The high degree to which insurers are offering rate discounts on workers compensation rates in Western Australia could lead to premium hikes in the future.
The appointed scheme actuaries’ recommended a 1.4% fall in premium rates for 2013/14, which included a 2.2% decrease due to the removal of a previous one-off adjustment. Therefore the underlying rise in rates was 0.8%.
Jason Allison, chief workers compensation portfolio and underwriting with GIO, said: “A number of factors continue to put upward pressure on rates in WA including low bond yields and rising claims costs.”
The recently released actuarial assessment notes the significant decrease in insurers’ profitability levels in the 2012 accident year due to a 17% increase in net claims costs incurred, compared to an earned premium increase of only 4%.
“The high degree to which insurers are offering discounts on the recommended rates is arguably resulting in unsustainably low insurer margins, bringing the risk of future premium spikes,” Allison said.
“Stable pricing in the workers compensation market is important for the WA economy because volatility can have a dramatic impact on a business.”
Insurance broker David Clarke agreed that rates were rising but also noted increasing competition.
“There are plenty of underwriters willing to work with brokers and insureds to place quality business even if in a high risk category and I have recently bound on some very attractive rates.
“I can get a good workers comp deal any day of the week but the gazette rates are on the up as are claims – both frequency and value.”