RELEASE DATE 29/03/2007
WorkCover’s unfunded liability has increased to $722.7 million after a loss of $28.6 million for the half-year to 31 December, 2006. The Scheme is 66.1 per cent funded.
WorkCover’s financial result for the July-December 2006 period is primarily due to an increase in the estimate of costs for income maintenance (weekly payments). The Scheme’s funding ratio has increased despite this loss because of an increase in the asset base, largely due to continued, strong investments. WorkCover remains cash flow positive.
The result compares with WorkCover’s funding position at 30 June 2006, when the Scheme was 65 per cent funded, with an unfunded liability of $694 million.
The average levy rate for 2007-08 will remain at 3.0 per cent.
“Earlier today, the Government acknowledged the need for substantial change to the WorkCover Scheme and announced that it intends to commission an independent review of the South Australian workers rehabilitation and compensation legislation,” said WorkCover Board Chair, Bruce Carter.
“The Government’s review is supported by the WorkCover Board and is consistent with the Board’s position, outlined in our annual report released last December. Our position is that legislative change is required to ensure the Scheme is effective in supporting injured workers to recover and return to work at a reasonable cost to employers who fund the Scheme,” said Mr Carter.
“We’ve significantly reformed the management of the Scheme over the past couple of years, largely focusing on improving return to work outcomes through stronger claims management.
“We appointed a single, proven claims agent, Employers Mutual, in January 2006 and we remain confident that their expertise will greatly enhance the performance of the Scheme. However, it has become increasingly clear that we have a different legislative framework here in South Australia compared with those States that have been so effective in improving return to work outcomes,” Mr Carter said.
“Our legislation has remained largely unchanged since the late-1980s. This is in contrast to other schemes’ legislation which have been regularly reviewed and updated in line with changes to the business and social environment, and scheme costs.
“The WorkCover Board, in November 2006, proposed to the Government a range of legislative changes it believes will enable the South Australian Scheme to improve from having the worst return to work outcomes in the nation.
“Achieving balanced and sustainable improvement will require a substantial collaborative effort of the Scheme’s stakeholders and we therefore welcome the Government’s intention to consult with stakeholders during this review,” Mr Carter said.
WorkCover CEO, Julia Davison, said the organisation would continue its urgent focus on better recovery rates and return to work outcomes.
“Our recent improvements combined with this crucial legislative reform will ensure our Scheme continues to support injured workers and delivers better value for employers in this State, by achieving earlier, safe return to work,” Ms Davison said.
Media contact: Danielle Martin, telephone 8233 2381 or 0418 295 324.
Background information on WorkCover
WorkCover is funded by employers to manage a balanced and financially sound system that rehabilitates, compensates and returns injured workers to safe workplaces and the community.
WorkCover began operations in 1987 and is constituted as a statutory authority under the WorkCover Corporation Act 1994 with a Board appointed by the Governor on the recommendation of the responsible Minister (now the Minister for Industrial Relations).
WorkCover is responsible for administering the Workers Rehabilitation and Compensation Act 1986. WorkCover manages South Australia’s Workers Rehabilitation and Compensation Scheme on behalf of about 65,000 employers, providing rehabilitation and compensation support for an estimated 500,000 employees (about 60 per cent of the state’s workforce).
In 2005-06, there were 22,930 claims incurred by workers employed by registered employers and 14,064 claims by workers employed by self-insurers (37,465 in total).
- 79 per cent of WorkCover claimants do not have any lost time from work (less than two weeks)
- 49 per cent of WorkCover claimants return to work within 1 month
- 71 per cent of WorkCover claimants return to work within 3 months
- Out of every 100 injured workers, 82 leave the Scheme within 12 months.
What is the unfunded liability?
In simple terms, the unfunded liability reflects the balance between the assets of WorkCover and the liabilities of WorkCover, including the actuary’s estimate of the claims liability of the Workers Rehabilitation and Compensation Scheme over 40 years.
The actuary uses complex calculations, based on a range of assumptions, to make an estimate of the value in current dollars of all the costs associated with current claims. This is an amount the actuary expects will be paid over the life of those claims, but is not payable today, tomorrow or even this year.
This estimate of the Scheme claims liability is then compared with WorkCover’s assets to arrive at our funding position.
Over time, WorkCover has collected substantial funds to meet the future costs of claims already incurred – currently the Scheme has more than $1.3 billion invested through an investment strategy that has out-performed most similar funds.