ACT Workers’ Compensation Review of Scheme Performance to ... · N:\ACTWC14\SCHEME REVIEW\REPORT\R_2014_ACT SCHEME PERFORMANCE_PUBLIC RELEASE_FINAL.DOCX Claim Numbers and Frequency

$Page 1: ACT Workers’ Compensation Review of Scheme Performance to ... · N:\ACTWC14\SCHEME REVIEW\REPORT\R_2014_ACT SCHEME PERFORMANCE_PUBLIC RELEASE_FINAL.DOCX Claim Numbers and Frequency$
© 2015 Finity Consulting Pty Limited

ACT Workers’ Compensation Review of Scheme Performance to 30 June 2014

Chief Minister, Treasury and Economic Development Directorate

April 2015

Finity Consulting Pty Limited

Sydney Melbourne Auckland

ABN 89 111 470 270 Level 7, 155 George Street Level 3, 30 Collins Street Level 5, 79 Queen St

www.finity.com.au

www.finityconsulting.co.nz

The Rocks NSW 2000 Melbourne VIC 3000 Auckland 1010

Ph: +61 2 8252 3300 Ph: +61 3 8080 0900 Ph: +64 9 363 2894

Fax:

+61 2 8252 3399 Fax:

+61 3 8080 0999


The Chief Minister, Treasury and Economic Development Directorate (CMTEDD) have requested that Finity

Consulting (Finity) undertake an actuarial review of the performance of the ACT private sector workers’

compensation scheme (the Scheme) in order to inform the CMTEDD on key developments in the scheme

experience.

This report includes:

An investigation of trends in the private sector claims experience to 30 June 2014

An estimate of reasonable premium rates for the 2015/16 financial year.

The terms of reference of our work are set out in our contract with the Chief Minister and Treasury

Directorate (number 2012.20117.210).

Karen Cutter Mimi Shepherd

Fellows of the Institute of Actuaries of Australia


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April 2015 N:\ACTWC14\SCHEME REVIEW\REPORT\R_2014_ACT SCHEME PERFORMANCE_PUBLIC RELEASE_FINAL.DOCX


Part I Executive Summary ....................................................................................................................... 3

Part II Detailed Findings ........................................................................................................................... 9

1 Introduction .......................................................................................................................................... 9

2 Overview of Claims Experience ....................................................................................................... 12

3 Claim Analysis and Assumptions .................................................................................................... 23

4 Economic, Expense and Profit Assumptions ................................................................................. 37

5 Results of Hindsight Analysis .......................................................................................................... 42

6 Premium Pool for 2015/16 ................................................................................................................. 46

7 Suggested Relativities and Reasonable Premium Rates .............................................................. 49

Part III Further Information ...................................................................................................................... 52

8 Data ..................................................................................................................................................... 52

9 Compliance with Standards and Approach .................................................................................... 55

10 Reliances & Limitations .................................................................................................................... 61

Part IV Appendices

A Glossary of Terms

B Scheme Background

C Data

D Valuation Approach

E Claim Number Analysis

F Claim Size Analysis

G Workforce, Wages and Premiums

H Recommended Rates by ANZSIC Division


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Part I Executive Summary

1 Introduction & Background

The Chief Minister, Treasury and Economic Development Directorate (CMTEDD) has requested that

Finity Consulting (Finity) undertake an actuarial review of the performance of the ACT private sector

workers’ compensation scheme (the Scheme) in order to inform the CMTEDD on key developments in

the scheme experience. As part of this review, we were required to investigate trends in the claims

experience to 30 June 2014 and to provide an estimate of reasonable premium rates for the 2015/16

financial year.

We note that the scope of our review is limited to the insured private sector workers’ compensation

scheme, i.e. it does not include self-insured employers or the ACT public sector. Our review

encompasses:

Identifying major trends in the insured private sector claims experience

Estimating future claim costs for past accident years

Developing a reasonable premium pool and average premium rate for the insured scheme for the

2015/16 policy year

Developing premium rates at the ANZSIC Class level for the 2015/16 policy year.

We have used data extracted from the policy and claims system in mid-December 2014. As such, for

some metrics we have also analysed the experience that has emerged in the September 2014 quarter.

2 Claims Experience

Section 2 of the main body of the report details various elements of claims experience that have emerged

in the last year. Section 2 details how our actuarial projections respond to this experience. These

elements are summarised below.

Wage Inflation in 2013/14

The rate of Average Weekly Earnings (AWE) inflation in the ACT was -6% in the year to 30 June 2014.

Given that at our previous review we expected AWE inflation to be 3.5% in the year, actual inflation was

around 9.5% lower than expected. Lower than expected wage inflation will mean:

Compensation amounts which are linked to wages will be lower than expected

Projected wages for the policy year will be lower than otherwise expected.

All else being equal, this leads to a reduction in ultimate claims costs and therefore in the dollar amount

of the risk premium. However, the impact on the risk premium rate is minimal as wages will also have

decreased by a similar amount.


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Claim Numbers and Frequency

The number of non-nil claims fell by 5% in 2013/14 with around 3,200 new non-nil claims reported. We

understand that this may be related to a safety review of the construction industry conducted in 2012/13

and subsequent improvements in WHS practices as a result of that review.

Similarly, the number of new lost time claims fell by 8%, with just over 2,000 new lost time claims in

2013/14. Again, we understand this may be related to the construction industry review.

Figure 1 shows our estimated ultimate non-nil and lost time claim frequencies for the Scheme.

Figure 1 – Estimated Ultimate Claim Frequency

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While non-nil claim frequency had been stable at just over 0.5 claims per $ million of wages between

2009/10 and 2012/13, estimated frequency reduced by 14% to 0.44 claims per $ million wages for

2013/14. We note however that non-nil claim reports in the first quarter of 2014/15 are at similar to levels

to those observed in 2012/13 i.e. higher than the low 2013/14 year.

We have therefore adopted a non-nil claim frequency of 0.47 claims per $ million of wages for the

2015/16 policy year, similar to the average frequency for the two latest accident years. This results in

around 3,400 non-nil claims for the 2015/16 policy year. This is 6% lower than adopted for the 2014/15

policy year (around 3,600 claims).

The frequency of claims receiving weekly benefits had been stable at around 0.32 claims per $ million of

wages until 2012/13. However lost time frequency also reduced (by around 15%) to 0.28 claims per

$ million wages in 2013/14. We have adopted a lost time frequency of 0.30 claims per $ million wages in

the 2015/16 policy year, again similar to the experience over the last two accident years.

Claim Payments

Almost $146 million of claim payments were made in 2013/14. This was $20 million (16%) higher than

the previous year and much higher than we projected at our previous review. This was largely driven by

lump sum payments that were $17 million (30%) higher than in 2012/13. This much higher level of lump


Page 5 of 84


sum payments reflects both an increase in the number of lump sum payments and the average size of

these lump sums, noting:

Over 500 claims received a lump sum payment during 2013/14, up 9% and the highest level seen

since 2003/04

The average size of lump sum payments was almost $150,000 compared with an average of

around $110,000 over the previous four years.

We understand that a large part of the increase in the number and size of lump sums in 2013/14 may

reflect:

A number of Supreme Court judgements that exceeded expectations, thus creating a shift in

plaintiff expectations. More recent settlements however appear to have returned to historic levels,

with the average settlement experience in the first three months of 2014/15 reducing to $120,000.

New Practice Directions that aim for finalisation within 12 months, plus ‘court blitzes’ aimed at

clearing the court docket

The deliberate attempt by some insurers to try and proactively settle some of their more difficult

matters pre-trial.

As such, our response to this higher lump sum experience has been to assume that:

The increase in number of lump sums in 2013/14 reflects a ‘speeding up’ of the payment of these

matters; we have not materially changed our view of the ultimate number of lump sums claims

The higher lump sum average claim size is mostly due to a higher than normal number of ‘larger’

lump sum settlements that will not be repeated. While we have increased our adopted average

claim size to $120,000, this is lower than the very high level observed during 2013/14.

With respect to other payments, we note that:

Legal costs were $4 million more than the previous year and $1 million more than expected,

reflecting the higher lump sum settlement activity in the last year

Weekly benefits were $1 million lower than the previous year and lower than expected, attributable

to the lower number of claims for the 2013/14 accident year

Medical costs were similar to the previous year and lower than expected (we had projected

payments would increase). As for weekly benefits, the lower than expected payments are

attributable to the lower number of claims for the latest accident year.

We have responded to this payment experience in our adopted average claim size for the 2015/16 policy

year. We have adopted a net of recoveries average claim size per non-nil claim of around $35,400. This

is 10% higher than that selected in our previous review ($33,330 after adjustment to December 2014

dollars using actual wage inflation) which mainly reflects the increase in the average size of lump sums.

3 Economic Assumptions

We have made allowance for the following economic assumptions in forming reasonable premium rates:


Page 6 of 84


Element Assumption Change from Previous Review

Discount rate 2.05% p.a. Down 1.40% p.a., reflecting reductions in yields

available on Commonwealth Government bonds

Wage Inflation 3.25% p.a. Down 0.25% p.a. reflecting medium term wage

inflation forecasts

Superimposed inflation 0.5% p.a. Increased from 0.23% p.a., reflecting evidence of

superimposed inflation in lump sum and legal

costs

The discount rate has reduced significantly since our previous review. This has a large impact on our

assessment of reasonable premium rates. If the discount rate had not changed, our assessment of

reasonable premium rates would be around 6% lower.

4 Expenses and Insurer Margin

We have included an expense loading of 22.1% of premium ($44.4 million) in the reasonable premium

rate for 2015/16, up slightly from 21.6% of premium ($42.3 million) adopted for our previous review. This

increase is due to a higher Regulatory Funding Levy.

The reasonable premium rate for 2014/15 includes an insurer margin of 13.5% of premium, up 1% from

that adopted previously. The increase is due to the impact of the reduction in the yield curve (as insurers

will require a higher margin to offset lower investment income).

5 Average Premium Rate for 2015/16

Our estimate of a reasonable premium pool for 2015/16 is just over $200 million as shown below.

Table 1 – Total Premium Pool

Premium Rate Component ($m)

Risk Premium Pool 129.4

Expense Loading 44.4

Profit Loading 27.1

Total Premium Pool 201.0

Wages Estimate 7,570.9

Average Risk Premium (% wages) 1.71%

Average Premium Rate (% wages) 2.65%

The reasonable average premium rate for 2015/16 is 2.65% of wages. This compares to the reasonable

premium rate for 2014/15 of 2.46% of wages, an increase of 0.20% of wages (an 8% proportional

increase). The main reasons for this increase are:

The changes to the claims assumptions, reflecting the recent experience, resulted in a reduction in

claim numbers which was more than offset by an increase in the adopted average claim size. The

net impact of claims assumptions increased the premium rate by 0.05% of wages.


Page 7 of 84


The reduction in the discount rate has increased the premium rate by 0.11% of wages. The flow

on impact to the insurer margin of reduced discount rates further increased the premium rate by

0.04% of wages

The increase in the expense rate increased the premium rate by 0.02% of wages.

6 ANZSIC Division Premium Rates

To derive reasonable premium rates at the ANZSIC Class level in the ACT, we have separately

considered frequency relativities and cost relativities, as shown in Appendix H.

The experience across the range of ANZSIC Classes shows considerable variation, with our reasonable

rates falling in the range 0.39% to 14.35%.

7 Achieved Premium Rates

The insurers achieved premium rate (estimated ultimate premium divided by estimated ultimate wages)

for past accident years are shown in Figure 2. We have also shown the reasonable premium rate for

2015/16. Note we have shown the estimated risk premium component separately.

Figure 2 – Estimated Ultimate Achieved Premium Rates

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Insurer achieved premium rates have been around 2.4% of wages since 2010/11. The estimated risk

premium declined from 1.9% of wages for 2010/11 to around 1.7% of premium in both 2011/12 and

2012/13. In 2013/14, the reduction in claim frequency resulted in a further reduction in the risk premium

to 1.6% of wages. We are estimating a risk premium of 1.71% for the 2015/16 policy year. We note that

there is considerable uncertainty over the estimated risk premium for more recent accident years.

We estimate the margin left to cover expenses and profit has risen from around 0.5% of wages (2010/11)

to 0.8% of wages (2013/14). This compares to allowances in our reasonable premium rates of 0.94% of

wages.


Page 8 of 84


8 Reliances and Limitations

Our reliances and limitations are an important part of this report and are detailed in Section 10.


Page 9 of 84


Part II Detailed Findings

1 Introduction

1.1 Purpose

The Chief Minister and Treasury Directorate (CMTEDD) have requested that Finity Consulting (Finity)

undertake an actuarial review of the performance of the ACT private sector workers’ compensation

scheme (the Scheme) in order to inform the CMTEDD on key developments in the scheme experience.

We understand this report may be made publicly available by the CMTEDD.

As part of this review, we were required to investigate trends in the claims experience to 30 June 2014,

and provide an estimate of a reasonable premium rate for the 2015/16 financial year. We note that the

scope of our review is limited to the insured private sector workers’ compensation scheme, i.e. it does not

include self-insured employers or the ACT public sector.

This is the seventh review of its kind that Finity has conducted. Our previous review is contained in the

report “ACT Workers’ Compensation Review of Scheme Performance to 30 June 2014” dated 17 April

2014 (the previous report).

1.2 Scope

Our review of the ACT private workers’ compensation scheme encompassed:

Identifying trends in the private sector experience that impact on Scheme cost, including

consideration of:

► Claim numbers and frequency for non-nil claims, lost time claims and lump sums

► Claim payments, average claim sizes and payment patterns by the following benefit type

groupings:

Weekly benefits

Medical and related benefits (including medical, hospital, and other

treatment/appliances)

Rehabilitation

Lump sum benefits (including common law settlements, statutory impairment lump

sums, commutations and death benefits)

Legal and investigation costs (including legal costs, investigation and medico-legal

costs, and other non-compensation benefits)

Recoveries (including sharing, employer and other recoveries)

Estimating future claim costs for past accident years

Developing a reasonable premium pool and average premium rate for the insured scheme as a

whole for the 2015/16 policy year

Developing reasonable premium rates at the ANZSIC Class level for the 2015/16 policy year.


Page 10 of 84


Appendix B of this report summarises the various historical legislative reforms that have had a significant

impact on the cost of the ACT workers’ compensation scheme.

1.3 Data

We have prepared this advice using data as at December 2014 sourced from CMTEDD’s new Workers

Compensation Management System (WCMS). WCMS utilises the National Insurers Data Specification

(NIDS) which was produced in combination with WorkSafe Tasmania, WorkCover WA and NT WorkSafe

and was designed to improve data collection and reporting, including improving the consistency in

information collected across all privately underwritten schemes in Australia.

We note that while the data provided was as at December 2014, not all insurer submissions were

complete as at that date. The last full financial year of data is for the year ending 30 June 2014, and

many of the graphs and commentary in this report are prepared using data to 30 June 2014 only. We

have also specifically utilised the claims data for the three months to 30 September 2014 in projecting

ultimate claim numbers and in forming our lump sum assumptions.

There were a number of areas where the data included in WCMS appears unreliable, in particular, case

estimates, wages and premium information. We understand that these data items are not currently of

sufficient quality due to some initial teething problems associated with implementing the new data

system; we expect these will resolve in time as insurers become more familiar with WCMS requirements.

These items have therefore been sourced from separate summarised data provided to Finity directly by

each insurer for the purposes of this review.

Further details of the data supplied and reconciliations carried out are included in Section 8.

1.4 Structure of the Report

The details of our review are set out in the following report parts and sections:

Part II – Scheme Review and Reasonable Premium Rates

Section 2 provides an overview of trends in claims experience

Section 3 includes our assessment of Scheme claim number and payment experience, including

the assumptions required to estimate ultimate claim costs

Section 4 summarises other assumptions adopted, namely economic, expense and profit

assumptions

Section 5 summarises our estimated ultimate costs for each past accident year and compares our

results to insurer reserves

Section 6 estimates a reasonable premium pool and the average premium rate

Section 7 includes a summary of the selected relativities and reasonable premium rates by

ANZSIC Division

Part III – Further Information

Section 8 describes the data we were supplied with for this investigation


Page 11 of 84


Section 9 sets out our compliance with the relevant professional standards and our approach to the

analysis

Section 10 details the reliances and limitations to which this report is subject.

Part IV – Appendices

Part IV contains the Appendices which include a detailed description of the data used and our analysis.


Page 12 of 84


2 Overview of Claims Experience

This section summarises trends in the Scheme claims experience. Full details of claim frequency and

average claim size, including projections by payment type, follow in Section 2.

2.1 Numbers of Claims Reported

The following graph shows the number of non-nil claims in each year (counted in the year of their first

payment).

Figure 2.1 – Non-nil Claim Numbers

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Key Findings

The number of non-nil claims fell by 5% with around 3,200 new non-nil claims reported in

2013/14.

The number of new lost time claims fell by 8%, with just over 2,000 new lost time claims in

2013/14.

Almost $146 million was paid in 2013/14, a 16% increase on the previous year, largely

driven by lump sum payments.

Over 500 claims received a lump sum payment during 2013/14, up 9% on the previous year

and the highest level seen since 2003/04. In addition, the average size of lump sum

payments was almost $150,000 compared with an average of around $110,000 over the

previous four years.

Payments were $23 million (20%) higher than expected, driven by the higher level of lump

sum payments. Legal costs were also higher than expected (by 7%), related to the higher

lump sum activity in the year. Weekly benefits and medical costs were both 7% lower than

expected, attributable to the lower number of claims for the 2013/14 accident year.


Page 13 of 84


The number of non-nil claims has reduced by over 5% per annum over each of the last two years. In

2013/14 there were approximately 3,200 new non-nil claims in the year. We understand that the

reduction in 2013/14 may be related to a safety review of the Construction industry conducted in 2012/13

and subsequent improvements in WHS practices as a result of that review.

The following table compares the number of non-nil claims reported the year to 30 June 2014 with

expected experience taken from our previous report.

Table 2.1 – Actual vs. Expected Claims Reported in 12 months to 30 June 2014

Accident

Year Actual Expected Difference Difference

Prior 17 10 7 75%

2010/11 16 13 3 23%

2011/12 30 28 2 8%

2012/13 421 432 -11 -3%

2013/14 2,713 2,966 -253 -9%

Total 3,197 3,449 -252 -7%

Non-Nil Claims Reported

Non-nil claims reported in the year were lower than expected by 7% driven by the lower number of

reports in the 2013/14 accident year.

2.2 Claim Payments

The following two graphs show the mix of claim payments by year and type. Figure 2.2 shows the

payments in actual historical values while Figure 2.3 shows payments inflated to December 2014 values.

Figure 2.2 – Gross Payments by Type – Actual Historical Values

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Payments had been stable at around $80 million per annum until 2008/09, but have increased every year

since then. Almost $146 million was paid in 2013/14, a 16% increase on the previous year, largely driven

by common law payments.

Insurers received around $4 million in non-reinsurance recoveries in 2013/14, bringing net payments in

the year to around $142 million.


Page 14 of 84


Figure 2.3 – Gross Payments by Type – Inflated to December 2014 values

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Figure 2.3 shows that, after adjusting for historical wage inflation, payments in real terms averaged just

over $100 million until 2011/12, but have increased significantly since then. The increase has been driven

by significantly higher common law payments.

The following table compares net payments in the 12 months to 30 June 2014 by payment type to the

expected payments taken from our previous report.

Table 2.2 – Actual vs. Expected Payments in the 12 months to 30 June 2014

Payment

Type Actual Expected Difference Difference

$m $m $m %

Weekly 26.3 28.3 -2.1 -7%

Medical 16.0 17.3 -1.3 -7%

Rehab 7.5 7.6 -0.1 -2%

Lumpsums1 74.4 49.0 25.4 52%

Legal 21.6 20.2 1.4 7%

Recoveries -4.0 -4.1 0.1 -3%

Total 141.8 118.4 23.4 20%1Includes Common Law

Payments in total in the 12 months to 30 June 2014 were $23.4 million (20%) higher than expected. This

is driven by the increase in common law lump sum payments in the year, which were more than 50%

higher than expected. Legal costs were also higher than expected which is likely related to the higher

lump sum activity.

Weekly benefit and medical payments were lower than expected by 7%. This is attributable to the lower

number of claims for the 2013/14 accident year; payments for older accident years were close to

expected.

Payments for other benefit types were close to expected.


Page 15 of 84


2.3 Claims Involving Lost Time

Figure 2.4 below shows the number of new weekly benefit claims (i.e. claims involving lost time) in each

year. We have counted claims as “new” lost time claims in the year that they first receive a weekly

benefit payment.

Figure 2.4 – Lost Time Claims Reported

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There were around 2,000 new lost time claims in 2013/14, an 8% decrease relative to the previous year.

This is the first such reduction since the GFC impacted on lost time claims in 2008/09. We understand

that this reduction may also be related to a safety review of the Construction industry.

The following table shows the number of new lost time claims was 8% lower than expected.

Table 2.3 – Actual vs. Expected Claims Reported in 12 months to 30 June 2014

Accident


Prior 0 6 -6 -100%

2010/11 6 6 0 -2%

2011/12 25 34 -9 -26%

2012/13 455 481 -26 -5%

2013/14 1,522 1,663 -141 -8%

Total 2,008 2,190 -182 -8%

Lost Time Claims Reported

The following graph shows the weekly benefit continuance rates in the first two years (8 quarters)

following the date of injury i.e. the proportion of lost time claims that “continue” to be on benefits from one

period to the next. All else being equal, a lower continuance rate implies better outcomes for the Scheme

(as more claimants are returning to work).


Page 16 of 84


Figure 2.5 – Weekly Benefit Continuance Rates

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DQ 2:3 DQ 3:4 DQ 4:5 DQ 5:6 DQ 6:7 DQ 7:8

While the continuance rate between development quarters 3 and 4 (‘DQ3:4’) appears to have improved

over the last two years (i.e. less claimants are continuing on weekly benefit), the continuance rate for

DQ4:5 appears to have increased. Continuance rates for all other development quarters have been

reasonably stable.

2.4 Common Law and Other Lump Sums

Number of Lump Sums Paid

Injured workers may choose to pursue either:

A common law claim (receiving either a damages award or negotiated settlement)

A redemption of statutory entitlements (a ‘commutation’)

A statutory permanent impairment benefit.

Pursuing either a common law claim or a commutation results in finalisation of the claim, as all of the

worker’s entitlements are settled via this path. However, payment of a statutory permanent impairment

benefit results in the settlement of the impairment benefit component only – the worker continues to have

an entitlement to receive future weekly benefits and medical costs. In reality, very few claimants pursue

statutory permanent impairment benefits relative to common law or commutations.

Figure 2.6 shows the number of claims that have received common law, negotiated settlement,

commutation, statutory impairment benefits or death benefits in each payment year. Note that around

5% of claimants receive more than one type of lump sum, with the bulk of these claims (around 80%)

receiving both a common law and a commutation payment. For the purpose of this graph we have

counted claims using the following hierarchy:

If a claim has a common law payment then it is counted as common law.

If a claim has no common law payment but has a negotiated settlement payment then it is a

settlement. Note that in the previous claims database (prior to 2013/14) there was no ability to


Page 17 of 84


distinguish between common law awards and negotiated settlements; all of these matters have

been deemed to be negotiated settlements.

If a claim has no common law or negotiated settlement payments but has a commutation payment

then it is counted as a commutation lump sum.

If a claim has no common law, negotiated settlement or commutation payments but has a statutory

impairment payment then it is counted as a statutory impairment benefit.

If a claim has no common law, negotiated settlement, commutation or impairment benefit

payments but has a death benefit then it is counted as a death lump sum.

