Changes to workers insurance premium rates for 2023/2024 have recently been published by icare.
The rate increases are unavoidable and necessary for the financial sustainability of the workers insurance scheme impacted by inadequate rate increases in prior years as it accounted for:
- a high inflationary environment; and
- financial market volatility impacting investment returns.
The scheme premium rate will rise from 1.48% to 1.60% of wages (estimated 2023/24 wages), which is 16% below the operational break even premium (OBEP) of 1.91% of wages.
Motor Trades Care believe that there is an urgent need for automotive businesses to revisit their approach to Work Health & Safety. The key to minimising the impact of increasing premiums is effective injury prevention and management.
What are the key changes?
The premium rate for the NSW workers insurance scheme will increase by an average of 8% each year for the next 3 years. This year, the majority of the Automotive sector, will experience rate increases above the 8% scheme average.
Key changes to be aware of:
- While the average premium rate increase is 8%, some work industry classifications (WIC) will have a higher or lower rate increase
- All Automotive WICs will have rate increases, the lowest is 2.46% and the highest is 12.87%
- Employer Safety Incentive (ESI) evolves into the Safe Employer Reward (SER) providing a discount based on safe workplaces and claims performance
- Claims Performance Adjustment (CPA) rate changes may provide a lower CPA adjusted premium for Experience Rated Employers
What does this mean for the Automotive Industry?
There are 17 WICs that make up the automotive industry workers insurance portfolio in the NSW scheme. Work Classification rates are generally based on the respective industry sectors inherent workplace safety risks, claims cost performance and the performance of the workers compensation scheme in its entirety.
On this basis for 2023/24, 65% of the 17 Automotive WICs will see an increase greater than the scheme average of 8%, and similar increases should be expected in the 2024/25 and 2025/26 policy renewal years.
If you are not sure what WIC(s) your policy is under, you can find this information in your 2023/24 workers insurance renewal pack or your Certificate of Currency that would have been issued by icare.
Table: Summary of 2023/24 Rate Changes for the Automotive Industry. The far-right column shows the possible 2025/26 rates by the end of the anticipated 3-year average increases.
Average Performance Premium (APP)
If your annual wages remain unchanged from 2022/23 or increase, you should expect to see a higher Average Performance Premium (APP) in your 2023/24 renewal.
- APP is the starting point for all premium calculations and is calculated as Annual Wages x WIC rate
- The table below shows and example APP calculation and highlights the significant difference ($66k) in APP between the highest and lowest Automotive WIC rates for 2023/24 at the same wage value
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 very 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
Safe Employer Reward (SER)
- The Employer Safety Incentive (ESI) is being replaced with the Safe Employer Reward (SER)
- SER is a performance-based reward designed to recognise employers who have safe workplaces and have demonstrated good claims performance in the 36 months prior to renewal
- Employers that meet the SER performance criteria will be eligible for a premium discount. The below tables illustrate the SER model and potential discount
Please be aware that final written premiums may be subject to other variables in the premium calculation including further levies/discounts. This information can be found in your icare premium renewal pack.
How can you navigate the impact of these changes?
- Review your Work Health and Safety (WHS) practices and implement actions to sure all reasonable steps have been taken to prevent workplace injuries. If you are successful in protecting your workers from injuries and do not have any claims with weekly benefits for a period of 36 months prior to renewal you can take advantage of the SER discount;
- Where injuries do occur, ensure you have an effective Return to Work (RTW) Program in place and appropriate support with RTW Coordination obligations;
- If you pay your renewal premium in full by due date, a discount is applicable. The discount is based on your initial premium payable and will not be adjusted as part of the hindsight premium calculation process, or if wages estimates are adjusted mid-term. For small employers the current discount is 5%. Experience-rated employers discount is 3%;
- Small employers need to submit your actual wages in the last period of the current premium year. icare will increase your wages by 30% for the renewal year if your declaration is not received;
- Make sure you pay your premium in full or your instalments on time. From 30 June 2023 icare will be charging late payment fees; and
- Effective 31 December 2023 all policy related refunds will be done by electronic funds transfer, icare will no longer be sending refund cheques. If you don’t provide bank details, any refunds will not be issued.
How can the MTC help you?
MTC is working closely with industry stakeholders to increase awareness and capability around effective Work Health and Safety (WHS), Injury Management and Return to Work (RTW) outcomes.
The expected future premium rate increases are unavoidable, and businesses will need to adapt to higher Average Performance Premiums (APP). Repositioning your approach to WHS, injury prevention and intervention will provide greater opportunities to minimise the potential for premiums to materially increase above APP or reduce premiums down to APP threshold.
Motor Trades Care is the provider of choice for the Automotive industry when it comes to specialist WHS and Workers Insurance consulting services.
If you are concerned about the potential impact of the 2023/24 premium rate increases or want to assess your WHS, injury management and RTW capability we can help! Please contact us for assistance on 1300 006 826 or complete an enquiry form here.