Employers who have a basic tariff premium greater than $10,000 and annual wages greater than $300,000 have their premiums experience adjusted. That is, their premiums are impacted as the result of a claim. The experience premium provides an incentive to medium and large employers to improve their claims experience through good injury management, return to work and occupational health and safety procedures.
The experience adjustment formula is designed to reflect the claims experience performance of a business compared to other employers in the same industry. The experience premium is calculated using an employer’s claims cost rate (claims divided by wages) and their industry claims cost rate. Employers with a claims cost rate below their industry claims cost rate receive a discounted premium that is below the basic tariff premium. Conversely, employers with a claims cost rate that is worse than their industry average will pay a premium that is above the basic tariff premium.
The industry claims costs rates used in premium calculations are set annually and published in the Insurance Premiums Order.
Employers may avoid paying a claims excess if there is an injury by notifying their Scheme Agent or insurer within the required timeframes.
Experience adjustment protection/capping for medium employers
Premium caps are in place to protect employers from significant experience-based premium increases.
For employers with a basic tariff premium:
- less than $50,000, the total premium cannot exceed one and half times the basic tariff premium
- equal to or greater than $50,000 and less than $150,000, the total premium cannot exceed two times the basic tariff premium
- equal to or greater than $150,000 and less than $300,000 the total premium cannot exceed two and a half times the basic tariff premium.
Claims costs included in the experience premium
For the purpose of calculating a medium or large employer's experience premium, claims costs include:
- all payments made by the Scheme Agent in respect of the claims, including weekly benefits, medical expenses and service provider costs
- the estimated costs of all future payments arising from the claims, calculated in accordance with WorkCover's Claims Estimation Manual, as at the expiry or renewal date of the policy.
The cost of an individual claim is capped at $150,000 when used to calculate an employer’s premium.
The initial experience premium is calculated using the employer’s wages and adjusted claims costs for the previous two years of insurance cover.
The hindsight experience premium is calculated using the employer’s wages and adjusted claims costs for the previous two years, together with the wages and adjusted claims cost for the current year of cover.
Call 13 10 50 for more information.