Insurance Premiums Order 2011-2012 at a glance
Each year the New South Wales Government approves the rates that the WorkCover Scheme will charge employers for workers compensation cover.
The Government has recently approved the rates for the 2011-2012 policy year and they have been published in the Insurance Premiums Order 2011-2012.
The Insurance Premiums Order includes important information on the WorkCover Industry Classification System, premium rates, dust diseases rates and the manner in which an employer’s workers compensation premium should be calculated by Scheme Agents for the relevant policy period.
The Insurance Premiums Order 2011-2012 applies to policies that commence or renew on or after 4pm on 30 June 2011.
Insurance Premiums Order (Retro-Paid Loss Premium Method) 2011-2012
Certain large employers are approved by WorkCover to have their premiums calculated using the Retro-Paid Loss Premium Method. Those employers’ premium calculations are subject to the Insurance Premiums Order (Retro-Paid Loss Premium Method), which operates in conjunction with the Insurance Premiums Order.
The Insurance Premiums Order (Retro-Paid Loss Premium Method) 2011-2012 applies to policies that commence or renew on or after 4pm on 30 June 2011.
No changes have been made to the formulas or adjustment rates used in the Retro-Paid Loss Premium Calculation Method.
Following is a summary of key components of the Insurance Premiums Order 2011-2012:
WorkCover Industry Classification Rates (WIC rates) for the 2011-2012 policy year are unchanged.
If you are a small employer, that is your basic tariff premium (payroll x WIC rate) is less than or equal to $10,000 or your annual wages are less than or equal to $300,000, your premium will remain unchanged except where your wages increase or decrease – or you move to a new industry classification.
As a small employer, you are not experience-rated, which means the cost of claims made against your policy are not included in your premium.
87% of Scheme employers are small employers.
If you are a medium or large employer, that is your basic tariff premium (payroll x WIC rate) is greater than $10,000 and your annual wages are greater than $300,000, your premium will be affected by your wages and claim costs.
Medium and large employers are experience-rated, which means the cost of claims made against your policy will be included in your premium calculation. The higher your basic tariff premium, the greater the impact your claim costs will have on your premium..
13% of Scheme employers are experience-rated.
If your premium is experience-rated, then it will also be affected by how your claims cost experience compares with other employers in the same industry sector.
If your claims cost experience is better than the benchmark for your industry sector, then that will be reflected in a reduction in your premium. If your experience is worse than the industry benchmark, then your premium will be higher – reflecting the greater demand being placed on the Scheme.
The benchmarks for each WorkCover Industry Classification are the Industry Claims Cost Rates and these have been gazetted for the 2011-2012 policy year.
A summary of the WorkCover Industry Classification Rates and Industry Claims Cost Rates as Gazetted in the Insurance Premiums Order 2010-2011 and the Insurance Premiums Order 2011-12 is available.
The definition of predecessor has been reworded to make its operation clearer and to better align with WorkCover’s policy intent of ensuring that the premium calculation of an employer who acquires the business of a former employer includes the cost of claims and wages history of that former employer.
The clarification means that the ‘predecessor rule’ applies not only where an employer ‘acquires’ the ‘business’ of the predecessor but where the employer ‘comes in to possession of the business’. In addition, the rule now states that it also applies where the employer, during a policy period, acquires the majority of the predecessor’s workforce.
These amendments are intended to help overcome ambiguities and uncertainties that have been experienced in the operational implementation of the rule.
The late payment prescribed rate is used for calculation of late payment fees applied to employers for late payment of premium. The rate is based on the interest rate calculation under section 22 (4) of the Taxation Administration Act 1996 for the period 1 April to 30 June each year using the February 90-day bank accepted bill rate published by the Reserve Bank plus the premium component.
The late payment prescribed rate for policy renewal year 2011/2012 is 1.018% per month, compounded monthly.
The Insurance Premiums Order prescribes the maximum excess amount recoverable from an employer who does not report injuries in a timely way. This amount is aligned to the maximum weekly compensation payment under section 35 of the Workers Compensation Act 1987.
Where an employer notifies WorkCover or the Scheme Agent within five days of becoming aware of the injury this excess is waived.
Where the excess is charged the cost of claims used in the premium calculation is reduced by the same amount, so that the employer is not effectively paying twice for the first week of the injured workers weekly compensation.
Where the excess is waived, the first week of the injured workers weekly compensation payments is deducted from the cost of claims, providing an incentive for timely reporting.
For policy renewal year 2011/2012 the maximum excess amount recoverable from an employer is $1,774.50 and the maximum cost of claim deduction amount is $1,774.50.
The extent to which motor vehicle allowances and accommodation allowances are excluded from wages is gazetted in the Insurance Premiums Order Schedule 1 clause 3. These allowances are aligned to the Income Tax Assessment Act 1997 (for motor vehicle allowance) and the Crown Employees (Public Service Conditions of Employment) Reviewed Award 2006 (for accommodation).
The current rate for motor vehicle allowance remains the same as gazetted in the Insurance Premiums Order policy renewal year 2010/2011 being $0.75 per kilometre. The accommodation allowance moves from $223.80 in policy renewal year 2010/2011 to $227.35 in policy renewal year 2011/2012.
Dust diseases contribution rates
The rates at which the Dust Diseases Contributions are collected are determined each year by the independent Dust Diseases Board actuary, and are approved by the directors of the Dust Diseases Board.
Dust diseases contribution rates are specified in eight schedules and these rates have not changed for 2011-2012 although a number of industries have moved between schedules.
A summary of the Dust Diseases Contribution rates for 2011-2012 is in the Insurance Premiums Order 2011-2012.
Mine Safety Fund premium adjustment rate
The NSW WorkCover Scheme is required to provide a contribution to the Mine Safety Fund established under the Mine Safety (Cost Recovery) Act 2005 to the Department of Industry and Investment for its mine safety activities.
The WorkCover Scheme recovers the contribution from mining industry employers covered by the Scheme through an adjustment to their workers compensation premium. Employers classified in Division B (Mining) of the WorkCover Industry Classification System have the Mine Safety Fund premium adjustment applied to their premium calculation.
The Mine Safety Fund premium adjustment rate for policy renewal year 2011/2012 is 0.710% of wages covered under mining industry WICs.
Call 13 10 50 for more information about the
2011-2012 Insurance Premium Order.