What is this about?

We are seeking feedback on a new cost-sharing mechanism for COVID-19 workers compensation claims. This mechanism will enable certain COVID-19 claims costs to be redistributed across the workers compensation system to maintain a healthy and competitive workers compensation market in NSW.

Overview

The likely impact of COVID-19 claims on the workers compensation scheme is uncertain, largely because future claims volumes and costs are difficult to predict at this point in time. However, if claims volumes are high, costs to the scheme may be significant. The uncertain long-term health impacts of COVID-19, an understanding of which is still emerging, also make it difficult to estimate the ultimate cost of COVID-19 claims.

Amendments to the Workers Compensation Act 1987 that commenced in May 2020 introduced a rebuttable presumption that workers in “prescribed employment” who contract COVID-19 contracted the virus in the course of their employment.  This gives these workers a presumptive right to workers compensation benefits. These legislative amendments established new powers enabling the regulations to make provision in relation to the sharing of financial risk arising out of COVID-19 between all insurers.

The State Insurance Regulatory Authority has developed a proposal for a cost-sharing mechanism to enable the cost of COVID-19 claims to be shared across the widest possible base, rather than individual employers and insurers bearing a variable and uncertain amount of risk. There are existing precedents for specific risks being managed at a whole-of-scheme level in this way. For example, all insurers in NSW contribute to the cost of claims from workers who contract a dust disease at work; and, while it has never been deployed, the workers compensation law makes provision for the cost of claims arising from an act of terror to be managed at a scheme-level.

The proposed cost-sharing mechanism will enable certain COVID-19 claims costs to be redistributed in a way that reflects the scale and nature of each insurer’s NSW workers compensation business. It is anticipated that these costs will largely be passed on through employer premiums. In this way, all employers will contribute to supporting workers who contract COVID-19 at work.

Next steps

SIRA is seeking your feedback on the consultation paper Cost-Sharing Mechanism for COVID-19 Workers Compensation Claims by no later than 5pm, Friday 18 December 2020.

Comments and feedback on the proposed cost-sharing mechanism should be submitted online or via email to [email protected]. Any enquiries about the consultation process should also be sent to [email protected].