Workplace Injury Insurance – Claims estimates
Information for employers
September 2006
Claims ESTIMATE is just that
• There’s no crystal ball to be able to predict with absolute certainty what the actual cost of every claim will be • But we do have 20 years of data of similar types of claims which is what the model uses to calculate an estimate
• Over time, these estimates closely match what’s paid out
• Initial estimate on a claim is an average – for that type of injury, industry, worker etc.
• It’s how employers work with their agents to manage claims that determines if estimates then become higher/ lower
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A way to measure performance
• Using statistical model to be consistent and objective (statistical case estimate, or SCE model) • All employers treated the same – no more lobbying agents for lower estimates • Claims costs are used as a relative measure of your performance – comparing you to your peers • All estimates, whether “high” or “low”, are included in the overall claims data for your industry • If you manage your claims better, you are rewarded with a lower premium rate than your industry, and vice versa
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Business size affects impact of claims costs
Premium rate Possible rate surcharge to industry rate
Industry rate
Potential rate discount to industry rate
Small employer <=$200K Medium size $5-$10m Very large >$100m
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What influences an estimate?
How claims attract an estimate
• Model looks at a range of characteristics of a claim, and how they interact, to allocate an “average” estimate • This estimate is based on years of data of what has actually happened to similar sorts of claims • There are millions of different combinations of factors so a “dollar breakdown” of each component does not exist • Estimates updated regularly to reflect recent Return To Work activity
• Inactive claims still have estimates – 30% of claims “come back again” but we don’t know which ones
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Return To Work activity key driver of estimates
The model looks at six main payment types: Weekly Medical & Rehab
Maims and Impairment Benefits
Medico-Legal Legal Common Law (new & old) The model also looks at the interdependencies between some payment types
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Example: status of weekly benefits paid
At the point of calculation, is the worker considered to be: “on benefits” – thus high probability of receiving future benefits “off benefits” – lower probability of receiving future benefits “yet to commence benefits” – no payments made, therefore lowest probability of receiving future benefits Payment status changes over time, affecting the estimate
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How various characteristics affect estimates
Note: estimates respond to how the characteristics interact, so the table below is a guide only.
Characteristic
Illustrative effect
Shorter the time, the faster the estimate reduces Lower the number, the lower the estimate and faster it reduces Longer the time, the faster the estimate reduces (although initial drop when worker returns to work)
Length of time on benefits Number of separate periods of benefits paid Time since last benefit period
Age at accident
Pre-Injury earnings Occupation, injury type, body location, work capacity, industry, report delay
Younger the person, the greater the total potential cost
Higher the earnings, the greater potential cost Combination of characteristics determines effect on estimate. Eg. concrete worker with strain type knee injury – higher than office worker with broken arm.
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Examples of average claim estimates
• Where weekly compensation is estimated:
Initial average for weekly benefits Incapacitated (on benefits) Yet to commence weekly benefits $30,000 $160,000 $5,000
Previous activity (fully or partially off benefits)
$20,000
• Where medical costs are estimated
$8,000
Any claim can have one or more estimate categories depending on the characteristics of the claims
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Key myths
Myths of claims estimates
• It’s not worth reporting claims now, especially minor ones • Estimates are high to get more money out of employers • High claims estimates equal high premium costs
• I’m not rewarded for my good claims performance
• My estimates are too high – that cost will never be realised
Remember, claims costs are simply a measure to compare you with your industry
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Main points to remember
• It’s insurance – employers pay their premium share based on whether they perform better or worse than their peers • Everyone is treated the same – claims costs are calculated objectively and consistently
• Large estimates do not necessarily equal large premiums – your own claims costs contribute to your industry’s costs
• Fastest way achieve lower estimates is to get your injured workers back to safe, sustainable work quickly
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Where to go for more information
• Your Agent • www.workcover.vic.gov.au • premium_information@workcover.vic.gov.au • VWA Advisory service – 1800 136 089
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