“Show me the data!” said insurance broker Cameron Gill (pictured above).
He was referring to worker to worker claims and how insurers, because of the steep rise in recoveries on these claims, have dramatically increased premiums and the excess on liability policies. The increases have applied, he said, across the country, including in Tasmania, and particularly in the construction sector.
However, while the rise in these claims in NSW and Victoria is well documented, he said he hasn’t seen data showing claims increases in Tasmania.
So why have insurers raised the rates for Gill’s Tassie clients?
“They’re all [the insurers] saying that it’s burning but they’re yet to actually show me, in region, especially in Tasmania, where’s the data? Where are they recovering?” said Gill, broker manager for Steadfast Taswide Insurance Brokers.
“Every broker would be copping it at the moment on those excesses and large premium increases, especially for anyone heavily loaded in construction,” he said.
The Hobart-based broker said workers’ comp insurers in his state say they’re not actually making many recoveries on these sorts of claims.
The workers’ compensation system in the Apple Isle, he said, is also different to other states.
“You’ve got iCare which is the NSW workers’ compensation scheme, looking to recover off people’s liability policies if they have been negligent and they are making significant recoveries off those policies,” said Gill. “Workers’ comp in Tasmania is quite different [to NSW] and it’s actually run by insurers and priced by insurers.”
He said insurers are yet to show him examples of where they’ve made these claims recoveries in Tasmania.
“The NSW scheme is significantly underfunded and, from what I understand, they have had to make recoveries any way that they can,” he said.
Gill suggested this could explain the very dramatic premiums and excess increases his clients are now suffering.
“It’s impacting us because insurers are taking a broad brush when it comes to liability policies,” he said.
Gill gave a concrete and striking example for liability policies that would previously have a worker to worker excess of $25,000.
“Now we’re seeing, on ones that have a slightly higher exposure, a 30% to 40% increase on premium but then the excess is going from $25,000 to $250,000,” he said.
He added that one major insurer has pulled out of coverages with a significant worker to worker component all together.
“They don’t want it, even if it’s renewal business, they’re just not doing it anymore,” said Gill.
“So that’s where [worker to worker liability] claims in NSW and Victoria are certainly impacting premiums in Tasmania,” he said.
As 2023 wraps up, Gill said this data issue is one of his biggest current insurance challenges. Not to mention that his clients are asking for this data too and he has nothing to show them.
“Clients are also asking, ‘Where are all these claims happening?’” said Gill.
Another related data issue impacting brokers: some insurers’ are willing to adopt a national, “broad brush” data approach for certain policies, but use more specific, regional risk management information for other coverages.
Gill gave the example of a property that could be denied coverage because the insurer says its location outside Hobart is in a major bushfire area.
“It seems they pick and choose a national approach or a regional approach [when it suits them], so it’s really quite frustrating,” he said.
Worker to worker claims are complex. Gill helpfully explained what this term means.
“For example, say you’re the main contractor on a site and you bring in a subcontractor,” he said. “If the subcontractor hurts themselves, or one of their employees hurts themselves, they’re covered by their workers’ comp but if this person might be found negligent or might be negligent, the insurer for the workers’ comp over here then tries to recover the whole claim off the head contractor’s liability policy.”
Gill said this recovery process is about transferring costs and getting money back. He said worker to worker claims were not very common six or seven years ago. However, today in NSW and Victoria, he said, they’ve become common.
“When people have large amounts of labour brought into their business, insurers see that as extremely high risk in terms of copping claims on this part of the policy,” said Gill. “That’s where they say that they’re seeing the claims and I’d love to see the data that shows these claims are being recovered in Tasmania but no-one has given it to me yet.”
Insurance business has approached iCare for comment and will be reaching out to insurers. The story will be updated with any new information.
Story Update on December 7:
An icare spokesperson provided the following comments to IB:
“Workers compensation premium rates payable by employers in New South Wales increased by an average of 8% in 2023-24 and are expected to increase by an average of 8% per annum over the next two years,” said the spokesperson. “This means the rate payable for the average employer is based on around 1.7% of wages. This is a lower rate than many comparable jurisdictions that have seen significant rises recently.”
The spokesperson’s comment continues:
“icare takes seriously its duty to provide an affordable and sustainable workers compensation scheme, and any recovery actions we, or our Claims Service Providers take against negligent third parties would have a positive financial impact that is likely to reduce, rather than increase an employer’s future workers compensation insurance premiums,” said the spokesperson. “As a public Workers Compensation insurer, ‘worker to worker’ claims do not routinely fall within our workers compensation scheme, which provides a wide range of coverage for injured workers and their private employers in New South Wales.”