On 13 May 2021 icare announced changes to workers insurance premiums for the coming 2021/2022 financial year. Inline with the NSW Governments priority to support employment as businesses grappled with the unforeseen impacts of the COVID-19 pandemic, icare placed premium updates for the 2020/2021 financial year on hold with the intension to revisit this decision at a later date.
Background to icares’ changes
Similar to other insurance underwriting companies, icare invests its assets to keep premiums as low as sustainably possible for its customers. COVID-19 in particular, has had a significant impact across the New South Wales (NSW) economy and for the most part the full effects still remain uncertain, however icare has not been immune to the impacts and its investment returns remain uncertain continuing to place pressure on the NSW workers insurance scheme.
An assessment of operational performance, the economic impacts of COVID-19 and medical cost inflation level, has meant that icare can no longer maintain the same scheme premium rate that they have for the past 7 years, and that a new pricing strategy underpinned by modest premium rate increases over several years, is essential to scheme sustainability.
What are the key changes?
The change will see the scheme average premium rate increase from 1.4% of wages to 1.44%, which represents a 2.9% premium rate increase across the scheme, impacting 50% of workers compensation industry classifications (WICs).
Some WICs workers insurance premiums will also be marginally impacted by an increase to the schedule one dust and diseases rate from 1.25% of wages to 1.40%, a change introduced by the State Insurance Regulatory Authority (SIRA) to 2021/2022 premiums.
What does this mean for the Automotive Industry in NSW?
There are 17 WICs that make up the automotive industry workers insurance portfolio in the NSW scheme. 60% of these WICs will not have a premium rate increase in 2021/2022. The table below provides a summary of the rate changes for the industry.
In simple terms these WIC rate increases means:
- All policy holders impacted by WIC rate increases (assuming no change to wages) can expect a larger Average Performance Premium (APP), which is the starting point for all premium calculations.
- All policy holders impacted by WIC rate increases and an estimated wage increase for 2021/2022 can expect a an even larger APP increase.
If your policy falls within one or more of the WICs you should expect an increase in your workers insurance premium at the next renewal in June 2021.
If you are not sure what WIC(s) your policy is under you can find this information on your 2020/2021 Certificate of Currency that would have been issued by icare.
IMPORTANT NOTES:
- If you are an experience rated policy holder (APP of $30,000 or greater) your claims performance adjustment can have an impact on the final premium payable.
- If you are a small employer policy holder (APP less than $30,000) with a current APP close to $30k, a WIC rate increase could move your APP above $30k. This means that your individual claims performance will now have a direct impact on your premium payable (up/down).
- Your premium can increase solely based on an increase in wages regardless of a WIC rate increase or your individual claims performance.
Table: Summary of Rate Changes for the Automotive Industry
One aspect of the change that is unlikely to have any material impact on the majority of Automotive WICs is the SIRA dust and diseases rate increase as it is highly unlikely that schedule one would apply to most business.
It is essential to keep in mind that there are other factors that that can influence your final premium payable. To better understand workers insurance and premium calculation factors, please read our article “Your workers insurance premium renewal demystified” here.
How can the MTC help you?
If you are unsure whether these changes will impact your business or are concerned about the possible impact of 2021/2022 Workers Insurance premium renewal, please contact us for assistance here.
Further information about 2021/2022 workers insurance premium changes can be found on the icare website here.