Figure 2.6 – Number of Claims Receiving a Lump Sum Payment

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Figure 2.6 shows:

Over 500 claims received a lump sum payment in the year, the highest level seen over the past

decade. Note that around 90 of these claims had already received a lump sum payment in a

previous year.

The number of claimants receiving either common law or negotiated settlement damages

increased from less than 200 per annum prior to 2011/12, to almost 300 in 2013/14. We

understand that there are environmental factors that may have impacted on the number of such

claims, including:

► New ACT Court Practice Directions that aim for finalisation within 12 months, plus ‘court

blitzes’ aimed at clearing the court docket

► The deliberate attempt by some insurers to try and proactively settle some of their more

difficult matters pre-trial.

► Anecdotal evidence that there has been an increase in advertising by plaintiff law firms

The number of commutations has been reasonably stable, with just under 200 commutations paid

per annum.


Page 18 of 84


The number of claims receiving only a statutory benefit lump sum in 2013/14 was low, with just 15

new statutory lump sum paid compared to an average of around 30-40 per annum in previous

years.

As expected, there are very few death benefit claims in each year. In 2013/14 there were two new

lump sum death benefit paid.

The following table shows the number claims receiving a lump sum payment in 2013/14 compared with

expectations from our previous review.

Table 2.4 – Actual vs. Expected Lump Sum Payments in 12 months to 30 June 2014

Accident


Prior 21 12 9 75%

2005/06 4 4 0 -7%

2006/07 11 5 6 111%

2007/08 11 10 1 6%

2008/09 24 14 10 74%

2009/10 52 30 22 72%

2010/11 64 51 13 26%

2011/12 113 104 9 9%

2012/13 126 129 -3 -2%

2013/14 88 65 23 35%

Total 514 424 90 21%

Lump Sum Claims Paid

The number of claims in receipt of a lump sum payment in the 12 months to 30 June 2014 was 514,

which was 21% higher than expected (424). The number of lump sums paid was higher than expected

for almost all accident years.

We note that when preparing our previous advice (upon which the 424 expected number is based), we

had observed the higher number of claims receiving a lump sum in 2012/13 but assumed at the time that

this was impacted by the imminent retirement of a Supreme Court judge and did not expect this to be an

ongoing feature. As such, we projected a drop in the number of lump sum payments in 2013/14 to more

normal levels, which, with the benefit of hindsight, has not eventuated.

Average Size of Lump Sums (Lump Sum Component)

The following graph shows the average size (inflated to December 2014 dollars) of lump sum claims by

year of settlement.


Page 19 of 84


Figure 2.7 – Average Size of Lump Sum Settlements

0

25,000

50,000

75,000

100,000

125,000

150,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

Ave

rag

e S

ize

($D

ec

-14)

Settlement Year

* Note 2009/10 has been adjusted to exclude a single large jockey claim (these claims are no longer

covered by the scheme) and 2014/15 includes just over 4 months’ worth of settlements

The average size of lump sum settlements in 2013/14 was almost $150,000 which is substantially higher

than earlier years. As noted above, some insurers have tried to proactively settle some of their more

difficult matters during 2013/14, which may explain this high average settlement experience. We note the

early experience in the first four months of 2014/15 suggest settlements have averaged around

$120,000.

Average Size of Lump Sums (Total Claim Cost)

We have also investigated the total average cost of claims that receive common law or commutations

(i.e. for those claims which receive a common law, negotiated settlement or commutation payment, the

average across all benefit payments received, not just the lump sum component).

Figures 2.7 to 2.9 show the average amount received for the following claims:

Those that have received a common law or negotiated settlement

Those that have received a commutation benefit (but no common law or settlement)

Those that have received a both a common law amount and a commutation.


Page 20 of 84


Figure 2.8 – Average Size of Claims Receiving Common Law or Negotiated Settlement

0

50

100

150

200

250

300

350

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14A

ve

rag

e C

laim

Siz

e ($D

ec-1

4)

Settlement Year

CL/Settlement LS Weekly Medical + Rehab Legal

Figure 2.7 shows the overall average cost of claims receiving common law payments (or negotiated

settlements) averaged around $270,000 (in December 2014 values) over the four years to 2012/13 with

the 2013/14 year significantly higher at around $320,000. The total cost of a common law/negotiated

settlement claim (ignoring the high 2013/14 year) is approximately made up as follows:

The common law component of the claim is around $150,000 per claim

Weekly benefits add around $40,000 per claim

Medical and rehabilitation costs add around $30,000 per claim

Legal costs account for around $40,000 per claim.

Figure 2.9 – Average Size of Claims Receiving Commutations

0

50

100

150

200

250

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14A

ve

rag

e C

laim

Siz

e ($D

ec

-14)

Settlement Year

Commutation Other LS Weekly Medical Legal

Figure 2.8 shows that the overall average cost of claims receiving commutations (but no common law) is

lower than for common law claims at around $150,000 (in December 2014 values), noting that the


Page 21 of 84


2009/10 year is impacted by a single large jockey claim (such claims are no longer covered in the

Scheme). The average claim size is broken down as follows:

The commutation component of the claim is around $70,000 per claim. This is around half the

amount that common law claims receive as a common law component.

Weekly benefits add around $30,000 per claim.

Medical and rehabilitation costs add around $20,000 per claim.

Legal costs account for around a further $30,000 per claim.

Figure 2.10 – Average Size of Claims Receiving both Common Law & Commutation

0

50

100

150

200

250

300

350

400

450

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14A

ve

rag

e C

laim

Siz

e ($D

ec

-14)

Settlement Year

Commutations CL/Settlement Other LS Weekly Medical Legal

Figure 2.10 shows the overall average cost for those claims that receive both a common law and

commutation is highly variable from year to year, noting there are between 10 and 25 such claims each

year. The cost of these claims has averaged around $300,000 (in December 2014 values) over the last

five years:

The common law component is around $105,000 and the commutation component is around

$75,000 (total of $180,000)

Weekly benefits add around $40,000 per claim

Medical and rehabilitation costs add around $25,000 per claim.

Legal costs account for around a further $60,000 per claim.

Other than legal costs, each of these components is similar to the averages for the claims that receive

only a common law; legal costs are significantly higher.

Lump Sum Contribution to Total Costs

Figure 2.10 shows:

The number of lump sum settlements in each year expressed as a proportion of scheme non-nil

claims reported in that year


Page 22 of 84


The amount spent on lump sum settlements in each year (including the weekly benefit, medical,

rehabilitation and legal cost components) expressed as a proportion of total payments made in

each year.

Figure 2.11 – Contribution of Lump Sum Claims

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Pro

po

rtio

n

Year

Proportion of Numbers Proportion of Costs

Figure 2.10 demonstrates the importance of lump sum claims to the scheme financials; generally only

around 10% to 15% of claims receive a lump sum but the cost of these claims represents between 75%

and 85% of total payments each year. In 2013/14, the number of lump sums made up a slightly higher

proportion of non-nil claims (16%) and a much higher proportion of payments (93%).

Claim Size Distribution

The following table shows the claim size distribution of all common law and other lump sum claims

recorded in WCMS (in December 2014 values) and includes all benefit payments made on these claims

(i.e. not just the lump sum component).

Table 2.5 – Claim Size Distribution

Size of

Settlement

$Dec-14

Number of

Claims Proportion

Average

claim size in

band ($000

Dec-14)

Number of

Claims Proportion

Average

claim size in

band ($000

Dec-14)

0-50k 307 10% 30,200 841 21% 29,700

50k-100k 441 14% 76,500 936 24% 73,300

100k-150k 450 15% 123,300 718 18% 122,900

150k-200k 399 13% 173,800 458 12% 173,900

200k-300k 594 19% 247,600 534 14% 245,100

300k-400k 351 12% 345,600 255 6% 346,600

400k-500k 182 6% 445,600 96 2% 444,800

500k-1m 276 9% 651,900 86 2% 633,300

>1m 47 2% 1,326,100 14 0% 2,245,200

Common Law Other Lump Sums

Almost 50% of common law claims settle for more than $200,000 and more than 10% settle for $500,000

or more. The distribution of other lump sums is skewed to lower cost claims.


Page 23 of 84


3 Claim Analysis and Assumptions

This section describes our findings in relation to trends in wage inflation, exposure measures, claim

numbers and frequency, claim payments and average claim size. We also document the assumptions

required to estimate ultimate claim costs.

3.1 Wage Inflation

The following graph shows the historical rate of change in the Australian Bureau of Statistics’ Average

Weekly Earnings (AWE) in the ACT. The grey bars show the actual rate of change (i.e. the wage

inflation in the period) whereas the orange bars show the wage inflation rate assumed at our previous

review.

Figure 3.1 – AWE Inflation

-8%

-6%

-4%

-2%

0%

2%

4%

6%

8%

10%

12%

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

AW

E I

nfl

ati

on

Ra

te

Year Ending 30 June

Expected Actual

Key Findings

Earned wages grew by 9% in real terms to $7.3 billion in 2013/14.

We estimate there will be around 3,175 non-nil claims for the 2013/14 accident year, down

7%. We believe the reduction in numbers reflects an increased focus on safety and

compliance in the construction industry and subdued employment conditions in other

industries.

We have adopted a non-nil claim frequency of 0.47 claims per $ million of wages for the

2015/16 policy year; resulting in a projected 3,390 claims. This is 6% lower than adopted

previously.

The selected average claim size per non-nil claim is around $35,400 for the 2015/16 policy

year, up 10% since our previous review, primarily due to an increase in the average size of

lump sums.


Page 24 of 84


The AWE index fell during 2013/14, implying AWE inflation of -6% in the year to 30 June 2014. By

comparison, we expected wage inflation would be 3.5% in this year; i.e. actual wage inflation was around

9.5% lower than expected. The impacts of this difference on our projections are:

Our projected wages base for the 2015/16 policy year will be lower than expected (compared with

our previous review)

Compensation amounts such as weekly benefit payments are linked to wages, and as such, lower

than expected wage inflation can mean claim payment experience is also lower than expected,

resulting in a decrease in the selected average size of such benefits. As a result, the projected

ultimate claims costs and the risk premium pool will decrease (all else being equal).

As both wages and ultimate claims costs are expected to reduce in around the same proportion, the

impact on the risk premium rate is minimal.

3.2 Exposure

Number of Employees

Employee numbers are used as a measure of exposure in the calculation of ultimate claim frequency.

Figure 3.2 shows the estimated ACT private sector workforce relevant to each accident year, split

between full time and part time workers. The number of employees is calculated as the ACT total (as

shown in ABS figures), less the number of Commonwealth and ACT Government employees (as

provided by the CMTEDD).

Figure 3.2 – Workforce (000s)

0

20

40

60

80

100

120

140

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Wo

rkfo

rce

(000s)

Accident Year

Full Time Part time

Total employee numbers grew by 3.6% in 2013/14, driven by an increase in the number of full time

employees. We have used the number of full time ACT private sector employees as a measure of

exposure in the calculation of ultimate claim frequency.

As these employee figures are not provided by the insurers, and are compiled from two different sources

of data, we rely more heavily on frequency per $ million wages measure rather than per full time

employee in our premium estimates.


Page 25 of 84


Earned Wages

Wages are also used as a measure of exposure in the calculation of ultimate claim frequency. When an

employer purchases workers’ compensation cover, the amount they pay is usually expressed as a

premium rate that is a percentage of “wages covered” for the policy year. In our analysis of claim

numbers, we estimate the ultimate number of claims for each accident year (as opposed to policy year).

In order to determine the relevant wages for each accident year, we use policy-year wages spread over

the period of cover (“earned” wages for each accident year).

Figure 3.1 shows earned wages by accident year. In this graph the wages have been increased for

historical wage inflation, i.e. all amounts are expressed in December 2014 values so that the graph

shows real growth in total wages. Note, the figures shown are estimates based on information to

September 2014 (wages are often revised from initial estimates to actual figures at the end of the policy

year and the figures shown here allow for the expected movement from initial to final wages); see

Appendix G. We have also shown our estimates from last year, increased with expected inflation in the

year.

Figure 3.3 – Estimated Ultimate Earned Wages

Earned wages increased by 9% in real terms in 2013/14 and are estimated to be around $7.3 billion in

December 2014 values. We note that while earned wages increased in real terms, our current wages

estimate for 2013/14 is around 4% lower than the expected wages ($7.6 billion), reflecting the impact of

negative wage inflation during 2013/14.

3.3 Total Claim Numbers and Frequency

Figure 3.3 shows the number of non-nil claims that have been reported to the insurers to 30 June 2014

and our estimate of ultimate numbers of claims for each accident year. We have shown claims reported

by duration, or “development years” following the accident; i.e. “DY1” represents claims reported within

one year of the accident, “DY2” represents claims reported between 1 to 2 years after the accident and

so on.

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

20

04

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

Ea

rne

d W

ag

es

($b

n D

ec

-14)

Accident Year Ending 30 June

Previous


Page 26 of 84


Figure 3.4 – Ultimate Number of (Non-Nil) Claims

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Accident year

DY1 DY2 DY3+ IBNR Previous Ultimate

Figure 3.3 shows that there are generally very few claims reported more than two years after the

accident, and as such, the number of Incurred But Not Reported (IBNR) claims is small for all but the

most recent accident year.

The estimated ultimate number of non-nil claims fell by 6% in 2012/13 and a further 7% in 2013/14. We

estimate there will be around 3,175 non-nil claims for 2013/14.

The reduction in claim numbers during 2013/14 reflects a combination of:

A review into the safety standards in the construction industry in late 2012, which led to an

increased focus on safety and compliance in the industry. As a result, claim numbers in this

industry reduced by around 25% in the year.

Generally subdued employment conditions in the ACT may have resulted in reduced claim

reporting across other industries. Claim reporting may be expected to return to a more ‘normal’

level once economic conditions improve.

The estimated ultimate number of non-nil claims is divided by both earned wages and full time

employees to arrive at a measure of the ultimate claim frequency per $ million earned wages and per 100

full time employees respectively, as shown in Figure 3.4 below.


Page 27 of 84


Figure 3.5 – Ultimate Non-Nil Claim Frequency

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

4.5

5.0

0.0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1.0

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

15

/16 P

olY

r

Cla

im F

req

ue

ncy

(pe

r 100 e

mp

loye

es)

Cla

im F

req

ue

ncy

(pe

r $m

wa

ge

s)


Freq (per $m wages) (Freq (per 100 eee's)

Non-nil claim frequency reduced by 14% to 0.44 claims per $ million wages for 2013/14, the lowest level

seen in the past 10 years. Prior to this, frequency had been stable at around 0.5 claims per $ million of

wages.

Similarly, frequency per 100 full time employees reduced by 12% to 3.48 for 2013/14.

Claim reports in the first quarter of 2014/15 indicate that non-nil claims have increased back to levels

observed in 2012/13. We have therefore adopted a non-nil claim frequency of 0.47 claims per $ million

of wages for the 2015/16 policy year, similar to the average observed over the last two accident years.

This results in around 3,390 claims for the 2015/16 policy year, 6% lower than adopted for the 2014/15

policy year (around 3,600) reflecting the lower than expected claim numbers that have emerged in the

past year.

Appendix E provides further details of our claim number analysis.

3.4 Weekly Benefits

Lost Time Claims

In order to understand the trends in the numbers of claimants receiving weekly benefit payments, we

have estimated the ultimate number of lost time claims. Figure 3.5 shows our estimated ultimate number

of lost time claims and the estimated proportion of non-nil claims that involve weekly benefits.


Page 28 of 84


Figure 3.6 – Estimated Ultimate Lost Time Claims and Proportion

0%

15%

30%

45%

60%

75%

0

500

1,000

1,500

2,000

2,500

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Accident year

DY1 DY2 DY3+ IBNR Lost Time %

As with non-nil claims, there are very few new lost time clams reported more than two years after the

accident, and as such, the number of Incurred But Not Reported (IBNR) claims is small for all but the

most recent accident year.

The estimated ultimate number of lost time claims reduced by 3% in 2012/13 and by a further 5%

2013/14. We project around 2,190 lost time claims in the 2013/14 accident year.

As the number of non-nil claims reduced by more than lost time claims, the estimated ultimate lost time

proportion increased. For the 2015/16 policy year, we have adopted a lost time proportion of 64.5%,

similar to the average over the two most recent years.

Figure 3.6 shows the ultimate lost time claims expressed as a frequency (per $ million of wages and per

100 full time employees respectively).

Figure 3.7 – Estimated Ultimate Lost Time Claim Frequency

0.0

0.5

1.0

1.5

2.0

2.5

3.0

0.0

0.1

0.2

0.3

0.4

0.5

0.6

20

05

20

06

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

15

/16 P

olY

r

Cla

im F

req

ue

ncy

(pe

r 100 e

mp

loye

es)

Cla

im F

req

ue

ncy

(pe

r $m

wa

ge

s)


Freq (per $m wages) (Freq (per 100 eee's)


Page 29 of 84


After having been stable at around 0.33 claims per $m wages between 2008/09 to 2011/12, the lost time

frequency has reduced to around 0.28 claims per $ million wages in 2013/14. We project a lost time

frequency of 0.30 claims per $ million wages in the 2015/16 policy year, similar to the average observed

over the last two accident years.

The lost time claim frequency had been stable at around 2.60 claims per 100 full time employees up until

2011/12, but decreased in the last two years to be 2.25 claims per 100 full time employees in 2013/14.

Average Weekly Benefit Payments

Figure 3.7 below shows the average weekly benefits paid per lost time claim by accident year. Each of

the accident years is split into payments made in the year of accident (“DY1”), the year following the year

of accident (“DY2”), etc. Our selected average weekly benefit claim size per lost time claim for the

2015/16 policy year is also shown.

Figure 3.8 – Weekly Benefits per Lost Time Claim

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pa

ym

en

ts p

er

Lo

st T

ime

Cla

im

($D

ec-1

4)

Accident Year

DY1 DY2 DY3 DY4 DY5+

Average weekly benefits per lost time claim reduced slightly in development year 1 but increased in

development year 2.

Our selected average claim size for the 2015/16 policy year for weekly benefits is $12,332 (in December

2014 dollars) per lost time claim. This is 2% higher than the selected average claim size at the previous

review (inflated to December 2014 dollars using actual wage inflation) reflecting the emerging

experience.

The average claim size expressed over all non-nil claims (not just lost time claims) is $7,954. This is 4%

higher than selected in our previous review ($7,643 after adjustment to December 2014 dollars using

actual wage inflation) due to both the increase in the number of lost time claims as a proportion of non-nil

claims and in the average weekly benefit size.

The full analysis of weekly benefit average claim sizes can be found in Appendix F.


Page 30 of 84


3.5 Medical and Related Payments

Figure 3.8 shows the average medical payments per non-nil claim for each past accident year and our

selected average medical claim size per non-nil claim for the 2015/16 policy year.

Figure 3.9 – Medical Benefits per Non-Nil Claim

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

5,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pa

ym

en

ts p

er

Cla

im ($D

ec

-14)

Accident Year


As for weekly benefits, average medical benefits per non-nil claim reduced in development year 1 but

increased in development year 2.

The selected average claim size for the 2015/16 policy year for medical benefits is $4,697 per non-nil

claim in December 2014 dollars. This is similar to that selected in our previous review ($4,647, inflated).

The full analysis of medical and related payment average claim sizes can be found in Appendix F.

3.6 Rehabilitation

Figure 3.9 shows the average rehabilitation benefits per non-nil claim along with our selected average

rehabilitation claim size per non-nil claim for the 2015/16 policy year.


Page 31 of 84


Figure 3.10 – Rehabilitation Benefits per Non-Nil Claim

0

500

1,000

1,500

2,000

2,500

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pa

ym

en

ts p

er

Cla

im ($D

ec

-14)

Accident Year


Average rehabilitation benefits per non-nil claim increased quite substantially in development years 1

and 2.

Our selected average claim size for the 2015/16 policy year for rehabilitation benefits is $2,213 per non-

nil claim in December 2014 dollars. This is 8% higher than selected in our previous review ($2,055,

inflated).

The full analysis of rehabilitation benefit average claim size can be found in Appendix F.

3.7 Lump Sums

Number of Lump Sums

Due to differing practices in the classification of lump sum payment types between insurers (as discussed

in Appendix C.4) we have grouped all lump sum claims together when performing our analysis.

The following graph shows the estimated ultimate number of lump sum claims for each past accident

year. We also show the rate of lump sum utilisation (expressed as the ultimate number of lump sum

claims over ultimate number of non-nil claims).


Page 32 of 84


Figure 3.11 – Estimated Ultimate Lump Sum Claim Numbers and Utilisation

0.0%

2.5%

5.0%

7.5%

10.0%

12.5%

15.0%

0

100

200

300

400

500

600

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

15

/16

Uti

lisa

tio

n

(pe

r n

on

-nil

cla

im)

Cla

im N

um

be

rs

Accident Year

Settled Future Previous Utilisation Utilisation

The changes made to the estimated ultimate number of lump sums for accident years up to 2012/13

reflects the experience which has emerged in the last 12 months; i.e. lump sum utilisation has reduced in

the 2010/11 to 2011/12 years but increased slightly in 2012/13. The utilisation rate for 2013/14 and

adopted for later years remains unchanged at 13.6%, in line with the experience over the previous four

years. We note that while the number of lump sums paid in the last year has been much higher than

observed previously (see section 2.4), we do not expect that this will translate into much higher ultimate

numbers of lump sums (i.e. the higher payment levels represent a bringing forward of lump sum

payments).

We estimate the ultimate number of lump sum claims to be just over 430 in 2013/14. This is lower than

the adopted number for recent accident years due to the lower total number of claims for this accident

year. For the 2015/16 policy year, we are projecting 460 lump sum claims.

We note the considerable level of uncertainty in these projections and the large IBNR component, even

for quite old accident years.

Settlement Experience and Adopted Average Size of Lump Sums

The following table shows the number and average size (inflated to December 2014 dollars) of lump sum

claims by year of settlement. Note that the table also shows the three months’ worth of settlement

experience to 17 December 2014. Figure 3.12 shows the information in graphical form.


Page 33 of 84


Table 3.1 – Average Size of Common Law & Other Lump Sum Settlements

Year of

Settlement

Number

of

Claims

Average

size ($ Dec-

14)

Change

(%)

Number

of

Claims

Average

size ($ Dec-

14)

Change

(%)

Number

of Claims

Average

size ($ Dec-

14)

Change

(%)

2004/05 218 111,100 280 76,363 472 96,878

2005/06 195 122,000 10% 277 71,993 -6% 443 98,707 2%

2006/07 204 117,500 -4% 313 74,259 3% 477 99,019 0%

2007/08 174 124,900 6% 236 65,710 -12% 382 97,468 -2%

2008/09 199 127,400 2% 253 65,133 -1% 426 98,176 1%

2009/10 157 136,900 7% 212 108,850 67% 351 126,961 29%

2010/11 173 173,600 27% 229 71,248 -35% 392 118,219 -7%

2011/12 187 138,500 -20% 251 66,754 -6% 420 101,542 -14%

2012/13 256 149,400 8% 245 61,028 -9% 473 112,445 11%

2013/14 294 195,800 31% 226 78,966 29% 514 146,741 31%

2014/15 * 208 136,300 -30% 81 73,360 -7% 285 120,297 -18%

* Note: 2014/15 shows settlements in the six months to December 2014 only

Common Law Lump Sums Lump Sums & Common Law

Figure 3.12 – Average Size of Lump Sum Settlements

0

25,000

50,000

75,000

100,000

125,000

150,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

14

/15

Sele

cted

Ave

rag

e S

ett

lem

en

t S

ize

($D

ec-1

4)

Settlement Year

Impact of jockey claim

The average size of lump sum settlements had been relatively stable at just under $100,000 (in

December 2014 values) until 2008/09, but has generally increased since then. The average size of lump

sum settlements in 2013/14 was almost $150,000, which is substantially higher than observed previously.

