Would an alternative workers’ compensation premium arrangement suit your business?
Published 07 April 2022
Although workers’ compensation insurance in Australia is fragmented into the different jurisdictions of the states and territories there are some principles that can be applied universally in terms of controlling and minimising premium costs. These can facilitate alternative premium arrangements which may benefit some employers.
Larger businesses with a positive workplace health and safety history may benefit from lower premiums under alternative arrangements that reward their performance record. While these can deliver either savings on premiums and/or cash flow efficiencies, they should be considered by employers in terms of their own unique situation.
Businesses that take a proactive approach to the frequency and severity of worker injuries and which have a plan for coordinating return to work after an incident has occurred tend to be better positioned for obtaining alternative premium arrangements for workers’ compensation cover.
Different workers’ compensation premium arrangements across the country
“Alternative workers’ compensation premium arrangements each come with their own set of considerations that need to be assessed to determine if a new premium structure is appropriate and will deliver sustainable premium savings for a client,” says Geoff Sawers, Divisional Manager, Workers Compensation, Gallagher Workplace Risk.
“Take the loss prevention recovery model in New South Wales for example: this model used to be a slam-dunk for NSW corporates, however, the trend of increasing adjustment factors over recent years has narrowed the premium gap.
“Gallagher Workplace Risk consultants are well versed with all premium arrangements across Australia and can help you understand whether there are premium savings and program efficiencies available to your business.”
These alternative premium arrangements include (but are not limited to)
state-based self-insurance where the business bears the cost of claims
loss prevention recovery model (NSW) which provides incentives to large employers for better safety and return-to-work outcomes
retro paid loss model which can enable large employers with good injury management and safety to benefit from reduced premiums
burning cost premium structure (risk states: WA, ACT, NT, Tas) may both reward or penalise good or poor control of workers’ compensation claims costs
deferred payment plan (risk states: WA, ACT, NT, Tas).
Alternative premium arrangements not one size fits all
Each of these alternatives may provide its own pros and cons for adoption by individual businesses. For example, the burning cost model can reward good claims management and cost control by the employer and penalise poor management for another business.
Similarly the loss prevention recovery model can provide NSW businesses with a clean slate but increasing adjustment factors could also push premiums up if the employer doesn’t efficiently manage workers’ compensation claims.
How Gallagher Workplace Risk can help
Our workplace risk experts are conversant with alternative premium arrangements and can help businesses explore whether a particular option is appropriate for you and can lead to cost control or premium savings.
Gallagher provides insurance, risk management and benefits consulting services for clients in response to both known and unknown risk exposures. When providing analysis and recommendations regarding potential insurance coverage, potential claims and/or operational strategy in response to national emergencies (including health crises), we do so from an insurance and/or risk management perspective.