Due to changes introduced by the New South Wales (NSW) State Government, the anticipated surge in workers compensation premiums has been avoided. The Workers Compensation Legislation Amendment Act 2012 (Act), which received assent on 27 June 2012, was designed to reduce WorkCover NSW's deficit, lower insurance premiums for NSW employers and fix some inequities in the system, in particular for seriously injured workers. The amendments drastically change the face of the NSW Workers Compensation Scheme and are likely to significantly impact key players within the scheme, including employers, workers and insurers.

An independent investigation into WorkCover's ailing financial position revealed a AU$4.1 billion deficit, which was increasing at a reported AU$9 million a day. NSW employers' premiums were 20% to 60% higher than competitive states (including Queensland and Victoria). As a result of the reforms, the expected 28% rise in premiums will not be implemented.

How have the savings been achieved?

The key reforms include:

  • Schedule 9 of the Act permits the entry of "new insurers" into the NSW Workers Compensation Scheme. While not expressly stated, these "new insurers" could include specialised insurers to underwrite specific industry classes, who will take all of the risk in an industry (eg Coal Mines Insurance).
  • Based on the Victorian model, the Act aims to reduce significantly entitlements to weekly payments so that all but "seriously injured workers" have a closed period of entitlements to either two years or five years.
  • The Act seeks to increase benefits for "seriously injured workers" who are totally unfit for work, up to the Commonwealth retirement age.
  • Based on the South Australian model, the Act intends to restrict journey claims to very limited circumstances where there is a real and substantial connection between the employment and the accident or incident.
  • The Act will limit payment of medical expenses to 12 months after the date of claim for an injury, or 12 months after the cessation of weekly payments (previously afforded a lifetime entitlement).
  • The Act has also introduced a new process to assess a worker's capacity (thereby entitlements to weekly benefits) by way of Work Capacity Assessments.

Other important changes include:

  • Restricting a worker's ability to dispute an insurer's decision to reduce weekly payments
  • Abandoning a worker's entitlement to compensation for pain and suffering
  • Restricting entitlements to lump sum compensation to one claim only, thus abandoning deterioration claims
  • Abandoning common law claims in negligence for nervous shock to non-workers
  • Reducing a worker's right to claim for heart attack and stroke injuries, unless work significantly increased the risk of injury
  • Relaxing the criteria to commute a claim.

It is important to recognise that the Act will not apply to police officers, paramedics and firefighters.

KEY IMPACT ON EMPLOYERS/INSURERS

One would expect that, with the implementation of the reductions in entitlements, workers compensation premiums will remain static with only marginal increases. Employers will still need to comply with the various requirements relating to procedural matters – reports of injury, notices of claim and the like.

The new laws, while controversial and unpopular amongst some groups, have gone a long way to align NSW with competitive states, including South Australia, Queensland and Victoria, and help to provide a scheme that is affordable, efficient and financially sustainable.

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