As noted in Section 2.4, some insurers have tried to proactively settle some of their more difficult matters

during 2013/14, which may explain this high average settlement experience. Also, we understand a

number of recent Supreme Court decisions have exceeded expectations, thus creating a shift in plaintiff

expectations. More recent settlements however appear to have returned to historic levels, with the

average settlement experience in the first three months of 2014/15 reducing to $120,000.

We have adopted an average settlement size of $120,000 (in December 2014 values) for lump sum

claims in the 2015/16 policy year. This partially recognises the higher average claim size for the 2013/14

settlement year but also responds to the lower size for the first three months of the 2014/15 year. Our

assumption is 15% higher than our previous selection of $104,000 (inflated to December 2014 values

using actual wage inflation). We test the sensitivity to this assumption in Section 6.5.


Page 34 of 84


The average lump sum size across all non-nil claims (not just lump sum claims) is $16,345. This is 16%

higher than in the previous report ($14,136 after adjustment to December 2014 dollars using actual wage

inflation).

The full analysis of average claim size for lump sum benefits can be found in Appendix F.

3.8 Legal and Investigation

Figure 3.12 shows legal and investigation costs per non-nil claim along with our selected average claim

size per non-nil claim for the 2015/16 policy year.

Figure 3.13 – Legal and Investigation Costs per Non-Nil Claim

0

1,000

2,000

3,000

4,000

5,000

6,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pa

ym

en

ts p

er

Cla

im ($D

ec

-14)

Accident Year


Average legal and investigation costs have generally increased across most development years, which is

likely related to the higher lump sum activity during 2013/14. As such, we have not fully reflected this

higher experience in our selections as we do not believe this higher lump sum activity will continue to the

same extent in future.

Our selected average claim size for the 2015/16 policy year for legal and investigation costs is $5,273 per

non-nil claim in December 2014 dollars. This is 8% higher than the average claim size adopted in the

previous report ($4,861, inflated).

The full analysis of the average claim size for legal and investigation costs can be found in Appendix F.

3.9 Recoveries

Figure 3.13 shows the amount recovered by insurers per non-nil claim along with our selection for the

2013/14 policy year. Recoveries include recoveries from other insurers (sharing), employers (excess)

and other sources.


Page 35 of 84


Figure 3.14 – Recoveries per Non-Nil Claim

0

200

400

600

800

1,000

1,200

1,400

1,600

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pa

ym

en

ts p

er

Cla

im ($D

ec

-14)

Accident Year


Recoveries vary significantly from year to year. Our selected average size for the 2015/16 policy year for

recoveries is $1,081 per non-nil claim in December 2014 dollars, up 7% relative to the previous report

($1,013, inflated).

The full analysis of the average size of recoveries can be found in Appendix F.

3.10 Overall Average Claim Size

Figure 3.14 summarises the adopted gross average claim sizes for each past accident year, and our

selection for the 2015/16 policy year.

Figure 3.15 – Adopted Gross Average Claim Size (per Non-Nil Claim) by Payment Type

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

Sele

cted

Pre

vio

us

Ave

rag

e C

laim

Siz

e ($D

ec

-14)

Accident Year

Weekly Medical Rehab Legal Lumpsum (incl Common Law)

Our selected gross average claim size per non-nil claim for the 2015/16 policy year is around $36,500.

After allowing for recoveries, the selected net average claim size per non-nil claim reduces to around


Page 36 of 84


$35,400. This is 10% higher than that selected in our previous review ($33,330, inflated) which mainly

reflects the increase in the average size of lump sums.

3.11 Payment Pattern

The valuation methods incorporate assumptions about the pattern of payments by development year.

The analysis is done by payment type, and the resulting payment pattern is shown below in Figure 3.15

for all payment types combined. Full details of each of the selected payment patterns can be found in

Appendix F.

Figure 3.16 – Selected Net Payment Pattern

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15

Pro

po

rtio

n o

f T

ota

l C

urr

en

t V

alu

e

Pa

ym

en

ts

Development Year

Figure 3.15 shows the majority of payments tend to be made within the first few years after the accident,

with 85% of payments being made within 5 years of the accident.

3.12 Summary of Assumptions for 2015/16 Policy Year

Table 3.2 summarises the adopted claim number and average claim size assumptions for estimating

reasonable premium rates for the 2015/16 policy year.

Table 3.2 – Claim Assumptions for 2015/16 Policy Year

Payment Type Number basis

Claim

Frequency

(per $m)

Ultimate

Claim

Numbers

Average

Claim Size

($Dec-14)

Average

Claim Size

per Non-Nil

($Dec-14)

Weekly benefits Lost time claims 0.30 2,185 12,332 7,954

Medical Non-Nil claims 0.47 3,387 4,697 4,697

Rehabilitation Non-Nil claims 0.47 3,387 2,213 2,213

Lump Sums Lump Sum claims 0.06 461 120,151 16,345

Legal & Investigation Non-Nil claims 0.47 3,387 5,273 5,273

Recoveries Non-Nil claims 0.47 3,387 -1,081 -1,081

Total Non-Nil claims 0.47 3,387 35,402


Page 37 of 84


4 Economic, Expense and Profit Assumptions

This section outlines the economic assumptions, expense assumptions and insurer margins incorporated

into our assessment of a reasonable premium pool.

4.1 Summary of Assumptions

Table 4.1 summarises the assumptions used in estimating a reasonable premium for the 2015/16 policy

year along with the assumptions adopted in our previous review. These are discussed in the remainder

of this section.

Table 4.1 – Summary of Economic, Expense and Profit Assumptions

Assumption Selected Previous

Discount Rate (p.a.) - valuation assumption 2.95% 3.30%

Discount Rate (p.a.) - premium rate assumption 2.05% 3.45%

Wage Inflation (p.a.) 3.25% 3.50%

Economic growth (p.a.) 0.50% 1.00%

Superimposed Inflation (p.a.)1 0.50% 0.23%

Expenses (% of premium) 22.1% 21.6%

Insurer margin (% of premium) 13.5% 12.5%1 average across all payment types

4.2 Discount Rate

For estimating the discounted cost of claims used to estimate outstanding claims liabilities, risk premiums

and insurer profitability, we have calculated the discount rate applicable to the duration of the ACT

workers’ compensation claims, based on the yields available on Commonwealth Government bonds at

30 June 2014 (the ‘valuation’ date). The yields available on Commonwealth bonds reduced since 30

June 2013. As a result, the discount rate adopted for this review is 2.95% per annum, down 0.35% per

annum relative to our previous valuation assumption of 3.30% per annum.

We also allow for the time value of money when estimating a reasonable premium rate for 2015/16. We

have used a risk free rate based on forward rates implied by yields available on Commonwealth

Government bonds as at 28 February 2015 (the latest available) in the determination of the premium

rate. Any margin above the risk free rate earned by the licensed insurers from their actual investments

contributes to profits and is taken into account in deriving an appropriate insurer margin. The discount

rate applicable for the 2015/16 policy year is 2.05% per annum (down from 3.45% per annum previously).

To discount past payments back to the premium receipt date in calculating hindsight risk premiums we

have used the actual average historical cash rates (as published by the Reserve Bank of Australia)

applicable in each year from 1999 to 2014.

4.3 Inflation

Two types of inflation are incorporated into our cost models: normal economic inflation (in this case wage

inflation based on AWE increases, given the income-related nature of the workers’ compensation

benefits) and superimposed inflation.

Wage inflation

Independent forecasts for wage inflation over the next few years are around 2.75% to 3.5% per annum,

with the lower end of the forecasts for shorter durations and the higher end for longer durations. As such,


Page 38 of 84


we have adopted a uniform assumption of 3.25% per annum for all future periods relevant to the 2015/16

underwriting year, down from 3.5% per annum adopted for the 2014/15 policy year.

The implied gap between the discount rate and inflation rate of -1.2% per annum (2.05% per annum

discount rate less 3.25% per annum inflation rate) compares to a gap of 0.05% adopted for the 2014/15

premium rates. All other things being equal, the decrease in the gap will act to increase the estimated

premium rate, reflecting that the real risk-free investment returns available to insurers are lower than a

year ago.

Superimposed Inflation

Superimposed inflation is the tendency for payments to increase at a higher rate than normal economic

inflation (i.e. wage inflation). Some examples of the forms superimposed inflation can take are:

Longer periods of payment – for example, in the case of weekly benefits and medical costs

More claims for particular heads of damage – for example, more claimants seeking lump sum

benefits.

We analysed the experience of the ACT workers’ compensation portfolio in order to detect any evidence

of superimposed inflation; this was done for each payment type. We observed evidence of

superimposed inflation over the longer term in medical and rehabilitation costs and to a lesser extent in

weekly benefits. In more recent years, we have observed some evidence of superimposed inflation in

lump sum and legal costs.

We have therefore incorporated a superimposed inflation assumption of 0.5% per annum across all

benefit types. This compares to an assumption of 2% per annum for medical and rehabilitation costs

only at our previous review, which equated to 0.23% per annum across all payment types.

We believe our assumption takes a balanced view of the likely rates of future superimposed inflation, but

acknowledge that this is one of the areas in the actuarial basis that is highly subjective.

The sensitivity to the superimposed inflation assumption is demonstrated in Section 6.5.

4.4 Economic Growth

In order to project wages for the coming policy year, we need to make an assumption about the growth of

the workforce due to general growth in the economy. We have adopted an assumption of 0.5% per

annum for economic growth to 2015/16, based on market forecasts (including budgetary forecasts)

available to us at the time of this review. This assumption has reduced since our previous review (1%

previously).

4.5 Expenses

Commission/Brokerage

The following table shows the commission/brokerage rates paid by each of the licensed insurers writing

workers’ compensation insurance in the ACT as well as the assumptions adopted in each of the insurer

premium rate filings for 2013/14 to 2014/15.


Page 39 of 84


Table 4.2 – Commission Rates

Insurer 2012/13 2013/14 2013/14 2014/15

AAL 3.0% 3.0% 3.6% 3.8%

IAG 3.3% 3.4% 3.2% 3.3%

QBE 4.2% 4.1% 4.2% 4.1%

SUN 3.4% 3.4% 3.4% 3.3%

ZUR 4.6% 4.6% 4.3% 5.7%

CCI 0.0% 0.0% 0.0% 0.0%

GUI 0.0% 0.0% 0.0% 0.0%

Average 3.4% 3.4% 3.4% 3.5%

Achieved Filed

Note: The average is a w eighted average based on

premium volume.

The overall average commission/brokerage paid in 2013/14 of 3.4% of premiums is unchanged from the

previous year and is also consistent with the average commission/brokerage rate assumed in the

insurers’ filed rates. We have therefore allowed for commission/brokerage of 3.4% of premium in our

estimated reasonable premium pool for 2015/16 (unchanged from the previous review).

Administration Expenses

The table below shows the expense rates included in the insurer’s filed rates over the last three policy

years.

Table 4.3 – Administration Expense Rates

Insurer 2012/13 2013/14 2014/15

AAL 15.0% 14.1% 11.9%

QBE 12.3% 11.2% 18.4%

SUN 18.5% 18.6% 18.3%

IAG 11.4% 9.5% 8.9%

CCI 42.9% 39.6% 41.0%

GUI 32.0% 31.0% 31.0%

ZUR 17.5% 16.8% 16.2%

Average 15.9% 14.7% 15.6%

Note: The above expense rates exclude statutory levies. The

average is a w eighted average based on premium volume.

We have included an allowance for other administration costs after consideration of the expense rates

included in the insurers’ filed rates and the expense levels in the other privately underwritten workers’

compensation schemes. We have adopted an allowance equal to 15% of premium, unchanged since our

previous review.

Statutory Charges and Levies

Our recommended premium rates also include the following levies for 2015/16:

Magistrates Court Levy of 0.29% of premium based on the expected collection during 2015/16, as

advised by the CMTEDD. This is down slightly from 0.30% adopted in the 2014/15 year.

Default Insurance Fund (DIF) levy of 1.4% of premium (unchanged), as advised by the CMTEDD

Regulatory Funding Levy of 1.9% of premium (up from 1.51% of premium previously) resulting in

total levies of $3.996 million. While the target levy collection for 2015/16 is $6.703 million, the


Page 40 of 84


increase in the levy is capped at 0.015% of wages (excluding GST for insurers) resulting in a

maximum allowable levy collection of $3.996 million. The shortfall between target and allowed levy

collections is expected to be funded out of ACT government consolidated revenues.

Total Expense Loadings

Table 4.4 below breaks down the total expense loading we have adopted into the component parts.

Table 4.4 – Assumed Expenses (% of premium)

Equivalent

Dollars ($m)

Commission & Brokerage 3.4% 6.8

Administration 15.0% 30.1

Statutory Charges & Levies

Magistrates Levy 0.3% 0.6

DIF Levy 1.4% 2.8

Regulatory Funding Levy 2.0% 4.0

Total Expense Loading 22.1% 44.4

Loading

(% of premium)

Our total expense loading is 22.1% of premium, down slightly from 21.6% of premium adopted for our

previous review.

4.6 Insurer margin

In determining an appropriate insurer margin for profit for this business we have utilised a model that

projects the after tax profits of the 2015/16 business in each future year until the cohort of business has

completely run off. In applying this model we have made the following long-term assumptions (in addition

to those detailed above in relation to claims costs and expenses):

Technical provisions will all be invested in risk free assets and will, on average, earn the risk free

rate of 2.05% per annum. The duration of these assets is assumed to match the duration of the

technical liabilities (around 3 years)

Additional capital allocated to the business will be invested in a mix of risk free and riskier assets

(equity, property, managed trusts) which earn on average 3.0% per annum above the risk free

rate. The duration of these assets is assumed to be longer than the duration of the technical

liabilities (around 5 years)

Claims provisions will be established incorporating a 12.5% risk margin

Capital will be allocated at a level necessary to achieve 1.5 to 2.0 times the APRA Prudential

Capital Requirement

Shareholders will demand a return on capital of 12% after tax.

The results of our modelling indicate that under these assumptions an appropriate insurer margin for this

business is around 12% to 15% of premium for an insurer which desires to hold capital at 1.5 to 2.0 times

the APRA minimum. We have adopted an insurer margin of 13.5% of premium in determining a

reasonable premium for the 2015/16 policy year (i.e. in the middle of this range). This is 1% higher than

adopted at the previous review reflecting the fact that reduced yields on risk-free assets acts to increase

the required insurer margin (i.e. insurers will require a higher margin as they are expecting to earn less

investment income on the capital required to support the business).


Page 41 of 84


This adopted margin of 13.5% compares to:

An average (weighted by premium volume) of 11.7% of premium adopted in the insurer filed rates

for 2014/15

13.0% of premium included in Tasmania’s 2015/16 suggested premium rates

11% of premium in the Western Australia 2014/15 gazetted premium rates.


Page 42 of 84


5 Results of Hindsight Analysis

We have prepared estimates of the future payments for outstanding workers’ compensation claims and

the ultimate claims cost for each accident year, using the valuation methods referred to in Section 9, the

claim assumptions detailed in Section 2, and the economic and other assumptions described in Section

4. This section summarises these results.

5.1 Estimated Ultimate Cost

Table 5.1 summarises our central estimate of ultimate costs by accident year, split between what has

been paid to 30 June 2014 and what we estimate to be outstanding at that date. The ultimate costs

shown are inflated to the time of payment and are undiscounted.

Table 5.1 – Estimated Ultimate Cost

Accident

Financial

Year

Paid to

30-Jun-14

Estimated

Outstanding

Estimated

Ultimate

Claims

Cost1

Change

Year-on-

Year

$m $m $m %

2001/02 60.6 2.2 62.8

2002/03 72.4 1.2 73.6 17%

2003/04 76.1 2.0 78.2 6%

2004/05 85.8 2.6 88.5 13%

2005/06 87.1 3.5 90.6 2%

2006/07 81.2 4.0 85.2 -6%

2007/08 75.0 6.8 81.8 -4%

2008/09 92.2 11.6 103.8 27%

2009/10 96.4 21.3 117.7 13%

2010/11 98.6 32.2 130.7 11%

2011/12 71.6 51.4 123.0 -6%

2012/13 51.2 78.0 129.2 5%

2013/14 18.7 100.8 119.6 -7%

As the ultimate costs shown in are inflated but undiscounted, if there were no trends in claim numbers,

average claim sizes or superimposed inflation, then we would expect each year to be higher than the

previous year by the amount of wage inflation.

We can see that the growth in ultimate costs has been somewhat variable over the years shown. Across

the whole period, growth in ultimate costs has averaged 6% per annum, around 1% higher than wage

Key Findings

For 2013/14, we estimate that ultimate costs will be 7% lower than 2012/13, reflecting the fact

that claim numbers fell significantly during the year.

Insurers as a whole appear to be adequately reserved; insurer central estimates of outstanding

claims liabilities are close to our central estimate.

Risk premiums (ultimate costs expressed as a proportion of wages) are estimated to be 1.6% of

wages for the 2013/14 accident year.


Page 43 of 84


inflation on average. For 2013/14, we estimate that ultimate costs will be 7% lower than 2012/13,

reflecting the fact that claim numbers fell significantly during the year.

5.2 Comparison to Insurer Central Estimates

The following table compares our estimated outstanding claims cost (inflated to date of payment and

discounted to 30 June 2014) and the central estimate of insurer reserves (i.e. case estimates plus

IBNR/ER reserves) at 30 June 2014.

Table 5.2 – Comparison to Insurer Central Estimates

Accident

Financial

Year

Finity

Central

Estimate

Insurer

Case

Estimates

Insurer

IBNR/ER

Insurer

Central

Estimate

Difference

(Insurer less

Finity)

% Difference

$m $m $m $m $m %

Prior 9 3 3 5 -4 -42%

2006/07 4 2 2 3 -1 -15%

2007/08 6 2 2 3 -3 -47%

2008/09 11 3 2 5 -5 -50%

2009/10 20 14 5 19 -1 -4%

2010/11 30 24 8 31 1 5%

2011/12 48 36 13 49 1 2%

2012/13 73 64 18 82 9 12%

2013/14 93 56 34 91 -3 -3%

Total 294 203 87 289 -5 -2%

Our central estimate of outstanding claims liability is $294 million. Insurer case estimates plus IBNR/ER

reserves of $289 million are therefore $5 million (2%) lower than our central estimate.

Proportionately, the insurer estimates are considerably lower than the Finity estimates for the 2008/09

and prior accident years, although the amounts involved are small. The insurer and Finity estimates are

close for all years after 2009/10 with the exception of 2012/13 where insurer estimates are higher than

the Finity estimates.

Insurers are also required by APRA to hold a risk margin in addition to this IBNR/ER reserve, which we

expect would be of the order of around 10% to 15% of the insurer central estimates as a whole (i.e.

around $30 million to $40 million). This would indicate that as whole, the insurer group is adequately

reserved.

The above estimate of reserve adequacy is performed at a high level, for the scheme as a whole. The

adequacy of any individual insurer’s reserves will vary depending on the insurer’s own reserving

practices.

5.3 Scheme Risk Premiums

Table 5.3 shows our estimate of the historical risk premium rates. Historical risk premiums are calculated

from actual past payments plus our latest estimate of outstanding claims. Claims costs are then

discounted to the beginning of the accident year and expressed as a proportion of earned wages for that

year.


Page 44 of 84


Table 5.3 – Risk Premiums

Accident

Financial

Year

Estimated

Ultimate

Claims Cost1

Earned

Ultimate

Wages

Cost as a % of

Earned Wages

$m $m %

2004/05 75.0 4,143 1.8%

2005/06 76.1 4,365 1.7%

2006/07 73.1 4,879 1.5%

2007/08 71.3 5,411 1.3%

2008/09 91.7 5,665 1.6%

2009/10 104.7 5,734 1.8%

2010/11 117.5 6,225 1.9%

2011/12 112.1 6,700 1.7%

2012/13 118.9 6,845 1.7%

2013/14 109.9 7,047 1.6%1 Net of recoveries, inflated and discounted to beginning of accident year

The estimated risk premiums reduced from around 1.8% of wages in 2004/05 to a low of 1.3% of wages

in 2007/08. Estimated risk premiums then increased over the next three years to 2010/11, before

stabilising at around 1.7% of wages in 2011/12 and 2012/13. In 2013/14, the risk premium has reduced

to 1.6% of wages, reflecting the reduction in claim numbers in the year.

5.4 Achieved Premium Rates

The following graph shows the estimated ultimate achieved premium rates split between the risk

premium component and insurer expenses/profit.

Figure 5.1 – Estimated Ultimate Achieved Premium Rates

0.0%

0.5%

1.0%

1.5%

2.0%

2.5%

3.0%

3.5%

4.0%

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

15

/16

Ach

ieve

d P

rem

ium

Ra

te

Accident Year

Risk Premium Expenses/Profit

Insurer achieved premium rates have been around 2.4% of wages since 2010/11. The estimated risk

premium declined from 1.9% of wages for 2010/11 to around 1.7% of premium in both 2011/12 and

2012/13. In 2013/14, the reduction in claim frequency resulted in a further reduction in the risk premium

to 1.6% of wages. We are estimating a risk premium of 1.71% for the 2015/16 policy year. We note that

there is considerable uncertainty over the estimated risk premium for more recent accident years.


Page 45 of 84


We estimate the margin left to cover expenses and profit has risen from around 0.5% of wages (2010/11)

to 0.8% of wages (2013/14). This compares to allowances in our reasonable premium rates of 0.94% of

wages.


Page 46 of 84


6 Premium Pool for 2015/16

This section brings together the analysis of previous sections, establishing our estimate of a reasonable

premium pool and the average premium rate.

6.1 Wages

Consistent with the assumptions used in our estimate of the risk premium pool, we have assumed wage

inflation of 3.25% per annum from 2013/14 to 2015/16 and employment growth of 0.5% per annum.

Hence we project earned wages of around $7.6 billion in the 2015/16 policy year, as shown in Figure 6.1

below.

Figure 6.1 – Estimated Wages Covered

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

20

04

/05

20

05

/06

20

06

/07

20

07

/08

20

08

/09

20

09

/10

20

10

/11

20

11

/12

20

12

/13

20

13

/14

20

15

/16

Pro

jecte

d

Wri

tte

n W

ag

es

(ori

gin

al

va

lue

s)

Year

Previous

Written wages in 2013/14 were around 9% lower than previously projected; this reflects the fact that

wage inflation during the year was -6% whereas we expected a 3.5% increase. This has a flow on

impact, with the projected wages for the 2015/16 policy year also around 9% lower than expected.

6.2 Average Renewal Date

Based on past patterns of wages covered and earned wages, we have estimated that the average

renewal date for workers’ compensation policies in the ACT is in mid-September of each year.

Hence the dates of key events we have assumed for the 2015/16 policy year are:

15 September 2015 – average renewal date, assumed equal to the average premium receipt date

Key Findings

We estimate a reasonable premium rate for the 2015/16 policy year to be 2.65% of wages. This

compares with 2.46% estimated for the 2014/15 policy year, an 8% proportional increase. Most of this

increase is due to the reduction in the risk free discount rate.


Page 47 of 84


15 March 2016 – average accident date, average date of first year’s claim payments

15 March 2016 – average date of second year’s claim payments, etc.

As we have selected our average claim size in December 2014 values, the above dates mean that claims

payments in the first year will need 14.5 months of inflation (including superimposed inflation) added,

payments in the second year need 26.5 months of inflation added, etc. All payments are then discounted

back to the average date of renewal, i.e. 15 September 2015.

6.3 Reasonable Premium Pool

The total scheme risk premium for 2015/16 represents the total expected claim costs, and is derived as

the number of non-nil claims adopted for 2015/16 times the adopted average claim size (refer Section

3.12), plus allowance for inflation and discounting (refer Sections 4.2 and 4.3). This results in a risk

premium of $129.4 million, or 1.71% of wages.

