Default Insurance Fund

The Organisation

The Workers Compensation Act 1951(the Act) was established to provide compensation to workers employed in the private sector for injuries arising out of or in the course of their employment.

The Default Insurance Fund (DI Fund) was established under the Act effective 1 July 2006. It provides a safety net to meet the cost of workers’ compensation claims made by workers in circumstances where:

  • an employer does not have a workers’ compensation insurance policy and cannot meet the claim costs payable under the Act; or
  • an employer’s insurance company is wound up under the Corporations Act or cannot provide the indemnity required to be provided under a compulsory workers’ compensation policy.

Funds are held in trust under the Financial Management Act 1996 in two separate accounts:

  • the Uninsured Employer Fund (UEF); and
  • the Collapsed Insurer Fund (CIF).

All claims and administration costs are met from the Fund.

The DI Fund meets the cost of any awards and claims for workers’ compensation, including the payment of weekly compensation, medical expenses and rehabilitation costs, as well as compensation settlements and any common law judgments or settlements.

A public servant appointed by the Director-General, Chief Minister, Treasury and Economic Development Directorate, manages the Fund. Mr. John Fletcher, General Manager, ACT Insurance Authority, is the current DI Fund Manager.

Administrative operations are subject to the same governance controls in relation to risk management, fraud prevention and records management as the ACT Insurance Authority. The Authority’s reporting on these operations is included in the relevant sections of the ACT Insurance Authority Annual Report.

The Authority also oversights workplace health and safety and associated risk management, accommodation, facilities management and workplace environmental management. Reporting on these issues is contained in the Authority’s Annual Report.

The Default Insurance Fund Advisory Committee is established under Schedule 3 of the Act. Their role is to monitor the operations of the DI Fund and, if requested by the Minister or the DI Fund Manager, advise on matters relating to the operation of the Act.

The Committee comprises the Executive Director, Continuous Improvement and Workers’ Compensation (Chair), the DI Fund Manager and three members appointed by the Minister.

The membership of the DI Fund Advisory Committee is:

  • Michael Young – Executive Director, Continuous Improvement & Workers’ Compensation (Chair);
  • Graciete Ferreira – Master Builders Association ACT (Employer Representative);
  • Susie Walford – GIO Insurance (Insurer Representative);
  • Dean Hall – CFMEU (Employee Representative) (exited 22nd August 2016);
  • Rosalind Read – CFMEU (Employee Representative) (commenced 23rd February 2017); and
  • John Fletcher – DI Fund Manager.

The Committee met on three occasions during 2016-17. At each meeting, a report on the status of the DI Fund was provided and a schedule detailing the status of all open claims was considered.

Uninsured Employer Fund (UEF)

This component of the Fund currently administers claims which have arisen when a worker has been injured and the employer failed to hold an ACT Workers’ Compensation Policy. Where the employer does not or cannot meet the cost of claims, the UEF responds on behalf of the employer as the default insurer.

Claims

When a claim is received the UEF undertakes an insurer search in an attempt to locate an insurer for the injured worker. In some cases an insurer is identified and the claim is then forwarded to the appropriate insurer.

When satisfied that an insurance policy is not in place, the DI Fund acts as the default insurer for the injured worker. The DI Fund arranges and facilitates appropriate rehabilitation and medical treatment for injured workers with the aim of returning an injured worker back to their pre-injury state where possible. Claims are managed within the auspices of the Act, and the DI Fund meets the cost of all legislated entitlements for injured workers including medical expenses, rehabilitation costs, weekly compensation and lump sum settlements.

Uninsured Employer Fund - Claims
 Number

Total claims opened during the reporting period

13

Total claims closed during the reporting period

11

Current open claims

31

Revenue

The Workers Compensation Act 1951, Section 168A requires the Fund Manager to undertake a review of the Uninsured Employer Fund each year to determine the appropriate levy on workers compensation insurers.

A funding model introduced in 2010-11 to address under-funding of the UEF aims to build on reserves to cover the unfunded component of the current claims provision and administrative expenses of the fund. As of 30 June 2016 the Fund reached a fully funded position.

In considering an appropriate levy for 2016-17, the Fund Manager took into consideration a range of issues including a sensitivity analysis of the volatility of the DI Fund, the potential for an increase in claims costs, and claim numbers in the current and future insurance years.

The Fund Manager imposed contributions from insurers and self insurers equal to 1.4 per cent of the gross written premiums equating to the collection of $2.663 million in levy revenue.

Expenses

The total expenses for 2016-17 were $0.386 million.

Balance Sheet

The Fund holds $10.188 million in cash and cash equivalents and total receivables of $1.163 million as at 30 June 2017.

The total outstanding claims provision for the UEF as at 30 June 2017 is $8.177 million.

The Fund total equity as at 30 June 2017 is $3.102 million.

Collapsed Insurer Fund (CIF)

This component of the Fund currently administers claims which have arisen from a previously approved Workers’ Compensation Insurer that has been wound up or is under liquidation. Currently the Fund administers claims for two collapsed insurers, National Employers’ Mutual Association Ltd in 1990 (NEM) and HIH Insurance in 2001 (HIH).

Claims

When satisfied that an insurer is unable to pay, the DI Fund acts as the default insurer for the injured worker. The DI Fund arranges and facilitates appropriate rehabilitation and medical treatment for injured workers with the aim of returning an injured worker back to their pre-injury state where possible. Claims are managed within the auspices of the Act, and the DI Fund meets the cost of all legislated entitlements for injured workers including medical expenses, rehabilitation costs, weekly compensation and lump sum settlements.

The liquidators for NEM have completed final statutory and administrative matters and the liquidation is now complete.

As at 30 June 2017 there was one open claim against NEM and two open claims against HIH.

The Fund Manager is the fund representative on the committee of inspection for the HIH liquidation.

Collapsed Insurer Fund - Claims
 Number

Total claims opened during the reporting period

1

Total claims re-opened during the reporting period

2

Total claims closed during the reporting period

1

Current open claims

3

Revenue

The Fund is not levying insurers and self-insurers for the CIF at present.

The Fund can appropriately and responsibly manage the impact of any future insurance collapses within the workers’ compensation industry through the retention of its current reserve and the imposition of a tailored levy on employers in the event of a collapse.

Expenses

The total expenses paid by the Fund during the year were $0.013 million, $47,000 in supplies and services and ($34,000) in Claims Expense. The claims expense consisted of $64,000 compensation payments and a decrease in the provision for claims payable of ($98,000) as the result of the 2016-17 actuarial valuation.

Balance Sheet

As at 30 June 2017, the CIF had cash and cash equivalents totalling $18.29 million with an estimated outstanding claims provision of $0.948 million.

The Fund total equity as at 30 June 2017 is $17.34 million.

The DI Fund financial statements are reported in Volume 2 of the 2016-17 Chief Minister, Treasury and Economic Development Directorate Annual Report.

Further information may be obtained from:

John Fletcher
General Manager
ACT Insurance Authority
+61 2 6207 0268
john.fletcher@act.gov.au