Workers compensation regimes are different across the various Australian states, and right now changes are on the way for the NSW scheme, but as Insurance Adviser finds out, there are still ways that brokers can show their value in this sector.
It’s 7am on a Thursday morning, just a fortnight out from Christmas, and 200- odd insurance brokers have hauled themselves out of bed to attend a packed seminar on workers compensation.
That’s right, workers comp.
It’s probably a little hard to imagine if you ply your trade in one of the eastern mainland states, but in Western Australia, Northern Territory, Tasmania and the ACT, workers compensation (WC) insurance is big business for brokers as insurers privately underwrite the scheme.
“The way the system works in WA means brokers are an intrinsic part of the process,” explains Mason Gray Insurance and Risk Principal Neil Gray, who gave the closing speech at the Perth seminar hosted by WorkCover WA.
What about the other states?
In NSW, Victoria and South Australia, insurers operate as scheme agents on behalf of the government authority. In Queensland, the scheme is operated entirely by the state.
While WC is one of the largest classes of insurance in Australia, the opportunities for brokers can be fairly limited in some states.
Take SA for example.
Brokers need to broaden their offering – it’s not just a transactional sale of insurance.
Broker Greg Naulty, Divisional Manager at Jardine Lloyd Thompson, says there’s very little a broker can do to assist clients when it comes to shopping.
“We have a monopoly supplier who also acts as the regulator,” explains Naulty.
“The employer can, at the time of registering, choose between two claims agents (but) as they work to the same guidelines, and with staff who mainly have moved from one to the other, there is little difference between them.”
Hold that thought
That’s not to say there’s no room for brokers to add value in states east of WA altogether. After all, WC is compulsory, which means there’s no shortage of potential clients.
“Brokers need to broaden their offering – it’s not just a transactional sale of insurance,” explains Gray, who was NIBA’s 2016 Broker of the Year for WA.
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“It’s about bringing risk capabilities to the company to help them with challenges around OHS regulations and actively assisting them in managing claims, particularly if there’s been a traumatic, major injury.”
Warren Saunders Insurance Brokers (WSIB) in NSW, for example, has a dedicated seven-person team specialising in WC, risk management and workplace health and safety.
They explain that as WC costs are often a business’s largest expense, it makes sense to maximise a policy’s outcomes, while minimising its cost.
“What a lot of employers don’t understand is that there’s a lot they can do to influence their premium. It’s important to identify and drive the correct strategy at the beginning of a claim to ensure the outcome can best benefit not only the injured workers, but also the employer,” says WSIB WC Manager Candice Craft.
That said, Craft says a big change will come into effect in NSW in late June which will see icare – the state’s new governing body – process all NSW premiums, and brokers should be looking to provide employers with assistance during this transition. In assisting employers, Candice emphasised the importance of a specialist WC broker who has a comprehensive understanding of claims and underwriting principles and legislation, detailed knowledge of corporate structures, strong analytical skills and an ability to communicate with people at all levels.
Trends and opportunities
One factor employers regularly need broker assistance with is ensuring that cover keeps up with business changes – in just 12 months they can go from having adequate cover to not enough.
“They won’t necessarily pick up the phone and talk to an insurance broker so you have to make them aware they have an obligation to disclose relevant changes,” says Gray.
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Technology is also allowing more people to work remotely, which employers may not have considered when it comes to OHS.
“It’s moving very quickly and could leave the law courts behind,” Gray adds (see case study 2).
Andrew Borden, General Manager of Workers Compensation at QBE, says market trends and performance vary greatly between the states and territories.
“For example, the recent increase in unemployment and wind-down of specific infrastructure projects in WA presents challenges for employment opportunities for injured workers and, in turn, puts pressure on claims costs,” Borden says.
“Some recent reviews have flagged the scheme profitability in Tasmania, while the ACT has an open common law environment and this is reflected in generally higher average rates.”
Gaps in the market
WC obviously doesn’t cover everything. Basically, it only comes into effect if an employee is injured at work or becomes sick due to their work. It then covers wages while they’re unfit for work, as well as medical expenses and rehabilitation.
With that in mind, it’s worth identifying gaps for up-sell opportunities.
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“For instance, income protection insurance for highly paid directors or workers not satisfied with their level of cover under a WC policy,” explains Greg Guest, insurance specialist and local Managing Partner at Sparke Helmore Lawyers Newcastle.
Borden adds that “in most states and territories exclusions around claims relating to journeys to and from work have been introduced by the relevant schemes”.
As this is not the case in Queensland, there’s an opportunity for brokers to up-sell journey cover to businesses with employees across the country to ensure they’re all covered equally.
Perhaps the most common oversight in the WC market is the relationship between contractors and subcontractors.
Guest says subcontractors will often work as sole traders, and may have income protection insurance or a similar policy, but not their own WC policy.
“In circumstances where such a person is injured, instead of calling upon their income protection policy or sickness policy, they will call upon the head contractor’s WC policy,” says Guest.
He adds that the advice he gives to construction employers is to play it safe.
“It’s always best to contract with an incorporated structure that has its own WC policy because when you do that, you’re protected,” he says.
While WC varies from state to state, plying your trade in this sector is essentially no different to any other type of insurance. A good broker understands their client’s business, mitigates their risks, lowers their premiums, and streamlines their claims process.
“At the end of the day it’s about protecting the worker while getting a fair and reasonable price for the employer,” says Gray.