When expenses (Section 0) and insurer profit margins (Section 4.4) are added to the risk premium, our

estimate of a reasonable premium pool for 2015/16 is $201.0 million. Table 6.1 shows the breakdown of

this amount into the component parts.

Table 6.1 – Total Premium Pool

Premium Rate Component ($m)

Risk Premium Pool 129.4

Expense Loading 44.4

Profit Loading 27.1

Total Premium Pool 201.0

Wages Estimate 7,570.9

Average Risk Premium (% wages) 1.71%

Average Premium Rate (% wages) 2.65%

The estimated reasonable average premium rate for 2014/15 is 2.65% of wages. This compares to our

estimated reasonable premium rate for 2014/15 of 2.46% of wages.

6.4 Comparison with 2014/15 Premium Rate

The reasonable premium rate has increased by 0.20% of wages (a 8% proportional increase). The

following table shows a reconciliation of the movement in the reasonable premium rate.

Table 6.2 – Movement in the Reasonable Premium Rate

Average

Premium

Rate

Increase/

(Decrease)

(% of Wages)

Suggested rate for 2014/15 2.46%

Expected rate for 2015/16 2.46% 0.01%

Change due to wage inflation 2.43% -0.03%

Change in claim assumptions 2.49% 0.05%

Change in economic assumptions 2.59% 0.11%

Change in expense loadings 2.61% 0.02%

Change in insurer margin 2.65% 0.04%

Total change 2.65% 0.20%


Page 48 of 84


The increase in the reasonable rate is due to:

Lower than expected wage inflation meant that, all else being equal, both average claim sizes and

wage estimated were lower than expected. The two impacts were roughly offsetting, reducing the

premium rate by 0.03% of wages.

The reduction in claim numbers was more than offset by the increase in the average size of lump

sum claims. The net impact increased premium rates by 0.05% of wages.

The decrease in the yield curve increased the premium rate by 0.11% of wages. The reduction in

assumed future wage inflation was offset by the increase in superimposed inflation.

Changes to the expense rate increased premiums by 0.02% of wages

The flow on impact to the insurer margin of reduced discount rates further increased the premium

rate by 0.04% of wages.

6.5 Sensitivity Analysis

The estimate of the average premium rate is sensitive to the assumptions used, and the selection of our

assumptions is subject to uncertainty. The effect on the average premium rate of changing each of the

assumptions is shown below. Note that the scenarios tested do not indicate the full range of possible

outcomes. Note also that each scenario is independent of the others shown.

Table 6.3 – Sensitivity Analysis

Scenario

Best

Estimate

Value

Sensitivity

Assumption

Premium

Rate Difference

Percentage

Difference

Base Case n/a n/a 2.65%

Claim frequency up 10% 0.47 0.51 2.92% 0.27% 10%

Average claim size up 10% 35,402 38,942 2.92% 0.27% 10%

Lump sum numbers up 10% 461 507 2.78% 0.12% 5%

Lump sum average size up 10% 120,151 126,159 2.78% 0.12% 5%

Discount rate up 1% p.a. 2.05% 3.05% 2.58% -0.08% -3%

Superimposed inflation at 2% p.a. 0.50% 2.00% 2.80% 0.15% 6%

Expense loadings up 1% 22.10% 23.10% 2.70% 0.04% 2%

Insurer margins up 1% 13.50% 14.50% 2.70% 0.04% 2%

The scenarios presented show:

A 10% increase in frequency or a 10% increase in overall average claim size would result in a 10%

increase in the average premium rate

If the number of claims receiving lump sum benefits were to increase by 10% or if the average cost

of these claims were to increase by 10%, the average premium rate would increase by 5%

A 1% per annum increase in the risk-free discount rate would result in a 3% reduction in our

estimate of the average premium rate

If benefit payments were to increase as a result of superimposed inflation at a rate of 2% per

annum, our estimate of average premium rate would increase by around 6%

If expenses or insurer margins were to increase by 1% of premium, the average premium rate

required would be 2% higher.


Page 49 of 84


7 Suggested Relativities and Reasonable Premium Rates

This section documents our suggested relativities and average premium rates by ANZSIC Division, and

provides some comparisons with insurer achieved rates.

7.1 Relativities

Our approach to calculating the relativities is explained in Section 9.5. Appendix H contains a summary

of the results of our analysis for each ANZSIC Division with non-nil wages in the ACT. The table shows:

ANZSIC Class and description

The Finity grouping used

Observed claim frequency relativities – average for latest three years

Observed capped claims cost relativities – average for latest five years

Our selected relativity

Our estimate of a reasonable premium rate.

We note that the relativity analysis shown in Appendix H uses data from different sources, with the claims

data being sourced from WCMS while the wages and premium data were sourced directly from insurers.

This may lead to some discrepancies with the classification of information by ANZSIC Division and/or

year between the two data sources.

7.2 Reasonable Premium Rates

The following example (for ANZSIC Code 7834 – Computer Consultancy Services) shows how we have

applied the selected relativities shown above to determine the ANZSIC premium rates:

1. average risk premium for Scheme = 1.71% (see Section 6.3)

2. suggested relativity for ANZSIC 7834 = 15 (see Appendix H)

3. average risk premium for ANZSIC 7834 = 0.26%

[equals 1.71% * 15/100]

4. average premium rate for ANZSIC 7834 = 0.39%

[equals (0.26%)/(1 – 22.1 % – 13.5%) * 0.98 which is

(average risk premium for ANZSIC 7834)/(1 – expenses as % of premium – insurer margin) *

scaling factor].

The scaling factor is applied to ensure that the overall average premium rate is achieved. We followed

this process to derive an average premium rate for each ANZSIC Class.

Key Findings




Page 50 of 84




The rates shown in Appendix H are indicative of the average rates that we consider to be appropriate for

the employers at the ANZSIC Class level, consistent with a target average rate of 2.65% overall. The

actual rates charged by insurers to individual employers would be expected to differ from these rates,

reflecting the following:

The actual expense loadings and profit requirements will differ from insurer to insurer

The experience of an individual employer will be taken into account by the insurer in determining

the appropriate rate to be charged; inferior risks will likely be charged additional premiums, while

superior risks may be given discounts (compared with the average)

The rates are determined on the basis of an assessment of the profitability for a single year’s

business; insurers who write business over a period of years increase or decrease rates in

response to accumulated profitability and competitive positioning

The application of minimum premiums (reflecting administration costs which are incurred

independent of the claims cost or “riskiness”).

7.3 Comparison with Insurer Relativities

The following graph compares the relativities of the 2015/16 reasonable rates with the relativities of

licensed insurers’ achieved rates for 2013/14. Each point on the graph represents one of the 17 ANZSIC

Divisions.

The 45-degree line indicates where suggested relativities equal to the achieved relativities. A point

above the 45-degree line is one where our suggested relativity is lower than the achieved relativity, and a

point below the 45-degree line is one where our suggested relativity is higher than the achieved relativity.

Figure 7.1 – Suggested vs. Achieved Relativities

0

50

100

150

200

250

300

350

400

0 50 100 150 200 250 300 350 400

Ach

ieve

d 2

013

-14

Suggested 2015-16

Mining Agriculture

Manufacturing

Transport & Storage

At the Division level, the achieved relativities tend to be close to or higher than our recommended

relativities for Divisions where the relativity is less than around 125. For Divisions where the relativity is


Page 51 of 84


more than 125 our suggested relativities tend to be higher than the achieved relativities. There are a

number of notable outliers (Mining and Agriculture, where the achieved relativity is significantly higher

than our suggested relativity; and Manufacturing and Transport & Storage, where the achieved relativity

is significantly lower than our suggested relativity) however these industries less than 5% of total wages

covered in 2013/14 and can be subject to year on year volatility in their achieved rates.

There is greater variability between recommended and achieved relativities at the ANZSIC Class level.

The following graph shows the achieved and recommended relativities for the top 50 ANZSIC Classes

(as measured by wage volume in 2013/14).

Figure 7.2 – Suggested vs. Achieved Premium Relativities – Top 50 ANZSIC Divisions

0

50

100

150

200

250

300

0 50 100 150 200 250 300

Ach

ieve

d 2

013

-14

Suggested 2015-16

Achieved 2013-14 8 Suggested 2015-16

Figure 7.2 shows a similar picture to Figure 7.1, i.e. the industry achieved relativities tend to be higher

than our suggested relativities where the relativity is less than around 125, but for industries where the

relativity is more than 125, our suggested relativities tend to be higher than the achieved relativities. This

suggests that lower risk industries tend to be over-priced relative to higher risk industries.


Page 52 of 84


Part III Further Information

8 Data

This section describes the data items we were supplied with for this investigation, the results of our

reconciliations and the data summaries produced.

8.1 Data Supplied

CMTEDD administers the ACT Workers Compensation Management System (WCMS). WCMS was

established in 2014 and contains workers’ compensation premium and claim information from all insurers

and self-insurers operating in the Scheme. As part of our review, CMTEDD supplied us with the following

information from WCMS:

Individual claim file showing the accident and report date, insurer code, current liability status, total

payments to date and estimated future payments outstanding for each claim reported or having

had a payment between 1 July 1999 and December 2014

Claim payment transaction file with payments made (by type and month) between 1 July 1999 and

December 2014

Individual policy files, with the ANZSIC Division and insurer codes for each policy written or

renewed between 1 July 1999 and December 2014.

In addition to the information provided, we also received the following summarised data from each of the

insurers:

Policies, premiums and wages written in each year

Earned premiums and wages in each year, split by ANZSIC Division

Triangulations of claims reported and claim payments to 30 September 2014

Case estimates and IBNR/ER allowances as at 30 June 2014.

We have also compiled workforce figures from information available from the Australian Bureau of

Statistics (ABS) and the Australian Public Service Employment Database (APSED), plus information on

the number of ACT public sector employees supplied by the CMTEDD.

Refer to Appendix A for a more detailed listing of the data.

8.2 Reinsurance and Other Recoveries

The data supplied for the purposes of our review did not include details of reinsurance recovery amounts.

Therefore, all data and projections contained in this review are gross of reinsurance, but net of all other

recoveries.


Page 53 of 84


8.3 Reconciliation

In preparing this advice we have relied on the claims information supplied by CMTEDD and premium,

wages and case estimate information supplied by the insurers.

We have compared the WCMS data provided for this review with the data provided for our previous

review (see Appendix C.3). The data from the two extracts matched closely.

We have also reviewed and checked the WCMS data for reasonableness and consistency. Reliance

was placed on, but not limited to, the accuracy of the information described in this report.

8.4 Data Summaries & Adjustments

Scheme Performance Analysis

In performing our claims analysis we have identified and separately considered claims which have zero

payments made to date (“nil claims”).

Further, in determining the number of claims in receipt of common law and lump sum benefits, we have

excluded from our claim number summaries those claims which received total common law or lump sum

benefits of less than $500. We found that one insurer in particular had a large number of such claims.

We have excluded these from all lump sum claim counts on the basis that the payment will most likely

reflect a small investigation or administration expense rather than an actual lump sum payment (noting

the costs of such claims continue to be included in our claim payment summaries).

Workforce Information

We have calculated an approximate private sector workforce as follows:

Total workforce in the ACT

less ACT public sector employees

less Commonwealth public sector employees.

Key findings

Claim number information on WCMS is fairly reliable and is satisfactory for the purposes of

our actuarial review.

Claim payment information on WCMS for 2001/02 and later years is of reasonable quality and

is satisfactory for the purposes of our actuarial review. Significant amounts of payments prior

to 2001/02 are missing (around 25%), primarily due to two larger insurers.

Premium and wages information on WCMS cannot be used at this time because the previous

system did not adequately capture policy adjustments in historical periods. We have instead

relied on information sourced directly from insurers.

Case estimates from WCMS are approximately $30 million (14%) higher than the estimates

provided by insurers, due mainly to discrepancies associated with two larger insurers. As

such, we have not relied on case estimates from WCMS to the extent we would like.


Page 54 of 84


We do not have a “full time equivalent” number of workers, and have therefore used the numbers of full

time workers to approximate the total ACT private sector workforce; see Appendix G.

Relativities Analysis

For the premium relativities analysis, we have:

Calculated claim frequency based on non-nil claims only

Calculated burning cost relativities using both

(i) wage-inflation adjusted payments

(ii) wage-inflation adjusted payments to date plus current case estimates (i.e. incurred costs)

Due to limitations with the case estimate information in WCMS, we have relied on payment based

cost relativities rather than the incurred cost relativities at this review.


Page 55 of 84


9 Compliance with Standards and Approach

This section describes our compliance with relevant standards and the approach used for the projection

of ultimate costs and premium rates.

9.1 Compliance with Relevant Australian Standards

The purpose of this report is to provide an overview of the performance of the Scheme, not to advise any

individual entity on the financial reporting of its workers’ compensation liabilities. Accordingly,

Professional Standard 300 “Valuations of General Insurance Claims” (PS 300) issued by the Institute of

Actuaries of Australia does not apply to this report. In the absence of any other applicable professional

standard, we have used PS 300 for guidance on our approach to the review, but our report is not

intended to comply with all requirements of PS 300.

This report has been prepared in accordance with the Institute of Actuaries of Australia’s Code of

Professional Conduct for the provision of actuarial advice.

9.2 Basis of Estimates

The estimates of future claims costs provided in this report are intended to be central estimates, which

means they are based on assumptions selected without deliberate bias towards either over-estimation or

under-estimation.

The premium rate estimates have been developed on the basis of the following principles:

Estimates of expected claims costs should be “central estimates”, incorporating allowance for both

“normal” and “superimposed” inflation

Claim costs are to be discounted to allow for the time value of money

Estimates of claims costs should take into account any amounts recoverable in respect of the

claims

Premiums should allow for the expenses of writing the business and administering claims

Premiums should include an appropriate allowance for profit.

9.3 Methodology for Actuarial Analysis

For the purpose of analysis, all data has been grouped into accident years, i.e. the year in which the

injury occurred which gave rise to the claim. Development of this data is then analysed and projected by

development year (which is a measure of the number of years since the year in which the accident

occurred, e.g. development year 2 is the year after the year in which the injury occurred). All analysis

has been carried out on a financial year basis (i.e. years ending 30 June).

In conducting our analysis of the ACT workers’ compensation experience, we have followed the same

approach as in the previous review. This involved examining claim numbers and frequency, and average

size by benefit type. The development analysis allows us to project future claim reports and costs in

respect of injuries which have already occurred, from which we can estimate the ultimate number and

cost of claims arising from each accident year. This allows analysis of the underlying trends in Scheme

experience and provides a basis for assessing a reasonable level of premium.


Page 56 of 84


Claim Numbers

In order to estimate ultimate numbers of claims we use the Chain Ladder method to estimate the number

of claims relating to accidents that occurred prior to 30 June 2014 that are yet to be reported (i.e.

“Incurred But Not Reported” or “IBNR” claims). The estimated ultimate number of claims (reported to

date plus IBNR claims) is then expressed as a claim frequency by dividing the ultimate number of claims

in each accident year by a measure of exposure.

Claim numbers were modelled by the following groups:

Non-nil claims – we analysed the ultimate number of claims that are expected to result in a

payment by the insurer, and also consider this as a frequency relative to both ultimate inflation-

adjusted wages earned in the period and full time employee numbers in the period. Further detail

on the calculation of ultimate inflation-adjusted wages can be found in Appendix G

Lost time – we analysed the numbers of claims receiving weekly benefits (“lost time”) and the

frequency of lost time claims relative to non-nil claims

Lump sums – we analysed the numbers of lump sum claims (common law, statutory impairment,

commutations and death benefits, excluding claims with total lump sum payments less than $500)

and utilisation rate (the ultimate number of lump sum claims divided by ultimate number of non-nil

claims).

Claim Duration

We examined trends in duration of weekly benefit claims by analysing the number of claims that remain

active in each development quarter. A claim received an “active” flag and was counted once if it received

a weekly payment in the quarter. We excluded from our active count any claims where total weekly

payments to date were negative or where the weekly payments made in a quarter total zero.

Average Claim Size

Claim payments were analysed and projected using the following benefit type groupings:

Weekly benefits – modelled using a Payments Per Claim Incurred (PPCI) approach, where the

claim count used is the estimated ultimate number of lost time claims. We supplemented this

primary model with a Payments Per Active Claim (PPAC) model

Medical and related benefits – modelled using a PPCI approach, where the claim count used is the

estimated ultimate number of non-nil claims

Rehabilitation benefits – modelled using a PPCI approach, where the claim count used is the


Lump sums – modelled using a Payments Per Claim Settled (PPCS) approach, where the claim

count used is the ultimate number of lump sum claims

Legal and other benefits – modelled using a PPCI approach, where the claim count used is the


Recoveries – modelled using a PPCI approach, where the claim count used is the estimated

ultimate number of non-nil claims.

An explanation of these methods can be found in Appendix D.


Page 57 of 84


From each of the above models we estimate the average payment, by payment type and development

year. The overall average claim size for each accident year is the result of adding our estimated

payments for each payment type and dividing by the projected ultimate number of claims.

9.4 Reasonable Premium Pool

The estimation of a reasonable premium pool includes allowance for claims, expenses and profit.

Diagrammatically this can be represented as follows:


Page 58 of 84


Figure 9.1 – Reasonable Premium Pool

We have assessed each element separately, and then tested the reasonableness of the estimated

premium pool resulting from the combination of all assumptions.

The estimate of the total premium pool, which includes allowances for expenses, levies and reasonable

insurer profit margins, is divided by insured wages to derive a reasonable Scheme average premium

rate. The derived rate for past years can be compared with the actual rates charged by insurers.

Claims Cost

The claims cost assumptions come from the actuarial analysis of the historical Scheme claims

experience discussed in Section 0.

Inflation and Discount

The long-tailed nature of workers’ compensation means that it is appropriate to allow for both future

inflation and the time value of money in assessing the premium rate.

For the purpose of establishing the average rates for this report we have based our assumptions on the

following:

Discount rate – expected returns on Australian government bonds over the period in which claim

payments are made

Normal economic inflation – current economic forecasts for medium term wage inflation

Superimposed inflation – analysis of recent Scheme experience, together with expectations for the

future (necessarily judgemental).

Premium

Pool

Inflation

& Discount

Commission

& Expenses

Inflation &

Discount

Claims

Cost

Claim

Frequency

Average

Size

Legislative

Amendments

Experience

Analysis

Qualitative

Input

Comm. &

Expenses

Premium

Pool

Inflation

& Discount

Commission

& Expenses

Inflation &

Discount

Insurer

Margin

Claims

Cost

Claim

Frequency

Average

Size

Legislative

Amendments

Experience

Analysis

Qualitative

Input

Comm. &

Expenses


Page 59 of 84


Commission and Expenses

We were supplied with average commission rates currently paid by each of the licensed insurers writing

workers’ compensation insurance in the ACT. Based on their market share (as measured by premium

volume), we have estimated the overall average commission paid by the Scheme as a whole.

We have allowed for other administration costs based on this information, along with expense rates

included in the insurer’s rates, and our knowledge of expense rates in other state workers’ compensation

schemes. We have also allowed for costs associated with funding the Regulatory Funding Levy, Default

Insurance Fund (the DIF levy) and Magistrates Court Levy.

Insurer margin

In determining an appropriate margin for profit for this business we have utilised a model that projects the

after tax profits of a single underwriting year’s business in each future year until the cohort of business

has completely run-off. On the basis of a series of assumptions regarding investment returns earned by

insurers, the capital required to support this business, and the return on capital required by the insurer

shareholders, we have derived an insurer margin we view as appropriate for this business.

9.5 ANZSIC 1993 Division Premium Rates

The ANZSIC 1993 codes have a “tree” structure comprising categories at four levels, namely Divisions (1

digit level), Subdivisions, Groups and Divisions (4 digit level). There are 17 Divisions within the ANZSIC

coding, each identified by an alphabetical character (A is agriculture, B is mining, etc.).

The determination of a reasonable premium rate for each ANZSIC Division proceeds from the estimate of

the total premium pool. The procedure adopted is to analyse the past claims experience and wages by

ANZSIC Division to determine cost “relativities” between Divisions. The resulting relativities are then

applied to the Scheme average premium rate to determine a set of rates for each ANZSIC Division,

which should produce the total premium pool. These rates will spread total premium costs across

ANZSIC Divisions in proportion to each industry’s contribution to the costs of the workers’ compensation

scheme.

Relativities

In considering the ACT experience by ANZSIC Class we have separately considered frequency

relativities and cost relativities (both with and without capping of large claims).

The frequency relativity for an ANZSIC Class is calculated as follows:

Divide the number of non-nil claims reported in each accident year by the earned wages for that

year, to determine the reported claim frequency

Divide the frequency for that ANZSIC Class by the frequency for the Scheme as a whole, to

determine the relativity (the experience of the ANZSIC Class relative to the experience of the

Scheme).

The claims cost (“burning cost”) relativity for an ANZSIC Class is calculated as follows:

Divide the inflated payments for each accident year by the remuneration for that year to derive a

burning cost rate


Page 60 of 84


Divide the burning cost rate for that ANZSIC Class by the overall burning cost rate for the year to

derive the relativity.

The frequency relativities tend to be more stable than the cost relativities, simply because the latter are

affected by the volatility of the claim sizes.

To reduce this volatility we also calculated a “capped” cost relativity. This capped cost relativity was

calculated in the same fashion as the uncapped cost relativity, but with individual claims capped at

$300,000.

We have calculated the relativities for each accident year from 2004/05 to 2014/15 and the combined

relativity across all years examined. The relativities considered together give an indication of the

underlying relativity for the Class being considered.

One of the biggest difficulties with derivation of ANZSIC Class specific premium rates in the ACT is the

size of the employer base and the statistical credibility of the experience at the Class level.

To overcome this difficulty, we have grouped like ANZSIC Classes, noting that “like” in this instance

refers to the riskiness in relation to workers’ compensation claims experience. Our approach to grouping

like Classes has been based on a combination of empirical evidence, judgement about the underwriting

risks associated with similar industries, and utilising findings from assessment of other workers’

compensation schemes.

The process to select an appropriate relativity for each ANZSIC Class was to:

Start with the selected ANZSIC groupings and relativities for 2014/15 and examine the ANZSIC

Classes within each group to decide whether any needed to move to another group bearing in

mind the experience which has emerged in 2013/14

For the larger ANZSIC Classes, calculate a “default” relativity by weighting the average claim

frequency relativity and the average paid cost relativity. Judgement is then be used to determine if

the “default” relativity was appropriate for selection or whether the 2014/15 relativity remains

appropriate

For the smaller ANZSIC Classes, calculate a default relativity based on the experience for the

group rather than the individual code. Judgement is then used to determine if the default relativity

is appropriate for the group or whether the 2014/15 relativity remains appropriate

Check that the selected relativities are comparable with the relativities implied by the current

premium rates charged by ACT insurers.

Having formed assumptions regarding appropriate relativities for each ANZSIC Division, the final steps in

the process are to consider the reasonableness of the implied rates by ANZSIC Division and to test that

the reasonable rates, when applied, produce the total premium pool required.


Page 61 of 84


10 Reliances & Limitations

10.1 Data

We have relied on the accuracy and completeness of all data and other information (qualitative,

quantitative, written and verbal) provided to us by CMTEDD and private insurers for the purpose of this

report. We have not independently verified or audited the data but we have reviewed it for general

reasonableness and consistency. It should be noted that if any data or other information is inaccurate or

incomplete, we should be advised, so that our advice can be revised, if warranted.

Specific data limitations identified and the impact of these on our review are discussed further in

Appendix B.

