Figures obtained by The Greens show that since 1997 private insurers have been paid more than $3.9 billion dollars to just manage workers compensation claims.  These fees have grown more than 5 times faster than both inflation and actual benefits paid to the injured.  This bureaucratic paper shuffling has wasted more than $1.6 billion and eroded the scheme’s financial sustainability.

The performance of the bureaucrats and private insurers is even more troubling when the reduction in injuries is factored in.  Since 1997 serious workplace injuries in NSW have fallen by 53%, from 60,109 to 28,056 in FY 2010.  On these figures, management fees per serious injury have grown 16 times faster than inflation from $2,358 in FY 1997 to $17,001 in FY 2010.

The Greens NSW are calling for the NSW government to urgently address this waste and mismanagement in the workers compensation scheme, rather than attack injured worker’s benefits.

Fast Facts:

  • From 1997 to 2010 major workplace injuries fell by 53%
  • From 1997 to 2010 inflation increased by 44%
  • From 1997 to 2010 management fees increased by 236% (more than 5 times inflation)
  • From 1997 to 2010 benefits paid increased by 43% (less than inflation)
  • From 1997 to 2010 management fees per major injury increased by 620% (14 times inflation)
  • If private insurer  management fees had, like benefits, grown only by inflation then $1.6 billion dollars would have been saved.
  • In FY 2010 management fees paid to private insurers accounted for 24% of the value of benefits paid to injured workers compared to just 10% in FY 1997

BACKGROUND

A.      The blowout in costs

An analysis by The Greens of WorkCover’s annual returns shows a staggering rate of growth in the fees paid to private insurers to manage workers compensation claims.  Over the same period injury rates have fallen and benefits paid to injured workers have barely kept up with inflation.
Date Payment to Private Insurers Payment to private insurers if limited to inflation of 2.5%  Benefits paid (unadjusted) Number of Major injuries[1] Management fee per major injury
1996/97

141,743,000

141,743,000

1,367,805,000

60,109

2,358

1997/98

137,676,000

145,286,575

1,467,737,000

58,604

2,349

1998/99

163,400,000

148,918,739

1,811,025,000

55,492

2,944

1999/00

134,654,000

152,641,707

2,016,000,000

53,224

2,529

2000/01

177,868,000

156,457,506

2,191,847,000

53,797

3,306

2001/02

160,730,000

160,369,194

2,692,423,000

54,674

2,939

2002/03

196,440,000

164,378,424

2,518,760,000

51,000

3,851

2003/04

172,392,000

168,487,884

2,047,690,000

51,551

3,344

2004/05

331,538,000

172,700,082

1,608,936,000

36,150

9,171

2005/06

393,587,000

177,017,583

1,518,437,000

31,613

12,450

2006/07

398,479,000

181,443,023

1,581,846,000

29,326

13,587

2007/08

649,538,000

185,979,099

1,632,507,000

30,077

21,595

2008/09

376,229,000

190,628,576

1,836,039,000

30,133

12,485

2009/10

476,996,000

195,394,291

1,962,418,000

28,056

17,001

Total

$3,911,270,000

$2,341,445,683

 

 


[1] Defined as an injury causing 5 days or more off work

B.     Where has the money gone?

While the WorkCover scheme is a publicly owned statutory fund, it pays private insurers to manage every claim.  Currently the seven private insurers that provide claims and policy services under contract to WorkCover are:

  • Allianz Australia Workers’ Compensation (NSW) Ltd
  • Cambridge Integrated Services Australia Pty Ltd (trading as Xchanging)
  • CGU Workers Compensation (NSW) Limited
  • Employers Mutual NSW Limited
  • Gallagher Bassett Services Pty Ltd
  • GIO General Limited, and
  • QBE Workers Compensation (NSW) Limited.

Payments made to private insurers are to manage claims and encourage those injured to return to work.  The $3.9 billion paid to these private insurers since 1996 has not lead to any significant increase in injured workers returning to work.  There has been almost no change in the rate at which injured workers have returned to work since 2003.[1]

Management fees paid to the private insurers have grown from just 10% of the cost of benefits paid in FY 1997 to more than 24% of the benefits paid to injured workers in FY 2010.

The simple fact is there has been hundreds of millions of dollars wasted every year on endless reporting and form filling by private insurers.  This bureaucratic tangle has been delivered by the agency overseeing the scheme, WorkCover.


[1] WorkCover Annual Report 2010/11 page 41 and WorkCover Annual report 2007/08 page 24 (FY 2003 being the first year comparable figures are available as reported in the FY 2008 Annual Report).

Media comment by The Greens NSW Industrial Relations spokesperson David Shoebridge:

“Since 1997 payments to private insurers to manage workers compensation claims have grown a staggering 620 per cent faster than both inflation and actual benefits paid to the injured,” Mr Shoebridge said.

“In 1997 the fees paid to insurers to just manage claims cost 10 per cent of the amount paid to injured workers; yet in 2010 insurers were creaming off almost one dollar in every four paid to benefit workers.

“With more than $3.9 billion dollars being paid to private insurers in the last 15 years, this growth in bureaucratic paper shuffling has wasted more than $1.6 billion and eroded the scheme’s financial sustainability.

“These are appalling results and to date no government has had the courage to tackle the real problem in the workers compensation scheme which is this unchecked growth in bureaucracy and paper shuffling.

“These figures show that the looming deficit in the scheme is not caused by payments for injured workers which over time have hardly kept pace with inflation.

“If payments to insurers had matched inflation, like payments to benefit workers have, the scheme would have saved $1.6 billion.

“With over $1.6 billion wasted in overpayments to private insurers, it is little wonder the scheme is facing financial trouble.

“This Government needs to hold WorkCover accountable for the staggering growth in paperwork that does nothing other than divert money from injured workers to private insurers.

“How can any government in good conscience see a quarter of the amount paid in benefits to injured workers siphoned off to private insurers to simply manage claims?”

“Before a single dollar is taken from injured workers the government must address the paper shuffling that is chewing up almost a quarter of the money paid to injured workers,” Mr Shoebridge said.

Inquiry into Workers Compensation in NSW

A copy of David’s submission to the current Parliamentary Inquiry into Workers Compensation in NSW is available for download here: Submission to NSW Workers Compensation Scheme Inquiry