An independent review has found the financial trajectory of Victoria’s workers’ compensation scheme to be unsustainable as outstanding claims liabilities continue to surge.
An outstanding claim liability is a claim an insurance entity is responsible for paying in the future.
The report also found a significant increase in the number of injured workers accessing weekly payments for longer periods resulting in an increase of previously recognised claims by $2.7 billion (US$1.9 billion) in 2020–21.
“This is in addition to $4.9 billion new claims recognised for the first time in 2020–21 ($4.2 billion in 2019–20),” the report reads.
Moreover, five problems were identified in the workers’ compensation scheme including softer application of capacity tests on injured workers, poor and declining return to work outcomes, an increase in the number and complexity of mental health-related claims, unchanged average premium rates, and the likelihood of investment revenue declining.
During the 2020-21 financial year, the state government gave WorkSafe $500 million (US$357 billion) so that it could deal with its financial challenges in the “short term.”
The move also was aimed at preventing business premium increases, which is approved by the state government and not by WorkSafe.
WorkSafe is the state’s health and safety regulator and manager of the state’s workers compensation scheme. It also trades as the Victorian WorkCover Authority.
The state government then established a “WorkCover Scheme Sustainability Steering Committee” in December 2020 “to support WorkSafe in implementing strategies to address long-term financial sustainability challenges and provide consolidated advice to relevant ministers.”
“The losses in 2018-19 were $823.1 million. In 2019-20 they were $3.021 billion. And in 2020-21 the losses were $539.7 million. The 2020-21 figure would have been well north of $1 billion without a $550 million capital injection received from the Victorian government,” he said.
Davis said the fact that the Andrews government was “forced” to give WorkSafe $500 million (US$357 billion) is reminiscent of Labor’s “financial mismanagement under the Cain/Kirner governments’ WorkCare scheme.”
“They always botch these schemes, failing to understand these schemes have to be run responsibly to ensure employees’ health and their support is not compromised,” Davis told The Australian.
A WorkSafe spokesperson said that “the growth of mental injuries and the impacts of COVID-19 continue to place significant pressure on our community, our workplaces and our workers’ compensation scheme,” reported The Australian.
“WorkSafe is ensuring the scheme remains contemporary, fit for purpose and sustainable and is developing initiatives designed to have a significant impact on workplace health and safety outcomes for injured workers and the scheme’s financial position.”
The Auditor-General said in his report that Victoria’s insurance entities held $47.6 billion (US$33.3 billion) of total assets and $50.3 billion ($US35 billion)of total liabilities, with 94.1 percent of those total liabilities related to outstanding insurance claims.
He added that the insurance entities’ WorkSafe, Transport Accident Commission (TAC) and Victorian Managed Insurance Authority (VMIA), have a “considerable influence” on the net result and balance sheet of the public financial corporations (PFC) sector.