10.2 Uncertainty

The estimates of future claims costs are intended to be a central estimate and are based on assumptions

selected without deliberate bias towards either over-estimation or under-estimation. Please note

however, that it is not possible to put a value on future claims cost with certainty. As well as difficulties

caused by limitations on the historical information, outcomes remain dependent on future events,

including legislative, social, and economic forces. Although we have prepared estimates in conformity

with what we believe to be the likely future experience, actual experience could vary considerably from

our estimates. Deviations are normal and are to be expected.

We have generally assumed that the payment of claims will proceed as in the recent past, and we have

not anticipated any extraordinary changes to the legal, social or economic environment that might affect

the cost, frequency or future reporting of claims.

In our judgement, we have employed techniques and assumptions that are appropriate, and the

conclusions presented herein are reasonable, given the information currently available. However, it

should be recognised that future claim emergence will likely deviate, perhaps materially, from our

estimates.

10.3 Distribution and Use

This report is being provided for the use of the CMTEDD for the purposes stated in Section 1.1 of this

report. It is not intended, nor necessarily suitable, for any other purpose. This report should only be

relied on by CMTEDD for the purpose for which it is intended. No other use of, or reference to, this

report may be made without the prior written consent of Finity, nor should any part of the report be

disclosed to any other person. The report should be considered as a whole.

Third parties, whether authorised or not to receive this report, should recognise that the furnishing of this

report is not a substitute for their own due diligence and should place no reliance on this report or the

data contained herein which would result in the creation of any duty or liability by Finity to the third party.

Finity has performed the work assigned and has prepared this report in conformity with its intended

utilisation by a person technically competent in the areas addressed and for the stated purposes only.

Judgements about the conclusions drawn in this report should be made only after considering the report

in its entirety, as the conclusions reached by a review of a section or sections on an isolated basis may

be incorrect.

The Chief Minister and Treasury Directorate


Part IV Appendices

A Glossary of Terms

The terms described below may have different meanings ascribed to them in other actuarial reports.

Term Definition

Accident Year The year (years ending 30 June) in which the injury occurred which gave

rise to a claim. E.g. a claim occurring on either 30 September 2008 or 30

March 2009 is said to belong to the 2008/09 accident year.

Active claim A claim which has received a weekly payment in the quarter, excluding

any claims where total weekly payments to date were negative or where

the weekly payments made in the quarter total zero.

Central Estimate An estimate of the liability which is intended to contain no deliberate bias

to either over- or under-estimation and does not include allowance for

claims handling expenses.

Claim Frequency Estimated ultimate number of claims divided by a measure of exposure

(either wages or employees).

Continuance Rate The number of claimants in receipt of weekly benefits in one quarter

divided by the number in receipt of weekly benefits in the preceding

quarter. For example, the rate for development quarter 1:2 is calculated

as the number of claimants receiving weekly benefits the second quarter

after the accident quarter, compared with the number receiving weekly

benefits in the accident quarter.

Development Year The number of years since the year in which the accident occurred, e.g.

development year 1 is the same as the year of accident, development

year 2 is the year following the accident year, etc.

Earned Premium Policy-year premiums spread over the period of cover. All premiums

shown are exclusive of GST and inclusive of brokerage/commissions.

Earned Wages Policy-year wages spread over the period of cover. All wages shown are

exclusive of superannuation, but include salary, overtime, shift and other

allowances, over-award payments, bonus, commissions, payments for

public and annual holidays (including loadings), payments for sick and

long service leave, value of board/lodging provided by employer,

reimbursement for expenses incurred by the worker due to employment,

any amount expended on behalf of the worker, directors’ fees, and fringe

benefits costs.

Loss Ratio Estimated ultimate cost (net of recoveries) divided by gross earned

premium for that year. Ultimate costs have been discounted to the mid-

point of the relevant accident year.

IBNR Incurred but Not Reported Claims – i.e. claims that have occurred at the

review date but have not yet been reported.



Nil claims Claims which have no payments made to date. Some nil claims will

always remain nil (“report only claims”) while others will become non-nil

claims as payments are made

Outstanding Claims Costs Includes the costs of IBNR claims and allowance for further payments on

already reported claims.

PPCF Payment per Claim Finalised

PPCI Payment per Claim Incurred

PPCS Payment per Claim Settled

Premium Pool Estimated claims costs plus allowance for expenses and insurer margins.

Premium Rate Premiums divided by wages. The premium rate may be calculated on

either a written or earned basis.

Risk Premium Total expected claim costs divided by wages. Historical risk premiums

are calculated from actual past payments plus our estimate of

outstanding claims.

Superimposed Inflation The tendency for claims costs to increase at a higher rate than normal

economic inflation (i.e. wage inflation).

Ultimate Claim Numbers The total expected number of claims for an accident year. This will

include all claims reported to the review date together with any IBNR

claims for the accident year.

Ultimate Claims Costs The total expected claim costs for an accident year. This includes all

amounts paid to the review date (net of recoveries) plus outstanding

claims costs.



B Scheme Background

This section covers the background to the workers’ compensation scheme in the ACT, including the

impacts of the major legislative amendments.

B.1 Introduction

The ACT workers’ compensation scheme (Scheme) is a privately underwritten scheme, operating under

the Workers’ Compensation Act 1951 (the Act). CMTEDD is responsible for the administration of the Act.

Under the Act, employers are required to take out a workers’ compensation insurance policy with an

approved insurer (approved by the Minister) or be granted an exemption to self-insure these risks by the

Minister. There are currently seven licensed insurers providing workers’ compensation insurance in the

ACT:

QBE (including the run-off of Mercantile Mutual Insurance)

Allianz

IAG (including the run-off of CGU, FAI, HIH, NZI and VACC)

Suncorp (written through the GIO licence and including the run-off of Vero)

Zurich

Guild

Catholic Churches Insurance (CCI).

B.1.1 The Default Insurance Fund

The Default Insurance Fund (DIF) is a body established under the Act to cover the cost of claims for

compensation where the employer is uninsured, bankrupt or insolvent. The DIF is funded by a levy on

premiums, and on notional premiums in the case of self-insurers. We have excluded the cost of claims

covered by the DIF from the analysis of claim performance of the Scheme and have included an

allowance for the DIF levy in determining the reasonable premium pool.

B.2 Compensation Types

Under the Act, a worker is entitled to compensation as described below.

B.2.1 Weekly Benefits

Compensation is provided to a worker who is incapacitated for work as a result of an injury or disease

arising out of, or in the course of, the worker’s employment. Weekly payments may continue for the

duration of the incapacity, or to age 65. The level of the weekly payment (“the replacement ratio”) varies

by duration of incapacity as shown in Table B.1 below.



Table B.1 – Weekly Benefit Entitlements

Weeks on Benefit Total Incapacity Partial Incapacity

0-26 weeks100% of average pre-incapacity weekly

earnings.

100% of the difference between average pre-

incapacity weekly earnings and average

weekly amounts the worker is being paid or

could earn in reasonably available suitable

employment.

26 weeks +

* 100% of average pre-incapacity weekly

earnings, if average pre-incapacity weekly

earnings are less than the pre-incapacity floor

(i.e. the federal minimum wage immediately

before the incapacity); or

* Maximum of either 65% of average pre-

incapacity weekly earnings and the statutory

floor.

A percentage of the difference between

average pre-incapacity weekly earnings

(subject to the minimum statutory floor and

maximum statutory ceiling of 150% of AWE)

and average weekly amounts the worker is

being paid or could earn in reasonably

available suitable employment, with this

percentage varying depending on the weekly

hours worked relative to pre-incapacity hours

of the employer.

The weekly benefits described above have been in place since 1 July 2002.

B.2.2 Medical and Rehabilitation Benefits

The Act provides for compensation to the injured worker for costs associated with medical treatment

(including hospital), rehabilitation services, alterations to the worker’s place of residence, wages lost by

the worker whilst attending treatment, transport to/from treatment, accommodation (including meals)

while at treatment, repair/replacement of damaged clothing, etc. The total amount of medical costs

relating to repair or replacement of contact lenses, crutches, prosthesis, spectacles, artificial aids and for

loss or damage to a worker’s clothing is capped at $500 (currently around CPI indexed to approximately

$700).

B.2.3 Death Benefits

Dependants are entitled to lump sum compensation on the death of the worker, capped at $150,000 (CPI

indexed to approximately $210,000). In addition, dependants may be entitled to receive weekly

payments of $50 per week (CPI indexed to $70 per week) and funeral expenses of $4,000 (CPI indexed

to just under $5,600).

B.2.4 Impairment Lump Sums

Workers who suffer a permanent impairment from a work-related injury or disease are entitled to receive

a maximum lump sum payment of $100,000 (CPI indexed to approximately $140,000) for a single injury

or $150,000 (CPI indexed to approximately $210,000) for multiple injuries. The level of the lump sum

payment varies between 2% and 100% of the maximum amount for a total loss as shown in Schedule 1

of the Act. For partial losses, the claimant is entitled to a proportionate reduction on the Schedule 1

amount. In most cases, a claim for an impairment lump sum cannot be made earlier than two years after

the injury. Weekly benefits may continue to be payable despite payment of a lump sum benefit, subject

to negotiation between the injured worker and employer or insurer.

B.2.5 Redemptions of Statutory Entitlements

In certain circumstances, subject to negotiation between the injured worker and the employer or insurer,

claimants may commute their statutory benefits. The redemption may include amounts for the worker’s

entitlement to weekly benefits, medical and other expenses. Throughout the report we refer to the

redemption of statutory entitlements as “commutations”.



B.2.6 Common Law

A worker may be entitled to seek compensation damages under common law where the work-related

injury or disease was caused or contributed to by the negligence of a third party. Damages awarded are

reduced by the amount of compensation already paid to the worker. Access to common law and the

maximum amount of compensation available are unlimited under the Act.

Common law payments may include either damages awarded at court or negotiated lump sum

settlements (i.e. a lump sum payment accompanied by a common law release).

B.2.7 Legal Costs

An injured worker may also seek reimbursement for the costs of legal and other expenses incurred as a

result of pursuing common law damages or negotiating a settlement of their statutory entitlement.

B.3 Journey Claims

Workers are covered for injuries arising out of journeys both to and from work and undertaken for work

purposes.

B.4 Employer Excess

The level of employer excess is not prescribed under the Act, but can be negotiated between the

employer and the insurer.

B.5 Legislative Reform

This section summarises the legislative reforms that have had a significant impact on our review. The

reader is referred to the relevant legislation for full details of the changes.

B.5.1 2002 Amendments

The Workers’ Compensation Amendment Act 2001 came into effect on 1 July 2002, and applies to

injuries where the accident occurred on or after this date.

The amendments from the previous legislation may be summarised as follows:

Weekly benefits

► Benefits cease upon return to work or pension age (previously death)

► Benefits depend on average pre-injury earnings including overtime (previously did not

include overtime or allowances)

► Benefits for incapacity post 26 weeks drop to 65% of pre-injury earnings (previously based

on a statutory rate) subject to a minimum of a statutory floor

► Benefits for partial incapacity subject to a minimum of a statutory floor (the federal minimum

wage) and statutory ceiling (150% of AWE) (previously based on a statutory amount).

Lump sums

► Introduction of 6% threshold for access to compensation for hearing loss

► Expanded the Table of Maims



► Increased maximum impairment, death and funeral benefits

► Introduction of a two year waiting period before a worker could claim for permanent

impairment benefits.

Medical benefits

► Increased maximum amount for specified medical costs.

Common Law

► Reduced statute of limitations for common law to 3 years (previously 6 years).

Other

► Definition of worker expanded to include volunteers

► Definition of employment-related diseases tightened

► Definition of journey claims tightened

► Increased focus on injury management processes, including the strengthening of

requirements for employers to provide suitable return to work

► Encouraged early notification of claims.

B.5.2 Civil Law (Wrongs) Act 2002

The amendments introduced as part of the Civil Law (Wrongs) Act 2002 came into force in late 2002 and

resulted in changes to legal proceedings in the ACT. In September 2003, the legislation was amended to

exclude workers’ compensation claims from the Wrongs Act.


The Workers’ Compensation Act 2006 and Workers’ Compensation Amendment Act 2006 (No 2) became

effective 1 July 2006 and resulted in the:

Establishment of the Default Insurance Fund

Change in definition of maximum duration of weekly compensation to 65 years of age

Categorisation of some ‘carers’ as workers

Encouragement of early reporting of injury

Specific mention of rehabilitation costs.


The Workers’ Compensation Amendment Act 2009 introduced a range of amendments that:

Allowed the appointment of a rehabilitation service provider in the event that an injured worker had

been unable to return to work in their pre-injury hours and duties within 4 weeks

Introduced new offences and penalties for non-compliance by employers.




The Workers’ Compensation Amendment Regulation 2011 came into effect on 1 September 2011 and

introduced amendments requiring compliance audits of Approved Insurers and Self-Insurers.

B.5.6 2013 Amendments – Regulatory Levy

The Workers Compensation Amendment Bill 2013, passed in October 2013, amends the Act to enable

funding of Work Health and Safety regulatory costs via an insurer levy.

B.5.7 2014 Amendments – Cross Border Arrangements

The Workers Compensation (Cross-border Workers) Amendment Bill 2014 was in October 2014, to align

cross-border state of connection with updated national guidelines. These amendments provide guidance

in the event of dispute regarding relevant jurisdiction and connection to employment in the ACT.



C Data

This section summarises the data provided to us for this review and documents the reconciliations

performed.

C.1 WCMS Data

The WCMS data provided to us by CMTEDD is detailed below.

C.1.1 Claim File

We received an individual claim file listing all claims reported or having had a payment between 1 July

1999 and December 2014, which included the following variables:

1. Claim ID (WCMS assigned)

2. Claim number (insurer assigned)

3. Policy number

4. Coverage ID and reference (unique identifiers to link to the coverage file)

5. Accident date

6. Report date, the date claim was notified to the insurer by the employer

7. Lodgement date, the date claim was lodged with employer

8. ANZSIC 1993 and 2006

9. Type of injury (“Injury”)

10. Mechanism of injury (“Mechanism”)

11. Part of body injured (“Body Location”)

12. Agency causing the injury (“Agency”)

13. Worker details (date of birth, gender, duty status, employment status, hours worked, pre-injury

earnings)

14. Whole Person Impairment (WPI) percentage

15. Claim finalised date

16. Date reopened

17. Claim status

18. Total estimated payments

19. Total estimate lost time.

C.1.2 Payment Transaction File

We received a claim payment transaction file with payments made (by payment type and month)

between 1 July 1999 and December 2014, which included the following variables:

1. Payment ID (WCMS assigned)



2. Payment reference (insurer assigned)

3. Claim ID and reference (unique identifiers to link to the claim file)

4. Insurer number and name

5. Date of transaction

6. Service date

7. Payment type

8. Payment amount

9. Payment Source (i.e. employer or insurer)

10. Time Lost in Minutes.

C.1.3 Case Estimate File

We received an individual claim file listing all claims reported or having had a payment between 1 July

1999 and December 2014, which included the following variables:

1. Claim ID (WCMS assigned)

2. Claim number (insurer assigned)

3. Insurer Name

4. Total estimated payments

5. Total payments to date

6. Total outstanding amounts

C.1.4 Policy File

We received an individual policy file for all policies written or renewed between 1 July 1999 and

December 2014, which contained the following variables:

1. Policy ID (WCMS assigned)

2. Policy number (insurer assigned)


3. Employer ABN

4. Employer name

5. Employer postcode.

C.1.5 Coverage File

We received an individual premium file for all policies exposed from 1 July 1988 that included the

variables listed below:



1. Policy ID (WCMS assigned)

2. Policy number (insurer assigned)

3. Cover ID (WCMS assigned)

4. Coverage reference (insurer assigned)


6. Employer ABN

7. ANZSIC 1993 and ANZSIC 2006

8. Start date of period of cover (“Effective Date”)

9. End date of period of cover (“Expiry Date”)

10. Number of workers (“Estimated Workers” and “Actual Workers”)

11. Wages in dollars (“Estimated Wages” and “Actual Wages”)

12. Premiums charged (“Initial Deposit”, “Adjusted Amount” and “Actual Final”)

13. Lapse reason code

14. Coverage type (e.g. new policy, adjustment, renewal, etc)

15. Policy type (e.g. normal, burning cost, minimum premium).

C.2 Information Provided by Insurers

Each of the insurers of workers’ compensation in the ACT provided us with summarised premium, wages

and claims information, including:

Written policies for policy years ending 30 June 2004 to 30 June 2014, separately for burner and

all other policies

Written wages for policy years ending 30 June 2004 to 30 June 2014. Insurers provided both initial

(i.e. that initially estimated at the start of the policy period) and final adjusted written wages,

separately for burner and all other policies

Written premium for policy years ending 30 June 2004 to 30 June 2014. Insurers provided both

initial and adjusted written premiums, separately for burner and all other policies

Earned wages for accident years ending 30 June 2004 to 30 June 2014, and by ANZSIC Division.

Insurers provided adjusted earned wages

Earned premium for accident years ending 30 June 2004 to 30 June 2014, and by ANZSIC

Division. Insurers provided adjusted earned premiums.

Numbers of claims reported, subdivided by accident year and report year

Claim payments made, subdivided by accident year and payment year

Case estimates and IBNR/ER allowances as at 30 June 2014, subdivided by accident year.

In order to improve the comparability and consistency of the information supplied by insurers, the data

required adjustment in some cases so that:



Premiums include brokerage and commissions

Wages exclude superannuation.

We compared the premium and wages information supplied for this review with that supplied for the

previous review and found some increases in wages and premiums recorded for more recent policy

years. This reflects expected development on policies as information is updated with final wages

estimates and changes to burner policies reflect emerging claims experience. The differences were not

unexpected.

We compared the claim number, claim payment and case estimate information supplied by the insurers

to that on WCMS. The reconciliations are detailed in Appendix C.3 below. Our findings were:

There are some significant differences between WCMS claim number data and insurer records

arising from differences in recording and reporting of nil claims and notifications for one insurer.

This is not expected to impact our analysis as our average payment models are based on the

number of non-nil claims.

There were some substantial differences in the case estimate information between WCMS and

insurer data, relating primarily to two larger insurers. There were also some less material

differences relating to two smaller insurers.

We have utilised WCMS case estimate information for all insurers.

C.3 Data Reconciliations

We compared the WCMS data provided for this review with the data provided for our previous review.

The following table summarises the comparison of claim reports and claim payments to 30 June 2013

from the two data sources.

Table C.1 – Reconciliation to Previous Data

Accident

Year

Current

Dataset

Previous

Dataset Difference

%

Difference

Current

Dataset

Previous

Dataset Difference

%

Difference

2003/04 3,592 3,618 -26 -1% 75.9 75.9 0.0 0%

2004/05 3,627 3,659 -32 -1% 84.4 84.4 0.0 0%

2005/06 3,538 3,556 -18 -1% 82.9 82.9 0.0 0%

2006/07 3,681 3,701 -20 -1% 77.7 77.7 0.0 0%

2007/08 3,484 3,484 0 0% 68.6 68.6 0.0 0%

2008/09 3,318 3,308 10 0% 80.5 80.5 0.0 0%

2009/10 3,424 3,418 6 0% 83.8 83.8 0.0 0%

2010/11 3,602 3,589 13 0% 75.2 75.2 0.1 0%

2011/12 3,578 3,554 24 1% 47.0 47.0 0.0 0%

2012/13 3,140 3,139 1 0% 20.8 20.6 0.2 1%

Total 34,984 35,026 -42 0% 696.9 696.6 0.3 0%

Claim Numbers Claim Payments ($m)

The data from the two sources matched closely.

We also received summaries of claim and policy data from the insurers operating in the Scheme in

response to our request to confirm the validity of the WCMS data.



Table C.2 shows a reconciliation of the number of claims on the WCMS database to those supplied by

insurers.

Table C.2 – Claim Numbers Reported - WCMS vs. Insurer Data

Accident

Year

WCMS

Data

Insurer

Data Difference

%

Difference

2003/04 4,050 4,879 -829 -17%

2004/05 4,073 5,105 -1,032 -20%

2005/06 3,972 3,982 -10 0%

2006/07 4,416 4,419 -3 0%

2007/08 4,219 4,223 -4 0%

2008/09 4,404 4,409 -5 0%

2009/10 4,738 4,739 -1 0%

2010/11 4,927 4,933 -6 0%

2011/12 5,016 5,044 -28 -1%

2012/13 4,848 4,872 -24 0%

2013/14 4,573 4,610 -37 -1%

The differences between the WCMS data and insurer data are significant in the 2003/04 and 2004/05,

but this relates to one insurer that had an abnormally high number of nil claims recorded on their

databases against these years, while the WCMS database did not include these nil claims. As such, our

view is that the number of claims on the WCMS database reconciles satisfactorily to the insurer data.

Table C.3 shows a reconciliation of claim payments in WCMS to that supplied by insurers.

Table C.3 – Claim Payments - WCMS vs. Insurer Data

Accident

Year

WCMS

Data

Insurer

Data Difference Difference

$000 $000 $000 %

2003/04 59,497 57,227 2,271 4%

2004/05 67,269 66,997 272 0%

2005/06 73,115 73,413 -297 0%

2006/07 80,269 79,331 937 1%

2007/08 75,093 75,604 -511 -1%

2008/09 73,512 72,126 1,386 2%

2009/10 89,176 89,642 -466 -1%

2010/11 97,072 96,594 479 0%

2011/12 101,393 99,400 1,993 2%

2012/13 122,377 118,099 4,278 4%

2013/14 139,110 131,284 7,826 6%

Differences in payments between the insurer data and WCMS database between 2004/05 to 2013/14

years are minimal. As such, our view is that the claim payment data on the WCMS database reconciles

satisfactorily to the insurer data.

Table C.4 shows a reconciliation of case estimates in WCMS to that supplied by insurers.



Table C.4 – Case Estimates - WCMS vs. Insurer Data

Accident

Year

WCMS

Data

Insurer


$000 $000 $000 %

Prior 8,858 2,870 5,989 209%

2004/05 1,673 251 1,423 568%

2005/06 2,772 657 2,115 322%

2006/07 3,128 1,374 1,755 128%

2007/08 3,050 881 2,169 246%

2008/09 7,955 2,113 5,842 277%

2009/10 26,497 15,551 10,946 70%

2010/11 29,530 20,660 8,870 43%

2011/12 42,612 30,211 12,401 41%

2012/13 54,491 59,587 -5,096 -9%

2013/14 39,480 58,174 -18,694 -32%

The case estimates from WCMS are overstated relative to insurer data by approximately $30 million. As

discussed previously, the differences relate to two larger insurers.

As a result of the reconciliation differences observed in older years, we do not rely on case estimates in

our analysis of ultimate claim size or costs, and use case estimates supplied directly by insurers instead

of that in WCMS when comparing to our projected central estimates.

Table C.5 shows a reconciliation of the WCMS wages data to that supplied by insurers.

Table C.5 – Wages & Premiums - WCMS vs. Insurer Data Wages Premiums Premium Rate

Policy

Year

WCMS

Data

Insurer


WCMS

Data

Insurer


WCMS

Data

Insurer


$m $m $m % $m $m $m %

2004/05 3,925 4,258 -334 -8% 151 149 3 2% 3.86% 3.49% 0.37% 11%

2005/06 4,219 4,566 -347 -8% 159 153 6 4% 3.77% 3.35% 0.43% 13%

2006/07 4,850 5,224 -375 -7% 158 151 7 5% 3.27% 2.89% 0.38% 13%

2007/08 5,259 5,773 -514 -9% 152 151 0 0% 2.88% 2.62% 0.27% 10%

2008/09 5,692 5,672 20 0% 146 139 6 5% 2.56% 2.46% 0.10% 4%

2009/10 5,739 5,977 -238 -4% 150 146 4 3% 2.62% 2.45% 0.17% 7%

2010/11 6,170 6,527 -357 -5% 157 151 6 4% 2.54% 2.31% 0.23% 10%

2011/12 6,664 6,928 -264 -4% 169 162 6 4% 2.53% 2.34% 0.19% 8%

2012/13 7,002 7,010 -8 0% 162 163 -1 0% 2.31% 2.32% -0.01% 0%

2013/14 6,818 7,007 -190 -3% 152 164 -12 -7% 2.23% 2.34% -0.11% -5%

The WCMS wages data is slightly lower than insurer data, while the WCMS premium information is

slightly higher than the insurer data. As a result the premium rates implied within WIMS are different to

that submitted by insurers. For this reason, pending further investigation into the reasons for these

differences, our analysis relies on the wages and premium information submitted by insurers rather than

that from WCMS.

