or in their top handful.”
Also in 2023, Sydney-headquartered firm, SafetyCulture launched SafetyCulture Care. The offering, available through brokers, blends business insurance, workplace safety and risk management.
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