C.4 Coding of Data on WCMS

C.4.1 Common Law, Commutations and Impairment Benefits

Discussions with the CMTEDD have revealed historical differences in coding practices of common law,

commutation and impairment benefit payments. Specific examples include:

For claims where a common law action is commenced and is subsequently settled out of court,

some insurers code the payments as common law while others code the payment as a

commutation



Some insurers are negotiating commutations with the claimant and having the claimant sign a

common law deed of release. These are being coded as common law rather than commutations

Some insurers are coding what are essentially impairment benefit payments as commutations.

As a result of these differences in practices, we have grouped all common law, commutation and

impairment benefit payments together in undertaking this review.

C.4.2 GST and ITCs

We understand that all claim payments made in the post-GST environment are reported inclusive of GST

for all insurers. However, practices vary in relation to the treatment of ITC recoveries – some insurers

net them off in payments captured on WCMS while others do not. We understand that the WCMS data

specification is in the process of being amended to offer greater clarity to insurers on the treatment of

ITCs. However, historical information will not be amended.

As we have analysed payment data net of ITC recoveries, we have had to adjust the data for those

insurers who have not netted off the ITC recoveries. Given that the majority of workers’ compensation

payments do not attract GST, we have only netted off estimated ITC amounts from legal and

investigation costs for these insurers. Some elements of medical and rehabilitation payments will also

attract GST (e.g. home modifications, vocational rehabilitation services) and hence should have ITC

recoveries netted off. However we do not know what proportion of medical and rehabilitation payments

attract GST, and have therefore not adjusted these payments. We believe this is immaterial in the

context of our review.

C.4.3 Incident notifications

We understand that some insurers are submitting incident notifications as well as claim records to

WCMS, and that the treatment of this varies by insurers.

By looking at the numbers of non-nil claims, we should effectively capture the true number of actual

claims involving workers compensation claim payments and the differences in reporting of notifications is

therefore not expected to have a material impact on our analysis.



D Valuation Approach

D.1 Chain Ladder Method

The chain ladder method estimates the ultimate number of claims incurred in each accident year by

analysing past claim reporting patterns and estimating a pattern for the future.

The chain ladder method can be applied to any cumulative data triangle that summarises the experience

by accident year and development period.

Chain ladder ratios are calculated from the data triangle by taking, for each accident period:

Cumulative Number of Claims reported to Development Period t

Cumulative Number of Claims reported to Development Period (t – 1)

Ratios for projection are selected taking into account the observed ratios in recent periods and changes

expected in the future. The ratios generated are then applied to the most recent cumulative claim figures

(separately for each accident period) to project reported claims to ultimate.

D.2 Payments Per Claim Incurred

The Payments Per Claim Incurred (PPCI) method models the claim process by assuming that the

payments in respect of a group of claims will develop in a predictable pattern over a period of years. This

pattern is defined by:

An average claim size

The proportion of claim payments that will be made in each development year.

The PPCI method proceeds as follows:

(i) Estimate the ultimate number of claims incurred in each accident year by using the Chain Ladder

method.

(ii) Inflate past claim payments, subdivided by accident and payment years, to the monetary values of

the latest accident year using an appropriate measure of past inflation.

(iii) For each accident year divide the inflation adjusted claim payments [derived in (ii)] by the

estimated ultimate number of claims incurred [calculated in (i)] to obtain an historical PPCI pattern

of payments.

(iv) Taking into account the result for (iii) and expectations for the future, select the average claims

size together with the proportion of the payments made in each development year.

(v) Using an assumed future rate of claim inflation calculate projected future payments for each

accident year by multiplying together:

(a) The estimated ultimate number of claims incurred

(b) The average claim size in current dollars

(c) The proportion of payments by development year

(d) The assumed inflation factor.



The present value of liabilities is calculated by discounting projected payments to the valuation date at

the assumed discount rate.

D.3 Payments Per Claim Settled

This method models the claims process by assuming that the payments in respect of a group of claims

will develop in a predictable pattern over a period of years. This pattern is often expressed as the

payments per claim settled together with the proportion of claims which will be settled in each

development year.

There can sometimes be a timing mismatch between the date a claim first receives a lump sum payment

and the date of final payment, and we note that a small amount of common law and lump sum claims do

involve multiple common law or lump sum payments. We therefore define date of settlement to be the

date of last payment. We note that the method may be susceptible to changes in data due to re-

openings and payment of further benefits, but this is not expected to materially alter the results of our

analysis providing the rate of such re-openings remains stable over time.

In order to use this method, we need to make assumptions about:

The number of claims incurred in each accident year

The average payment per claim settled in the monetary values of the latest accident year (not

necessarily the same average cost for all accident years)

The proportion of claims settled in each development period, before allowance for claim inflation

Rates of future claim inflation and investment earnings.

Future payments are projected by multiplying together:

The number of claims outstanding

The payment per claim settled in current dollars

The proportion of claims settled by development period

The proportion of future settlements paid by development period

The inflation index based on projected rates of claims inflation.

The present value of liabilities is then calculated by discounting projected payments to the valuation date

at the assumed discount rate.

D.4 Continuance model

The continuance model is in effect a Payments Per Active Claim (“PPAC”) model which assumes that the

payments in respect of a group of claims will develop in a predictable pattern over a period of years. This

pattern is defined by:

An average claim size

The proportion of claims will remain active and receiving benefits in each development year.



The PPAC method proceeds as follows:

(i) Estimate the ultimate number of active claims incurred in each accident year by using the Chain

Ladder method, taking into account the number of claims active in the most recent period and

assumed continuance rates in future.

(ii) Inflate past claim payments, subdivided by accident and payment years, to the monetary values of

the latest accident year using an appropriate measure of past inflation.

(iii) For each accident year divide the inflation adjusted claim payments [derived in (ii)] by the

estimated ultimate number of active claims [calculated in (i)] to obtain an historical pattern of

average weekly benefits per continuing claim.

(iv) Taking into account the result for (iii) and expectations for the future, select the average claims

size together with the proportion of the payments made in each development year.

(v) Using an assumed future rate of claim inflation, calculate projected future payments for each

accident year by multiplying together:

(a) The estimated ultimate number of active claims incurred

(b) The average claim size in current dollars

(c) The proportion of payments by development year

(d) The assumed inflation factor.

The implied payments were then converted into PPCIs for comparison with the PPCI model.



E Claim Number Analysis

ACT Workers' Compensation Scheme Review

All Claims

Excludes Nil Claims

Chain Ladder Model

E1.1 Cumulative Number of Claims (excluding nil claims)Accident Development Quarter (delay to first payment) Reported

Quarter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 to date

Dec-07 494 792 830 840 843 844 844 845 847 847 849 850 850 850 851 853 853 853 853 853 854 854 854 854 854 854 855 855 855 855

Mar-08 476 807 837 847 857 858 861 861 864 865 869 871 872 872 873 874 874 874 873 873 873 873 873 873 873 873 873 873 873

Jun-08 520 790 815 831 838 843 847 848 848 850 853 855 854 853 853 854 854 854 854 854 855 855 855 855 855 855 855 855

Sep-08 514 792 825 837 840 845 849 852 856 857 857 857 858 858 858 858 858 858 860 860 860 860 861 861 861 861 861

Dec-08 461 704 747 758 766 768 773 775 777 777 778 778 778 778 778 779 779 779 779 779 779 779 780 779 780 780

Mar-09 463 784 824 836 839 841 842 844 844 844 844 844 848 848 848 848 848 848 848 848 848 848 848 849 849

Jun-09 485 776 803 815 820 824 828 828 828 829 829 830 831 832 832 832 832 833 834 834 834 834 834 834

Sep-09 492 782 825 839 843 846 848 849 851 852 852 853 853 853 853 853 853 853 854 854 854 854 854

Dec-09 463 720 756 767 772 776 779 779 779 779 779 780 780 780 780 780 781 782 783 783 783 783

Mar-10 504 856 882 895 903 909 910 911 912 913 913 914 914 914 914 914 914 914 915 915 915

Jun-10 545 826 854 862 869 873 873 876 877 879 879 879 879 880 880 881 881 882 882 882

Sep-10 578 885 926 939 943 946 949 951 952 953 957 958 959 959 960 960 960 960 960

Dec-10 553 817 844 857 863 865 866 868 869 871 871 872 873 874 874 874 875 875

Mar-11 507 799 834 840 844 849 853 856 857 860 860 861 863 866 868 868 868

Jun-11 580 870 887 897 902 902 903 905 906 908 908 908 911 911 911 911

Sep-11 537 881 919 928 935 935 938 938 939 942 944 944 944 945 945

Dec-11 532 816 860 875 880 883 886 887 891 893 893 894 894 894

Mar-12 461 801 837 847 853 858 866 869 869 870 870 870 870

Jun-12 545 830 859 862 869 869 870 872 874 875 877 877

Sep-12 537 792 824 840 841 844 844 846 849 849 849

Dec-12 485 738 784 794 804 805 807 809 810 810

Mar-13 489 811 847 855 862 867 867 869 869

Jun-13 493 784 818 821 829 831 833 833

Sep-13 499 780 811 823 828 828 828

Dec-13 424 652 687 701 703 703

Mar-14 429 727 751 757 757

Jun-14 476 760 783 783

Sep-14 535 767 767

E1.2 Chain Ladder FactorsAccident Development Quarter (delay to first payment)

Quarter 1:2 2:3 3:4 4:5 5:6 6:7 7:8 8:9 9:10 10:11 11:12 12:13 13:14 14:15 15:16 16:17 17:18 18:19 19:20 20:21 21:22 22:23 23:24 24:25 25:26 26:27 27:28 28:29 29:30

Dec-07 1.6032 1.0480 1.0120 1.0036 1.0012 1.0000 1.0012 1.0024 1.0000 1.0024 1.0012 1.0000 1.0000 1.0012 1.0024 1.0000 1.0000 1.0000 1.0000 1.0012 1.0000 1.0000 1.0000 1.0000 1.0000 1.0012 1.0000 1.0000

Mar-08 1.6954 1.0372 1.0119 1.0118 1.0012 1.0035 1.0000 1.0035 1.0012 1.0046 1.0023 1.0011 1.0000 1.0011 1.0011 1.0000 1.0000 0.9989 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000

Jun-08 1.5192 1.0316 1.0196 1.0084 1.0060 1.0047 1.0012 1.0000 1.0024 1.0035 1.0023 0.9988 0.9988 1.0000 1.0012 1.0000 1.0000 1.0000 1.0000 1.0012 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000

Sep-08 1.5409 1.0417 1.0145 1.0036 1.0060 1.0047 1.0035 1.0047 1.0012 1.0000 1.0000 1.0012 1.0000 1.0000 1.0000 1.0000 1.0000 1.0023 1.0000 1.0000 1.0000 1.0012 1.0000 1.0000 1.0000

Dec-08 1.5271 1.0611 1.0147 1.0106 1.0026 1.0065 1.0026 1.0026 1.0000 1.0013 1.0000 1.0000 1.0000 1.0000 1.0013 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0013 0.9987 1.0013

Mar-09 1.6933 1.0510 1.0146 1.0036 1.0024 1.0012 1.0024 1.0000 1.0000 1.0000 1.0000 1.0047 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0012

Jun-09 1.6000 1.0348 1.0149 1.0061 1.0049 1.0049 1.0000 1.0000 1.0012 1.0000 1.0012 1.0012 1.0012 1.0000 1.0000 1.0000 1.0012 1.0012 1.0000 1.0000 1.0000 1.0000

Sep-09 1.5894 1.0550 1.0170 1.0048 1.0036 1.0024 1.0012 1.0024 1.0012 1.0000 1.0012 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0012 1.0000 1.0000 1.0000

Dec-09 1.5551 1.0500 1.0146 1.0065 1.0052 1.0039 1.0000 1.0000 1.0000 1.0000 1.0013 1.0000 1.0000 1.0000 1.0000 1.0013 1.0013 1.0013 1.0000 1.0000

Mar-10 1.6984 1.0304 1.0147 1.0089 1.0066 1.0011 1.0011 1.0011 1.0011 1.0000 1.0011 1.0000 1.0000 1.0000 1.0000 1.0000 1.0000 1.0011 1.0000

Jun-10 1.5156 1.0339 1.0094 1.0081 1.0046 1.0000 1.0034 1.0011 1.0023 1.0000 1.0000 1.0000 1.0011 1.0000 1.0011 1.0000 1.0011 1.0000

Sep-10 1.5311 1.0463 1.0140 1.0043 1.0032 1.0032 1.0021 1.0011 1.0011 1.0042 1.0010 1.0010 1.0000 1.0010 1.0000 1.0000 1.0000

Dec-10 1.4774 1.0330 1.0154 1.0070 1.0023 1.0012 1.0023 1.0012 1.0023 1.0000 1.0011 1.0011 1.0011 1.0000 1.0000 1.0011

Mar-11 1.5759 1.0438 1.0072 1.0048 1.0059 1.0047 1.0035 1.0012 1.0035 1.0000 1.0012 1.0023 1.0035 1.0023 1.0000

Jun-11 1.5000 1.0195 1.0113 1.0056 1.0000 1.0011 1.0022 1.0011 1.0022 1.0000 1.0000 1.0033 1.0000 1.0000

Sep-11 1.6406 1.0431 1.0098 1.0075 1.0000 1.0032 1.0000 1.0011 1.0032 1.0021 1.0000 1.0000 1.0011

Dec-11 1.5338 1.0539 1.0174 1.0057 1.0034 1.0034 1.0011 1.0045 1.0022 1.0000 1.0011 1.0000

Mar-12 1.7375 1.0449 1.0119 1.0071 1.0059 1.0093 1.0035 1.0000 1.0012 1.0000 1.0000

Jun-12 1.5229 1.0349 1.0035 1.0081 1.0000 1.0012 1.0023 1.0023 1.0011 1.0023

Sep-12 1.4749 1.0404 1.0194 1.0012 1.0036 1.0000 1.0024 1.0035 1.0000

Dec-12 1.5216 1.0623 1.0128 1.0126 1.0012 1.0025 1.0025 1.0012

Mar-13 1.6585 1.0444 1.0094 1.0082 1.0058 1.0000 1.0023

Jun-13 1.5903 1.0434 1.0037 1.0097 1.0024 1.0024

Sep-13 1.5631 1.0397 1.0148 1.0061 1.0000

Dec-13 1.5377 1.0537 1.0204 1.0029

Mar-14 1.6946 1.0330 1.0080

Jun-14 1.5966 1.0303

Sep-14 1.4336

E1.3 Selected Chain Ladder FactorsDevelopment Quarter (delay to first payment)

1:2 2:3 3:4 4:5 5:6 6:7 7:8 8:9 9:10 10:11 11:12 12:13 13:14 14:15 15:16 16:17 17:18 18:19 19:20 20:21 21:22 22:23 23:24 24:25 25:26 26:27 27:28 Tail

Dec-14 Selected 1.5700 1.0450 1.0125 1.0090 1.0035 1.0035 1.0015 1.0015 1.0015 1.0015 1.0015 1.0010 1.0005 1.0004 1.0003 1.0002 1.0002 1.0002 1.0002 1.0002 1.0002 1.0001 1.0001 1.0001 1.0001 1.0001 1.0001 1.0005

E1.4 Incremental Projected Number of ClaimsAccident Development Quarter (delay to first payment) Ultimate

Quarter 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 Tail Claims

Dec-07 494 298 38 10 3 1 0 1 2 0 2 1 0 0 1 2 0 0 0 0 1 0 0 0 0 0 1 0 0 0 0 855

Mar-08 476 331 30 10 10 1 3 0 3 1 4 2 1 0 1 1 0 0 -1 0 0 0 0 0 0 0 0 0 0 0 0 874

Jun-08 520 270 25 16 7 5 4 1 0 2 3 2 -1 -1 0 1 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 856

Sep-08 514 278 33 12 3 5 4 3 4 1 0 0 1 0 0 0 0 0 2 0 0 0 1 0 0 0 0 0 0 0 0 862

Dec-08 461 243 43 11 8 2 5 2 2 0 1 0 0 0 0 1 0 0 0 0 0 0 1 -1 1 0 0 0 0 0 0 781

Mar-09 463 321 40 12 3 2 1 2 0 0 0 0 4 0 0 0 0 0 0 0 0 0 0 1 0 0 0 0 0 0 0 850

Jun-09 485 291 27 12 5 4 4 0 0 1 0 1 1 1 0 0 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 835

Sep-09 492 290 43 14 4 3 2 1 2 1 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 855

Dec-09 463 257 36 11 5 4 3 0 0 0 0 1 0 0 0 0 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 784

Mar-10 504 352 26 13 8 6 1 1 1 1 0 1 0 0 0 0 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 917

Jun-10 545 281 28 8 7 4 0 3 1 2 0 0 0 1 0 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 884

Sep-10 578 307 41 13 4 3 3 2 1 1 4 1 1 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 962

Dec-10 553 264 27 13 6 2 1 2 1 2 0 1 1 1 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 877

Mar-11 507 292 35 6 4 5 4 3 1 3 0 1 2 3 2 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 870

Jun-11 580 290 17 10 5 0 1 2 1 2 0 0 3 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 914

Sep-11 537 344 38 9 7 0 3 0 1 3 2 0 0 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 948

Dec-11 532 284 44 15 5 3 3 1 4 2 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 898

Mar-12 461 340 36 10 6 5 8 3 0 1 0 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 875

Jun-12 545 285 29 3 7 0 1 2 2 1 2 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 882

Sep-12 537 255 32 16 1 3 0 2 3 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 857

Dec-12 485 253 46 10 10 1 2 2 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 817

Mar-13 489 322 36 8 7 5 0 2 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 878

Jun-13 493 291 34 3 8 2 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 844

Sep-13 499 281 31 12 5 3 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 844

Dec-13 424 228 35 14 6 2 2 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 721

Mar-14 429 298 24 9 7 3 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 782

Jun-14 476 284 34 10 7 3 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 827

Sep-14 535 305 38 11 8 3 3 1 1 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 914

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Lost Time Claims

Excludes Nil Claims

Chain Ladder Model

E2.1 Cumulative Number of ClaimsAccident Development Year (of first Weekly Benefit Payment) Reported

Year 1 2 3 4 5 6 7 8 to date

2006/07 1,633 2,155 2,197 2,207 2,209 2,209 2,209 2,209 2,209

2007/08 1,687 2,124 2,153 2,157 2,161 2,161 2,161 2,161

2008/09 1,593 2,082 2,109 2,116 2,117 2,117 2,117

2009/10 1,641 2,128 2,160 2,166 2,166 2,166

2010/11 1,701 2,157 2,191 2,197 2,197

2011/12 1,714 2,196 2,221 2,221

2012/13 1,668 2,123 2,123

2013/14 1,522 1,522

E2.2 Chain Ladder FactorsAccident Development Year (of first Weekly Benefit Payment)

Year 1:2 2:3 3:4 4:5 5:6 6:7 7:8

2006/07 1.3197 1.0195 1.0046 1.0009 1.0000 1.0000 1.0000

2007/08 1.2590 1.0137 1.0019 1.0019 1.0000 1.0000

2008/09 1.3070 1.0130 1.0033 1.0005 1.0000

2009/10 1.2968 1.0150 1.0028 1.0000

2010/11 1.2681 1.0158 1.0027

2011/12 1.2812 1.0114

2012/13 1.2728

2013/14

E2.3 Selected Chain Ladder FactorsDevelopment Year (of first Weekly Benefit Payment)

1:2 2:3 3:4 4:5 5:6 6:7 Tail

Dec-14 Selected 1.3200 1.0155 1.0033 1.0015 1.0005 1.0003 1.0003

E2.4 Incremental Projected Number of ClaimsAccident Development Year (of first Weekly Benefit Payment) Ultimate

Year 1 2 3 4 5 6 7 8 Tail Claims

2006/07 1,633 522 42 10 2 0 0 0 0 2,209

2007/08 1,687 437 29 4 4 0 0 0 0 2,162

2008/09 1,593 489 27 7 1 0 1 0 0 2,118

2009/10 1,641 487 32 6 0 1 1 0 0 2,168

2010/11 1,701 456 34 6 3 1 1 0 0 2,203

2011/12 1,714 482 25 7 3 1 1 0 0 2,234

2012/13 1,668 455 33 7 3 1 1 0 0 2,169

2013/14 1,522 487 31 7 3 1 1 0 0 2,052


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Claim Number Summary

E3.1 Ultimate Number of ClaimsAccident

Year Reported IBNR Ultimate Reported IBNR Ultimate

2006/07 3,693 1 3,694 2,209 0 2,209

2007/08 3,495 2 3,497 2,161 1 2,162

2008/09 3,324 3 3,327 2,117 1 2,118

2009/10 3,434 5 3,439 2,167 1 2,168

2010/11 3,614 9 3,623 2,198 5 2,203

2011/12 3,586 17 3,603 2,224 10 2,234

2012/13 3,361 35 3,396 2,146 23 2,169

2013/14 3,071 102 3,173 1,852 200 2,052

All Claims (excl Nils) Lost Time Claims


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Common Law & Lump Sum

Excludes Nil Claims

Chain Ladder Model

E4.1 Cumulative Number of ClaimsAccident Development Year (of first Common Law Payment) Reported

Year 1 2 3 4 5 6 7 to date

2006/07 10 82 201 282 330 353 372 381 381

2007/08 12 79 189 262 301 331 347 347

2008/09 12 83 200 300 350 384 384

2009/10 12 93 243 345 396 396

2010/11 13 90 245 347 347

2011/12 14 106 234 234

2012/13 9 120 120

2013/14 13 13

E4.2 Chain Ladder FactorsAccident Development Year (of first Common Law Payment)

Year 1:2 2:3 3:4 4:5 5:6 6:7 7:8

2006/07 8.2000 2.4512 1.4030 1.1702 1.0697 1.0538 1.0242

2007/08 6.5833 2.3924 1.3862 1.1489 1.0997 1.0483

2008/09 6.9167 2.4096 1.5000 1.1667 1.0971

2009/10 7.7500 2.6129 1.4198 1.1478

2010/11 6.9231 2.7222 1.4163

2011/12 7.5714 2.2075

2012/13 13.3333

2013/14

E4.3 Selected Chain Ladder FactorsDevelopment Year (of first Common Law Payment)

1:2 2:3 3:4 4:5 5:6 6:7 Tail

Dec-14 Selected 8.5000 2.3000 1.4200 1.1450 1.0750 1.0400 1.0720

E4.4 Incremental Projected Number of ClaimsAccident Development Year (of first Common Law Payment) Ultimate

Year 1 2 3 4 5 6 7 8 Tail Claims

2006/07 10 72 119 81 48 23 19 9 18 399

2007/08 12 67 110 73 39 30 16 8 17 372

2008/09 12 71 117 100 50 34 15 9 20 428

2009/10 12 81 150 102 51 30 17 10 22 475

2010/11 13 77 155 102 50 30 17 10 22 476

2011/12 14 92 128 105 49 29 17 10 21 465

2012/13 9 111 126 103 51 30 17 10 22 479

2013/14 13 83 125 93 46 27 15 9 20 432


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F Claim Size Analysis


Weekly Benefits

PPCI Model

F1.1 Incremental Inflated Payments ($000 Dec-14)Accident Development Year (of Payment) Acc Yr Pay Yr

Year 1 2 3 4 5 6 7 8 Total Total

2006/07 7,821 8,757 3,187 1,318 824 357 241 134 22,638 7,821

2007/08 8,256 7,911 2,745 1,309 826 155 108 21,309 17,013

2008/09 8,591 9,537 3,588 1,604 922 290 24,532 19,689

2009/10 8,749 9,142 3,717 2,208 1,117 24,933 22,348

2010/11 9,839 10,074 4,402 2,373 26,688 24,702

2011/12 9,215 9,702 4,054 22,971 25,792

2012/13 8,906 10,430 19,335 26,536

2013/14 8,025 8,025 26,530

F1.2 Inflated Payment Per Claim IncurredAccident Development Year (of Payment)

Year 1 2 3 4 5 6 7 8

2006/07 3,540 3,964 1,442 597 373 161 109 60

2007/08 3,819 3,660 1,270 606 382 72 50

2008/09 4,056 4,502 1,694 757 435 137

2009/10 4,035 4,216 1,714 1,018 515

2010/11 4,467 4,573 1,999 1,077

2011/12 4,125 4,343 1,815

2012/13 4,107 4,809

2013/14 3,910

F1.3 Selected Payments per Claim IncurredDevelopment Year (of Payment)

1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 4,050 4,600 1,850 1,000 475 140 85 60 72

F1.4 Actual & Projected Payments Inflated to Payment Date ($000)Accident Development Year (of Payment) Ultimate

Year 1 2 3 4 5 6 7 8 Tail Costs Outstanding

2006/07 5,859 6,633 2,572 1,128 750 341 247 131 171 17,834 171

2007/08 6,349 6,385 2,347 1,192 786 160 107 130 174 17,628 303

2008/09 6,929 8,133 3,261 1,544 946 284 180 132 177 21,586 488

2009/10 7,685 8,297 3,553 2,267 1,099 304 191 140 188 23,724 822

2010/11 9,037 9,617 4,528 2,331 1,046 320 202 148 198 27,427 1,913

2011/12 8,989 9,948 3,979 2,234 1,101 337 212 155 208 27,164 4,247

2012/13 9,220 10,257 4,012 2,250 1,109 339 214 156 209 27,766 8,289

2013/14 7,832 9,440 3,939 2,209 1,089 333 210 154 206 25,411 17,579

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Medical & Related Costs (excl. rehab)

PPCI Model



2006/07 6,710 6,360 1,996 785 341 106 60 42 16,401 6,710

2007/08 6,407 5,146 1,439 587 374 13 -89 13,877 12,767

2008/09 6,326 6,091 1,846 467 201 55 14,986 13,468

2009/10 6,752 6,148 1,989 737 508 16,134 15,066

2010/11 7,509 6,369 1,858 570 16,305 16,431

2011/12 7,092 5,536 1,626 14,254 16,396

2012/13 7,187 7,039 14,226 15,592

2013/14 6,411 6,411 16,162

F2.2 Inflated Payment PerClaim IncurredAccident Development Year (of Payment)

Year 1 2 3 4 5 6 7 8

2006/07 1,817 1,722 540 212 92 29 16 12

2007/08 1,832 1,472 412 168 107 4 -25

2008/09 1,901 1,831 555 140 61 17

2009/10 1,963 1,788 578 214 148

2010/11 2,073 1,758 513 157

2011/12 1,968 1,536 451

2012/13 2,116 2,072

2013/14 2,020


1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 2,050 1,800 480 180 105 30 15 11 27



2006/07 5,040 4,813 1,611 665 310 102 61 41 108 12,752 108

2007/08 4,915 4,153 1,222 534 360 13 -87 37 106 11,253 144

2008/09 5,103 5,157 1,676 444 207 55 50 36 105 12,833 191

2009/10 5,917 5,568 1,894 757 500 103 54 39 113 14,945 308

2010/11 6,888 6,072 1,906 561 380 113 58 43 123 16,145 717

2011/12 6,884 5,668 1,602 649 393 116 60 44 127 15,543 1,389

2012/13 7,431 6,936 1,630 634 384 114 59 43 124 17,355 2,988

2013/14 6,262 5,712 1,580 615 372 110 57 42 120 14,871 8,609


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Rehabilitation

PPCI Model



2006/07 2,936 2,664 792 273 96 33 6 -110 6,689 2,936

2007/08 2,445 2,376 648 145 32 -10 5 5,641 5,108

2008/09 2,404 2,640 666 167 68 28 5,972 5,572

2009/10 2,549 2,810 769 356 139 6,623 6,109

2010/11 3,050 3,409 940 404 7,802 6,766

2011/12 2,917 3,159 875 6,951 7,327

2012/13 2,813 3,111 5,924 7,332

2013/14 3,136 3,136 7,587


Year 1 2 3 4 5 6 7 8

2006/07 795 721 214 74 26 9 2 -30

2007/08 699 679 185 42 9 -3 1

2008/09 723 793 200 50 21 8

2009/10 741 817 224 104 40

2010/11 842 941 259 111

2011/12 810 877 243

2012/13 828 916

2013/14 988


1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 910 900 250 110 25 8 4 3 3



2006/07 2,205 2,013 639 232 87 32 6 -107 11 5,119 11

2007/08 1,878 1,918 551 132 30 -10 5 10 11 4,525 22

2008/09 1,939 2,248 604 159 70 28 13 10 11 5,083 35

2009/10 2,239 2,547 737 366 137 28 14 11 12 6,090 65

2010/11 2,802 3,250 964 397 91 30 16 12 13 7,573 161

2011/12 2,846 3,236 860 396 93 31 16 13 13 7,505 563

2012/13 2,910 3,065 849 388 91 30 16 12 13 7,374 1,399

2013/14 3,060 2,856 823 376 89 29 15 12 12 7,273 4,213


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Legal & Investigation Costs

PPCI Model



2006/07 1,280 3,412 3,720 2,786 1,853 1,443 916 353 15,764 1,280

2007/08 1,170 2,864 3,332 2,355 1,123 1,105 969 12,918 4,581

2008/09 1,205 3,144 3,541 2,723 1,616 1,610 13,840 7,789

2009/10 1,108 3,389 4,335 3,192 2,147 14,170 10,370

2010/11 1,454 3,632 4,895 3,823 13,804 12,592

2011/12 1,267 2,943 4,414 8,624 14,523

2012/13 1,180 3,844 5,024 15,847

2013/14 1,360 1,360 18,522


Year 1 2 3 4 5 6 7 8

2006/07 347 924 1,007 754 502 391 248 96

2007/08 335 819 953 673 321 316 277

2008/09 362 945 1,064 818 486 484

2009/10 322 985 1,260 928 624

2010/11 401 1,003 1,351 1,055

2011/12 352 817 1,225

2012/13 347 1,132

2013/14 429


1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 360 960 1,290 990 550 400 260 150 313



2006/07 960 2,603 3,002 2,387 1,689 1,398 943 345 1,255 14,583 1,255

2007/08 899 2,310 2,881 2,146 1,070 1,135 947 525 1,233 13,146 1,757

2008/09 972 2,710 3,232 2,605 1,665 1,584 865 518 1,217 15,367 2,600

2009/10 974 3,093 4,158 3,283 2,111 1,376 928 555 1,305 17,784 4,164

2010/11 1,337 3,495 5,043 3,756 1,992 1,503 1,014 607 1,426 20,173 6,543

2011/12 1,237 3,030 4,327 3,567 2,056 1,551 1,046 626 1,472 18,914 10,319

2012/13 1,223 3,769 4,381 3,488 2,011 1,517 1,023 612 1,439 19,465 14,472

2013/14 1,328 3,046 4,247 3,382 1,949 1,471 992 594 1,395 18,405 17,076


28/04/2015 - 3:29 PM Page 4 of 8


Recoveries

PPCI Model



2006/07 -88 -600 -2,513 -863 -321 -46 -387 -115 -4,933 -88

2007/08 -113 -528 -839 -203 -903 -370 -42 -2,998 -713

2008/09 -162 -483 -306 -659 -113 -677 -2,399 -3,202

2009/10 -67 -403 -581 -1,039 -463 -2,552 -2,251

2010/11 -186 -507 -737 -1,114 -2,545 -1,419

2011/12 -129 -670 -807 -1,606 -2,826

2012/13 -192 -428 -620 -3,508

2013/14 -68 -68 -3,714


Year 1 2 3 4 5 6 7 8

2006/07 -24 -162 -680 -234 -87 -12 -105 -31

2007/08 -32 -151 -240 -58 -258 -106 -12

2008/09 -49 -145 -92 -198 -34 -204

2009/10 -19 -117 -169 -302 -134

2010/11 -51 -140 -203 -308

2011/12 -36 -186 -224

2012/13 -57 -126

2013/14 -21


1 2 3 4 5 6 7 8 Tail

Dec-14 Selected -40 -150 -215 -275 -130 -110 -55 -55 -51



2006/07 -66 -461 -2,023 -736 -289 -45 -397 -111 -364 -4,492 -364

2007/08 -88 -426 -725 -185 -901 -381 -41 -192 -192 -3,131 -385

2008/09 -131 -417 -278 -635 -115 -663 -183 -190 -190 -2,800 -563

2009/10 -59 -367 -565 -1,072 -453 -378 -196 -204 -204 -3,498 -982

2010/11 -172 -486 -758 -1,090 -528 -413 -214 -223 -222 -4,107 -1,601

2011/12 -127 -692 -790 -991 -486 -427 -221 -230 -230 -4,193 -2,584

2012/13 -200 -418 -730 -969 -475 -417 -216 -225 -225 -3,875 -3,257

2013/14 -67 -476 -708 -939 -461 -404 -210 -218 -218 -3,700 -3,634


28/04/2015 - 3:29 PM Page 5 of 8



Excludes Nil Claims

PPCS Model

F6.1 Incremental Number of Claims Settled as Lump Sum or Common LawAccident Development Year (of Last LS_CL Payment) Settled

Year 1 2 3 4 5 6 7 8 to date

2006/07 4 63 115 82 53 30 20 11 378

2007/08 10 65 96 76 43 30 24 344

2008/09 12 55 108 97 55 52 379

2009/10 6 61 139 111 64 381

2010/11 9 57 147 113 326

2011/12 10 76 126 212

2012/13 4 88 92

2013/14 8 8

F6.2 Lump Sum/Common Law Proportion Settled (% of Ultimate Lump Sums/Common Law)Accident Development Year (of Last LS_CL Payment)

Year 1 2 3 4 5 6 7 8

2006/07 1.0% 15.8% 28.8% 20.5% 13.3% 7.5% 5.0% 2.8%

2007/08 2.7% 17.5% 25.8% 20.4% 11.6% 8.1% 6.5%

2008/09 2.8% 12.8% 25.2% 22.7% 12.8% 12.1%

2009/10 1.3% 12.9% 29.3% 23.4% 13.5%

2010/11 1.9% 12.0% 30.9% 23.7%

2011/12 2.1% 16.3% 27.1%

2012/13 0.8% 18.4%

2013/14 1.9%

F6.3 Selected Proportion SettledDevelopment Year (of Last LS_CL Payment)

1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 1.70% 15.00% 27.50% 23.00% 12.50% 8.20% 4.50% 3.00% 4.60%

F6.4 Incremental Projected Number of Claims Settled as Lump Sum or Common LawAccident Development Year (of Last LS_CL Payment) Ultimate

Year 1 2 3 4 5 6 7 8 Tail Finalised

2006/07 4 63 115 82 53 30 20 11 21 399

2007/08 10 65 96 76 43 30 24 11 17 372

2008/09 12 55 108 97 55 52 18 12 19 428

2009/10 6 61 139 111 64 38 21 14 21 475

2010/11 9 57 147 113 57 38 21 14 21 476

2011/12 10 76 126 104 57 37 20 14 21 465

2012/13 4 88 128 107 58 38 21 14 21 479

2013/14 8 65 119 99 54 35 19 13 20 432


28/04/2015 - 3:29 PM Page 6 of 8



Excludes Nil Claims

PPCS Model

F6.5 Incremental Inflated Payments ($000 Dec-14)Accident Development Year (of Last LS_CL Payment) Acc Yr Pay Yr


2006/07 194 5,886 10,269 9,083 6,386 3,849 2,577 2,575 40,819 194

2007/08 322 3,927 8,295 9,791 4,563 3,500 5,716 36,113 6,208

2008/09 372 3,858 11,297 10,028 7,263 11,438 44,256 14,568

2009/10 60 4,674 14,002 13,317 9,403 41,456 21,296

2010/11 253 3,417 16,187 18,192 38,048 32,400

2011/12 329 5,012 14,585 19,926 36,188

2012/13 179 6,341 6,520 48,034

2013/14 267 267 68,517

F6.6 Inflated Payments per Claim Settled in $Dec-14 ($000)Accident Development Year (of Last LS_CL Payment)

Year 1 2 3 4 5 6 7 8

2006/07 49 93 89 111 120 128 129 234

2007/08 32 60 86 129 106 117 238

2008/09 31 70 105 103 132 220

2009/10 10 77 101 120 147

2010/11 28 60 110 161

2011/12 33 66 116

2012/13 45 72

2013/14 33

F6.7 Selected Payments per Claim Settled in $Dec-14 ($000)Development Year (of Last LS_CL Payment)

1 2 3 4 5 6 7 8 Tail

Dec-14 Selected 33.0 68.0 110.0 120.0 120.0 180.0 180.0 180.0 180.0



2006/07 406 4,806 8,833 7,357 5,852 3,406 2,684 3,224 2,847 39,417 2,847

2007/08 254 3,183 7,520 8,810 4,418 3,807 5,398 1,855 3,132 38,376 4,987

2008/09 300 4,394 9,747 10,088 7,970 10,372 2,728 2,265 3,824 51,688 8,817

2009/10 90 4,584 13,746 14,147 9,217 6,703 3,161 2,624 4,431 58,702 16,919

2010/11 277 4,068 17,379 17,351 8,001 6,522 3,076 2,553 4,311 63,538 24,463

2011/12 546 5,468 14,606 13,144 7,955 6,485 3,058 2,538 4,287 58,087 37,466

2012/13 213 6,783 14,507 13,894 8,409 6,855 3,233 2,683 4,531 61,107 54,111

2013/14 301 4,918 13,964 13,373 8,093 6,598 3,111 2,582 4,361 57,301 57,000


28/04/2015 - 3:29 PM Page 7 of 8


All Payments

F7.1 Actual & Projected Payments Inflated to Payment Date ($000)Accident Development Year (of Payment) Acc Yr

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Tail Ultimate

2006/07 14,403 20,408 14,634 11,033 8,400 5,236 3,545 3,525 1,485 515 448 355 373 213 173 149 85 81 74 71 6 0 0 0 0 0 0 0 0 0 85,212

2007/08 14,207 17,522 13,795 12,628 5,762 4,725 6,329 2,364 1,780 534 468 378 397 222 183 160 91 87 80 78 5 0 0 0 0 0 0 0 0 0 81,796

2008/09 15,112 22,225 18,243 14,206 10,743 11,660 3,654 2,771 2,096 586 524 437 458 246 209 187 105 102 96 94 5 0 0 0 0 0 0 0 0 0 103,757

2009/10 16,845 23,722 23,523 19,748 12,611 8,135 4,152 3,166 2,399 655 589 497 520 276 237 213 119 116 110 108 6 0 0 0 0 0 0 0 0 0 117,746

2010/11 20,169 26,017 29,062 23,305 10,982 8,075 4,151 3,140 2,375 672 598 496 520 282 238 212 119 115 108 106 6 0 0 0 0 0 0 0 0 0 130,749

2011/12 20,377 26,658 24,585 18,999 11,112 8,093 4,172 3,147 2,378 681 605 499 523 285 240 212 120 116 108 105 7 0 0 0 0 0 0 0 0 0 123,020

2012/13 20,797 30,393 24,650 19,685 11,528 8,438 4,328 3,282 2,483 694 620 517 542 291 248 221 124 120 113 111 6 0 0 0 0 0 0 0 0 0 129,192

2013/14 18,717 25,497 23,846 19,015 11,131 8,136 4,176 3,166 2,394 671 599 499 523 282 239 213 120 116 109 107 6 0 0 0 0 0 0 0 0 0 119,561

F7.2 Actual & Projected Payments Inflated to Payment Date & Discounted to Middle of Accident Year ($000)Accident Development Year (of Payment) Acc Yr

Year 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 Tail Ultimate

2006/07 14,403 19,106 13,106 9,531 6,933 4,142 2,719 2,637 1,085 366 309 238 243 134 106 89 49 46 41 38 3 0 0 0 0 0 0 0 0 0 75,321

2007/08 14,207 16,762 12,730 11,133 4,868 3,871 5,057 1,845 1,349 393 335 263 268 145 117 99 54 51 46 43 3 0 0 0 0 0 0 0 0 0 73,638

2008/09 15,112 21,438 16,812 12,547 9,200 9,739 2,980 2,196 1,613 438 380 308 314 164 135 117 64 60 55 52 3 0 0 0 0 0 0 0 0 0 93,730

2009/10 16,845 22,665 21,539 17,533 10,921 6,879 3,410 2,526 1,860 493 430 353 359 185 154 135 73 69 64 61 3 0 0 0 0 0 0 0 0 0 106,556

2010/11 20,169 24,934 27,005 21,123 9,721 6,942 3,466 2,547 1,872 514 445 358 365 192 158 136 74 70 64 61 4 0 0 0 0 0 0 0 0 0 120,218

2011/12 20,377 25,848 23,251 17,547 9,968 7,053 3,531 2,587 1,899 528 456 365 372 197 161 138 76 71 65 61 4 0 0 0 0 0 0 0 0 0 114,553

2012/13 20,797 29,644 23,479 18,213 10,360 7,366 3,670 2,704 1,987 540 468 379 386 202 167 144 79 74 68 64 4 0 0 0 0 0 0 0 0 0 120,793

2013/14 18,717 24,899 22,620 17,520 9,962 7,074 3,526 2,597 1,907 519 450 364 371 194 160 139 76 71 65 62 3 0 0 0 0 0 0 0 0 0 111,297


28/04/2015 - 3:29 PM Page 8 of 8



G Workforce, Wages and Premiums

G.1 Workforce

We have compiled workforce figures from information available from the Australian Bureau of Statistics

(ABS) and the Australian Public Service Employment Database (APSED), plus information on the

number of ACT public sector employees supplied by the CMTEDD.

We have calculated an approximate private sector workforce as:

Total full time workforce in the ACT

Less full time Commonwealth public sector employees

Less full time ACT public sector employees.

This is shown in Table G.1 below.

Table G.1 – Calculation of ACT Private Sector Workforce (Full Time Employees)

Accident

Year ABS

Commonwealth

Government

Public Servants

ACT

Government

Public

Servants

ACT Private

Sector

Workforce

2004/05 136,212 39,783 13,084 83,345

2005/06 144,125 43,522 12,699 87,904

2006/07 146,122 47,289 12,258 86,575

2007/08 146,910 49,461 12,844 84,605

2008/09 147,755 50,739 13,646 83,370

2009/10 150,447 51,958 13,869 84,620

2010/11 153,930 53,594 14,317 86,019

2011/12 156,193 56,313 14,897 84,983

2012/13 155,404 54,612 15,424 85,368

2013/14 157,115 49,887 16,088 91,140

G.2 Earned Wages

Recorded wages can change over time as employers update their initial estimate over the course of the

policy period. In order to arrive at an estimate of the ultimate earned wages we examined the

development of reported wages for older policy years and as a result selected a multiplier to gross up the

reported wages for the more recent policy years to ultimate. This is shown in Table G.2 below.



Table G.2 – Earned Wages Data

Accident

Year Reported

Gross-up

Factor

Estimated

Ultimate Inflated Ultimate1

$m $m $m

2004/05 4,143.0 1.000 4,143.0 6,136.0

2005/06 4,365.0 1.000 4,365.0 6,184.9

2006/07 4,879.2 1.000 4,879.2 6,494.7

2007/08 5,410.9 1.000 5,410.9 7,100.5

2008/09 5,665.3 1.000 5,665.3 7,006.2

2009/10 5,733.8 1.000 5,733.8 6,601.4

2010/11 6,218.4 1.001 6,224.6 6,798.2

2011/12 6,686.8 1.002 6,700.2 7,055.0

2012/13 6,818.0 1.004 6,845.3 6,656.6

2013/14 6,983.8 1.009 7,046.9 7,270.21 In 31 December 2014 values

G.3 Earned Premium

Table G.3 shows the reported earned premium amounts by calendar year. As for wages, they have been

inflated and grossed-up to ultimate estimates by analysing the development of reported premiums for

older policy years.

Table G.3 – Earned Premium Data

Accident

Year Reported

Gross-up

Factor

Estimated

Ultimate Inflated Ultimate1

$m $m $m

2003/04

2004/05 145.8 1.000 145.8 216.0

2005/06 152.7 1.000 152.7 216.4

2006/07 153.6 1.000 153.6 204.5

2007/08 148.8 1.000 148.8 195.2

2008/09 140.0 1.000 140.0 173.1

2009/10 145.8 1.000 145.8 167.9

2010/11 150.0 1.000 150.0 163.9

2011/12 158.9 1.003 159.4 167.8

2012/13 161.0 1.013 163.1 158.6

2013/14 164.4 1.018 167.3 172.61 In 31 December 2014 values

G.4 Historical Premium Rates

Table G.4 shows the calculation of the historical premium rate. The earned premiums and wages have

both been grossed up to ultimate as discussed above, and are expressed in December 2014 values.



Table G.4 – Calculation of Premium Rate

Accident

Year

Gross Earned

Premium

Gross Earned

Wages

Premium to

Wages

$m $m

2004/05 145.8 4,143.0 3.52%

2005/06 152.7 4,365.0 3.50%

2006/07 153.6 4,879.2 3.15%

2007/08 148.8 5,410.9 2.75%

2008/09 140.0 5,665.3 2.47%

2009/10 145.8 5,733.8 2.54%

2010/11 150.0 6,224.6 2.41%

2011/12 159.4 6,700.2 2.38%

2012/13 163.1 6,845.3 2.38%

2013/14 167.3 7,046.9 2.37%



H Recommended Rates by ANZSIC Division

H.1 Premium Rates by ANZSIC Class

ANZSIC Description Rel. Group

Estimated

Wages for

2015/16 ($m)

Claim Freq

Rel - last 3

years

Capped

Claim Cost

Rel - last 5

years

2015/16

Selected

Relativity

2015/16

Suggested

Premium

Rate

0111 Plant Nurseries 1 1.9 123 75 200 5.22%

0123 Sheep-Beef Cattle Farming 5 0.7 190 123 350 9.13%

0124 Sheep Farming 5 0.2 323 2,375 350 9.13%

0125 Beef Cattle Farming 5 0.1 0 0 350 9.13%

0142 Poultry Farming (Eggs) 6 3.0 53 201 250 6.52%

0219 Services to Agriculture n.e.c. 8 1.0 1,178 137 260 6.78%

0301 Forestry 10 0.1 0 0 550 14.35%

0302 Logging 10 0.7 692 1,646 550 14.35%

0303 Services to Forestry 11 0.6 224 348 350 9.13%

1411 Gravel and Sand Quarrying 14 0.9 260 289 250 6.52%

1419 Construction Material Mining n.e.c. 13 4.2 355 250 250 6.52%

2129 Dairy Product Manufacturing n.e.c 17 6.9 80 25 250 6.52%

2161 Bread Manufacturing 18 0.2 573 170 250 6.52%

2162 Cake and Pastry Manufacturing 18 0.2 0 0 250 6.52%

2163 Biscuit Manufacturing 18 0.1 0 0 250 6.52%

2179 Food Manufacturing n.e.c. 18 0.3 144 52 250 6.52%

2181 Soft Drink, Cordial and Syrup Manufacturing 18 0.6 309 243 250 6.52%

2183 Wine Manufacturing 18 0.6 145 18 250 6.52%

2221 Made-Up Textile Product Manufacturing 23 0.9 495 465 140 3.65%

2249 Clothing Manufacturing n.e.c. 24 1.4 0 0 180 4.70%

2311 Log Sawmilling 25 1.2 563 162 400 10.44%

2313 Timber Resawing and Dressing 27 0.5 452 51 270 7.04%

2322 Fabricated Wood Manufacturing 28 0.1 0 0 300 7.83%

2323 Wooden Structural Component Manufacturing 28 11.4 261 305 300 7.83%

2329 Wood Product Manufacturing n.e.c 29 0.6 134 249 190 4.96%

2412 Printing 30 45.6 89 91 90 2.35%

2413 Services to Printing 30 0.9 0 13 90 2.35%

2421 Newspaper Printing or Publishing 30 11.1 13 65 90 2.35%

2422 Other Periodical Publishing 30 2.0 0 13 90 2.35%

2423 Book and Other Publishing 30 2.2 34 42 90 2.35%

2520 Petroleum and Coal Product Manufacturing n.e.c. 31 0.5 144 132 300 7.83%

2531 Fertiliser Manufacturing 31 0.1 0 0 300 7.83%

2543 Medicinal and Pharmaceutical Product Manufacturing 40 2.4 60 33 60 1.57%

2547 Ink Manufacturing 28 0.1 0 0 300 7.83%

2562 Plastic Extruded Product Manufacturing 28 0.2 0 0 300 7.83%

2610 Glass and Glass Product Manufacturing 35 0.9 992 1,016 500 13.05%

2629 Ceramic Product Manufacturing n.e.c. 33 0.1 0 0 140 3.65%

2632 Plaster Product Manufacturing 33 0.2 0 0 140 3.65%

2633 Concrete Slurry Manufacturing 33 1.0 29 16 140 3.65%

2635 Concrete Product Manufacturing n.e.c. 36 1.3 0 26 170 4.44%

2640 Non-Metallic Mineral Product Manufacturing n.e.c. 36 2.3 101 174 170 4.44%

2741 Structural Steel Fabricating 31 3.9 362 119 300 7.83%

2742 Architectural Aluminium Product Manufacturing 31 18.2 149 279 300 7.83%

2749 Structural Metal Product Manufacturing n.e.c. 31 3.0 263 201 300 7.83%

2759 Sheet Metal Product Manufacturing n.e.c. 37 3.5 140 195 200 5.22%

2762 Spring and Wire Product Manufacturing 31 0.4 1,354 481 300 7.83%

2764 Metal Coating and Finishing 31 0.3 255 49 300 7.83%

2769 Fabricated Metal Product Manufacturing n.e.c. 31 6.4 295 348 300 7.83%

2824 Aircraft Manufacturing 39 1.9 49 12 150 3.91%

2831 Photographic and Optical Good Manufacturing 40 0.1 0 0 60 1.57%

2832 Medical and Surgical Equipment Manufacturing 40 0.5 0 0 60 1.57%

2839 Professional and Scientific Equipment Manufacturing n.e.c. 40 0.5 0 0 60 1.57%

2841 Computer and Business Machine Manufacturing 40 0.9 411 485 60 1.57%

2842 Telecommunication, Broadcasting and Transceiving Equipment Manufacturing 40 2.5 31 27 60 1.57%

2849 Electronic Equipment Manufacturing n.e.c. 40 1.5 0 9 60 1.57%

2852 Electric Cable and Wire Manufacturing 29 0.2 0 0 190 4.96%

2854 Electric Light and Sign Manufacturing 29 0.5 0 0 190 4.96%

2859 Electrical and Equipment Manufacturing n.e.c. 29 1.8 0 335 190 4.96%

2862 Mining and Construction Machinery Manufacturing 39 0.4 251 12 150 3.91%

2865 Lifting and Material Handling Equipment Manufacturing 37 8.6 168 62 200 5.22%

2866 Pump and Compressor Manufacturing 33 0.2 538 541 140 3.65%

2867 Commercial Space Heating and Cooling Equipment Manufacturing 33 1.5 264 116 140 3.65%

2869 Industrial Machinery and Equipment Manufacturing n.e.c. 33 5.1 58 15 140 3.65%

2911 Prefabricated Metal Building Manufacturing 41 0.3 0 0 450 11.74%

2919 Prefabricated Building Manufacturing n.e.c. 41 0.6 121 190 450 11.74%

2921 Wooden Furniture and Upholstered Seat Manufacturing 29 14.3 228 177 190 4.96%

2922 Sheet Metal Furniture Manufacturing 41 0.5 139 110 450 11.74%

2923 Mattress Manufacturing (Except Rubber) 33 0.7 0 0 140 3.65%

2929 Furniture Manufacturing n.e.c. 33 19.9 140 218 140 3.65%

2941 Jewellery and Silverware Manufacturing 40 0.4 0 0 60 1.57%

2949 Manufacturing n.e.c. 28 0.5 0 0 300 7.83%

3610 Electricity Supply 57 31.0 290 139 150 3.91%

3620 Gas Supply 43 41.1 28 60 90 2.35%

3701 Water Supply 42 66.2 45 22 60 1.57%

3702 Sewerage and Drainage Services 42 2.2 60 37 60 1.57%

4111 House Construction 44 42.8 169 129 170 4.44%

4112 Residential Building Construction n.e.c. 44 20.9 121 203 170 4.44%

4113 Non-Residential Building Construction 44 82.9 107 214 170 4.44%

4121 Road and Bridge Construction 45 32.3 385 324 360 9.39%

4122 Non-Building Construction n.e.c. 44 41.7 261 166 170 4.44%

4210 Site Preparation Services 46 56.2 198 336 300 7.83%

4221 Concreting Services 49 24.4 115 484 500 13.05%

4222 Bricklaying Services 49 12.6 263 296 500 13.05%

4223 Roofing Services 49 11.6 343 411 500 13.05%

4224 Structural Steel Erection Services 49 12.3 391 599 500 13.05%



Estimated

Wages for

2015/16 ($m)

Claim Freq

Rel - last 3

years

Capped

Claim Cost

Rel - last 5

years

2015/16

Selected

Relativity

2015/16

Suggested

Premium

Rate

4231 Plumbing Services 47 56.9 222 285 230 6.00%

4232 Electrical Services 48 112.1 157 101 120 3.13%

4233 Air Conditioning and Heating Services 47 57.8 154 215 230 6.00%

4234 Fire and Security System Services 48 34.2 157 113 120 3.13%

4241 Plastering and Ceiling Services 124 15.9 190 275 270 7.04%

4242 Carpentry Services 124 53.3 208 288 270 7.04%

4243 Tiling and Carpeting Services 124 14.3 156 269 270 7.04%

4244 Painting and Decorating Services 124 22.7 158 293 270 7.04%

4245 Glazing Services 124 5.7 272 439 270 7.04%

4251 Landscaping Services 50 31.4 305 342 350 9.13%

4259 Construction Services n.e.c. 31 32.2 152 428 300 7.83%

4512 Cereal Grain Wholesaling 51 0.2 405 13 100 2.61%

4519 Farm Produce and Supplies Wholesaling n.e.c. 51 0.7 178 788 100 2.61%

4521 Petroleum Product Wholesaling 43 3.0 83 15 90 2.35%

4522 Metal and Mineral Wholesaling 23 7.7 151 303 140 3.65%

4523 Chemical Wholesaling 43 3.3 79 26 90 2.35%

4531 Timber Wholesaling 23 2.3 258 252 140 3.65%

4539 Building Supplies Wholesaling n.e.c. 23 17.5 141 151 140 3.65%

4611 Farm and Construction Machinery Wholesaling 52 0.6 0 0 130 3.39%

4612 Professional Equipment Wholesaling 53 6.5 44 39 50 1.30%

4613 Computer Wholesaling 82 52.2 23 43 15 0.39%

4614 Business Machine Wholesaling n.e.c. 53 14.1 74 67 50 1.30%

4615 Electrical and Electronic Equipment Wholesaling n.e.c. 53 39.0 58 65 50 1.30%

4619 Machinery and Equipment Wholesaling n.e.c. 54 10.6 153 82 120 3.13%

4621 Car Wholesaling 52 0.1 0 0 130 3.39%

4622 Commercial Vehicle Wholesaling 52 0.2 0 0 130 3.39%

4623 Motor Vehicle New Part Dealing 52 14.1 167 113 130 3.39%

4624 Motor Vehicle Dismantling and Used Part Dealing 52 0.1 0 0 130 3.39%

4711 Meat Wholesaling 56 1.6 95 322 300 7.83%

4712 Poultry and Smallgood Wholesaling 56 1.2 375 553 300 7.83%

4713 Dairy Produce Wholesaling 56 0.3 266 1,226 300 7.83%

4714 Fish Wholesaling 56 0.1 0 0 300 7.83%

4715 Fruit and Vegetable Wholesaling 56 1.8 113 25 300 7.83%

4716 Confectionery and Soft Drink Wholesaling 52 5.0 48 142 130 3.39%

4717 Liquor Wholesaling 52 6.6 125 36 130 3.39%

4718 Tobacco Product Wholesaling 52 0.4 0 0 130 3.39%

4719 Grocery Wholesaling n.e.c. 56 14.5 208 199 300 7.83%

4721 Textile Product Wholesaling 52 0.3 0 0 130 3.39%

4722 Clothing Wholesaling 52 2.3 164 22 130 3.39%

4731 Household Appliance Wholesaling 23 1.2 0 0 140 3.65%

4732 Furniture Wholesaling 52 0.3 259 17 130 3.39%

4733 Floor Covering Wholesaling 52 1.1 62 14 130 3.39%

4739 Household Good Wholesaling n.e.c. 52 6.6 464 233 130 3.39%

4793 Toy and Sporting Good Wholesaling 52 0.2 0 0 130 3.39%

4794 Book and Magazine Wholesaling 52 1.0 83 26 130 3.39%

4795 Paper Product Wholesaling 23 4.9 102 200 140 3.65%

4796 Pharmaceutical and Toiletry Wholesaling 52 9.8 110 131 130 3.39%

4799 Wholesaling n.e.c. 23 1.1 59 1,040 140 3.65%

5110 Supermarket and Grocery Stores 125 121.1 291 246 280 7.31%

5121 Fresh Meat, Fish and Poultry Retailing 59 7.7 249 126 110 2.87%

5122 Fruit and Vegetable Retailing 60 5.8 26 104 110 2.87%

5123 Liquor Retailing 60 3.7 21 3 110 2.87%

5124 Bread and Cake Retailing 60 16.1 77 87 110 2.87%

5125 Takeaway Food Retailing 59 57.3 136 76 110 2.87%

5126 Milk Vending 59 1.1 113 197 110 2.87%

5129 Specialised Food Retailing n.e.c. 60 7.0 85 64 110 2.87%

5210 Department Stores 126 18.2 142 115 220 5.74%

5221 Clothing Retailing 126 51.9 217 208 220 5.74%

5222 Footwear Retailing 58 8.9 42 96 150 3.91%

5223 Fabric and Other Soft Good Retailing 61 6.1 195 245 210 5.48%

5231 Furniture Retailing 55 25.9 112 170 150 3.91%

5232 Floor Covering Retailing 55 7.2 186 175 150 3.91%

5233 Domestic Hardware and Houseware Retailing 61 43.3 226 258 210 5.48%

5234 Domestic Appliance Retailing 62 27.4 82 53 60 1.57%

5235 Recorded Music Retailing 62 9.8 47 67 60 1.57%

5241 Sport and Camping Equipment Retailing 62 18.4 50 26 60 1.57%

5242 Toy and Game Retailing 62 4.0 188 400 60 1.57%

5243 Newspaper, Book and Stationery Retailing 62 14.3 78 43 60 1.57%

5244 Photographic Equipment Retailing 62 0.9 0 0 60 1.57%

5245 Marine Equipment Retailing 62 0.1 0 0 60 1.57%

5251 Pharmaceutical, Cosmetic and Toiletry Retailing 62 44.0 83 33 60 1.57%

5252 Antique and Used Good Retailing 62 1.3 0 4 60 1.57%

5253 Garden Equipment Retailing 61 6.6 194 78 210 5.48%

5254 Flower Retailing 55 3.8 261 147 150 3.91%

5255 Watch and Jewellery Retailing 62 13.3 61 107 60 1.57%

5259 Retailing n.e.c. 61 50.1 200 244 210 5.48%

5261 Household Equipment Repair Services (Electrical) 55 6.1 164 132 150 3.91%

5269 Household Equipment Repair Services n.e.c. 55 5.6 94 10 150 3.91%

5311 Car Retailing 65 92.2 84 97 110 2.87%

5312 Motor Cycle Dealing 65 5.5 168 115 110 2.87%

5313 Trailer and Caravan Dealing 65 0.2 298 119 110 2.87%

5321 Automotive Fuel Retailing 55 8.2 121 120 150 3.91%

5322 Automotive Electrical Services 55 2.9 39 22 150 3.91%

5323 Smash Repairing 65 22.6 115 145 110 2.87%

5324 Tyre Retailing 65 6.9 191 260 110 2.87%



Estimated

Wages for

2015/16 ($m)

Claim Freq

Rel - last 3

years

Capped

Claim Cost

Rel - last 5

years

2015/16

Selected

Relativity

2015/16

Suggested

Premium

Rate

5329 Automotive Repair and Services n.e.c. 65 41.0 124 122 110 2.87%

5710 Accommodation 67 95.2 195 171 170 4.44%

5720 Pubs, Taverns and Bars 68 17.2 128 99 120 3.13%

5730 Cafes and Restaurants 68 203.4 130 120 120 3.13%

5740 Clubs (Hospitality) 67 75.1 170 161 170 4.44%

6110 Road Freight Transport 70 28.1 266 577 500 13.05%

6121 Long Distance Bus Transport 70 5.5 320 558 500 13.05%

6122 Short Distance Bus Transport (Including Tramway) 71 2.0 0 172 250 6.52%

6123 Taxi and Other Road Passenger Transport 71 5.2 185 319 250 6.52%

6402 Scheduled Domestic Air Transport 74 36.8 138 109 120 3.13%

6403 Non-Scheduled Air and Space Transport 74 0.1 0 135 120 3.13%

6509 Transport n.e.c. 75 3.8 291 606 210 5.48%

6611 Parking Services 74 0.9 185 722 120 3.13%

6619 Services to Road Transport n.e.c. 75 2.6 126 4 210 5.48%

6629 Services to Water Transport n.e.c. 77 1.7 47 2 130 3.39%

6630 Services to Air Transport 78 10.0 74 109 180 4.70%

6641 Travel Agency Services 62 19.2 36 28 60 1.57%

6642 Road Freight Forwarding 79 1.1 157 442 200 5.22%

6643 Freight Forwarding (Except Road) 79 0.2 0 0 200 5.22%

6644 Customs Agency Services 80 0.1 0 0 30 0.78%

6649 Services to Transport n.e.c. 79 3.0 254 188 200 5.22%

6709 Storage n.e.c. 81 7.6 145 520 220 5.74%

7111 Postal Services 62 14.7 56 121 60 1.57%

7112 Courier Services 71 11.8 433 259 250 6.52%

7120 Telecommunication Services 84 40.6 53 65 30 0.78%

7321 Banks 84 11.0 47 61 30 0.78%

7322 Building Societies 84 1.6 0 7 30 0.78%

7323 Credit Unions 85 8.1 101 85 90 2.35%

7329 Deposit Taking Financiers n.e.c. 84 0.3 0 0 30 0.78%

7330 Other Financiers 84 0.6 0 0 30 0.78%

7340 Financial Asset Investors 84 1.4 0 0 30 0.78%

7411 Life Insurance 84 0.3 0 0 30 0.78%

7412 Superannuation Funds 84 5.4 0 14 30 0.78%

7421 Health Insurance 84 1.5 94 3 30 0.78%

7422 General Insurance 85 19.2 125 93 90 2.35%

7511 Financial Asset Broking Services 83 13.8 35 16 15 0.39%

7519 Services to Finance and Investment n.e.c. 83 58.1 18 6 15 0.39%

7520 Services to Insurance 84 21.5 29 35 30 0.78%

7711 Residential Property Operators 84 2.4 103 24 30 0.78%

7712 Commercial Property Operators and Developers 84 43.0 63 44 30 0.78%

7720 Real Estate Agents 84 124.7 26 21 30 0.78%

7741 Motor Vehicle Hiring 88 4.9 219 201 200 5.22%

7742 Other Transport Equipment Leasing 88 0.2 0 0 200 5.22%

7743 Plant Hiring or Leasing 88 14.0 159 240 200 5.22%

7810 Scientific Research 84 44.8 48 27 30 0.78%

7821 Architectural Services 83 38.0 19 14 15 0.39%

7822 Surveying Services 84 17.4 32 54 30 0.78%

7823 Consulting Engineering Services 83 158.8 22 21 15 0.39%

7829 Technical Services n.e.c. 84 26.2 73 33 30 0.78%

7831 Data Processing Services 84 14.7 24 9 30 0.78%

7832 Information Storage and Retrieval Services 84 9.7 10 3 30 0.78%

7833 Computer Maintenance Services 84 21.6 27 59 30 0.78%

7834 Computer Consultancy Services 83 1,304.5 10 10 15 0.39%

7841 Legal Services 84 110.5 42 34 30 0.78%

7842 Accounting Services 83 181.6 12 16 15 0.39%

7851 Advertising Services 80 14.4 20 40 30 0.78%

7852 Commercial Art and Display Services 80 13.9 51 29 30 0.78%

7853 Market Research Services 80 15.9 14 31 30 0.78%

7854 Business Administrative Services 128 133.5 90 38 50 1.30%

7855 Business Management Services 80 393.4 29 26 30 0.78%

7861 Employment Placement Services 90 49.2 139 104 170 4.44%

7862 Contract Staff Services 90 10.7 188 354 170 4.44%

7863 Secretarial Services 80 10.9 0 33 30 0.78%

7864 Security and Investigative Services (Except Police) 91 72.7 114 164 150 3.91%

7865 Pest Control Services 92 4.7 192 94 350 9.13%

7866 Cleaning Services 93 99.0 146 294 280 7.31%

7869 Business Services n.e.c. 94 47.9 77 80 60 1.57%

8111 Central Government Administration 95 0.4 0 0 110 2.87%

8113 Local Government Administration 95 1.9 43 300 110 2.87%

8130 Foreign Government Representation 95 34.3 107 102 110 2.87%

8410 Preschool Education 97 3.1 315 80 120 3.13%

8421 Primary Education 97 4.5 230 358 120 3.13%

8422 Secondary Education 99 172.2 104 58 60 1.57%

8423 Combined Primary and Secondary Education 99 112.7 109 53 60 1.57%

8431 Higher Education 100 18.7 35 25 40 1.04%

8432 Technical and Further Education 100 14.2 102 34 40 1.04%

8440 Other Education 99 44.6 113 58 60 1.57%

8611 Hospitals (Except Psychiatric Hospitals) 101 74.4 106 108 90 2.35%

8613 Nursing Homes 127 93.5 273 225 250 6.52%

8621 General Practice Medical Services 103 79.3 35 35 35 0.91%

8622 Specialist Medical Services 103 87.7 32 43 35 0.91%

8623 Dental Services 103 50.5 85 36 35 0.91%

8631 Pathology Services 104 32.8 132 115 110 2.87%

8632 Optometry and Optical Dispensing 105 17.2 31 12 20 0.52%

8633 Ambulance Services 101 1.4 136 18 90 2.35%



Estimated

Wages for

2015/16 ($m)

Claim Freq

Rel - last 3

years

Capped

Claim Cost

Rel - last 5

years

2015/16

Selected

Relativity

2015/16

Suggested

Premium

Rate

8634 Community Health Centres 106 12.8 88 94 140 3.65%

8635 Physiotherapy Services 103 20.5 17 21 35 0.91%

8636 Chiropractic Services 103 6.9 57 21 35 0.91%

8639 Health Services n.e.c. 106 36.6 81 76 140 3.65%

8640 Veterinary Services 107 17.8 307 102 100 2.61%

8710 Child Care Services 89 110.7 334 163 160 4.17%

8721 Accommodation for the Aged 102 35.1 302 242 200 5.22%

8722 Residential Care Services n.e.c. 102 55.9 201 193 200 5.22%

8729 Non-Residential Care Services n.e.c. 132 77.9 274 274 280 7.31%

9111 Film and Video Production 108 1.1 46 110 40 1.04%

9112 Film and Video Distribution 108 0.2 0 0 40 1.04%

9113 Motion Picture Exhibition 108 5.1 160 73 40 1.04%

9121 Radio Services 108 15.5 26 11 40 1.04%

9122 Television Services 108 24.5 50 32 40 1.04%

9220 Museums 110 4.1 80 15 20 0.52%

9231 Zoological and Botanic Gardens 111 1.3 354 215 200 5.22%

9239 Recreational Parks and Gardens 111 0.1 553 32 200 5.22%

9241 Music and Theatre Productions 112 1.8 166 405 160 4.17%

9242 Creative Arts 112 0.5 0 0 160 4.17%

9252 Performing Arts Venues 112 5.7 288 53 160 4.17%

9259 Services to the Arts n.e.c. 112 3.0 314 674 160 4.17%

9311 Horse and Dog Racing 113 2.8 353 177 450 11.74%

9312 Sports Grounds and Facilities n.e.c. 114 37.7 101 120 100 2.61%

9319 Sports and Services to Sports n.e.c. 133 32.6 67 26 70 1.83%

9321 Lotteries 84 0.4 0 0 30 0.78%

9322 Casinos 115 10.2 107 133 160 4.17%

9329 Gambling Services n.e.c. 115 2.7 108 28 160 4.17%

9330 Other Recreation Services 111 4.6 111 81 200 5.22%

9511 Video Hire Outlets 108 1.2 0 0 40 1.04%

9519 Personal and Household Goods Hiring n.e.c. 129 5.6 177 144 140 3.65%

9521 Laundries and Dry-Cleaners 116 4.1 69 367 230 6.00%

9522 Photographic Film Processing 129 0.7 100 0 140 3.65%

9523 Photographic Studios 129 1.4 0 0 140 3.65%

9524 Funeral Directors, Crematoria and Cemeteries 129 2.7 137 33 140 3.65%

9525 Gardening Services 117 16.0 370 302 400 10.44%

9526 Hairdressing and Beauty Salons 118 43.4 69 106 90 2.35%

9529 Personal Services n.e.c. 112 3.6 45 84 160 4.17%

9610 Religious Organisations 119 26.0 75 34 50 1.30%

9621 Business and Professional Associations 80 192.6 40 28 30 0.78%

9622 Labour Associations 80 8.7 44 87 30 0.78%

9629 Interest Groups n.e.c. 120 41.8 140 105 140 3.65%

9633 Fire Brigade Services 91 1.6 50 0 150 3.91%

9634 Waste Disposal Services 122 15.0 354 326 320 8.35%

9700 Private Households Employing Staff 112 0.8 0 0 160 4.17%

Documents

ACT Workers’ Compensation Review of Scheme Performance to ... · N:\ACTWC14\SCHEME REVIEW\REPORT\R_2014_ACT SCHEME PERFORMANCE_PUBLIC RELEASE_FINAL.DOCX Claim Numbers and Frequency