Default Insurance Fund
Transmittal Certificate
Compliance Statement
The 2017-18 Default Insurance Fund Annual Report must comply with the 2017 Annual Report Directions (the Directions). The Directions are found at the ACT Legislation Register: https://www.legislation.act.gov.au/ni/2017-280/notification.asp
The Compliance Statement indicates the subsections, under the five parts of the Directions that are applicable to the Default Insurance Fund (the Fund) and the location of information that satisfies these requirements:
Part 1 Directions Overview
The requirements under Part 1 of the Directions relate to the purpose, timing and distribution, and records keeping of annual reports. The 2017-18 Default Insurance Fund Annual Report complies with all subsections of Part 1 under the Directions.
In compliance with Section 13 Feedback, Part 1 of the Directions, contact details for the Fund are provided within the 2017-18 Default Insurance Fund Annual Report to provide readers with the opportunity to provide feedback.
Part 2 Agency Annual Report Requirements
The requirements within Part 2 of the Directions are mandatory for all directorates and public sector bodies and the Fund complies with all subsections. The information that satisfies the requirements of Part 2 is found in the 2017-18 Default Insurance Fund Annual Report as follows:
- A. Transmittal Certificate, see page 307;
- B. Organisational Overview and Performance, inclusive of all subsections, see page 309-313; and
- C. Financial Management Reporting, inclusive of all subsections, is contained within the CMTEDD Annual Report.
Part 3 Reporting by Exception
The Fund has nil information to report by exception under Part 3 of the Directions for the
2017-18 reporting period.
Part 4 Directorate and Public Sector Body Specific Annual Report Requirements
Part 4 of the 2017 Directions is not applicable to the Fund.
Part 5 Whole of Government Annual Reporting
All sections of Part 5 of the Directions apply to the Fund. Consistent with the Directions, the information satisfying these requirements is reported in the one place for all ACTPS directorates, as follows:
- N. Community Engagement and Support, see the Annual Report of the Chief Minister, Treasury and Economic Development Directorate;
- O. Justice and Community Safety, including all subsections O.1 – O.4, see the Annual Report of the Justice and Community Safety Directorate;
- P. Public Sector Standards and Workforce Profile, including all subsections P.1 – P.3, see the Annual State of the Service Report; and
- Q. Territory Records see the Annual Report of the Chief Minister, Treasury and Economic Development Directorate
ACT Public Service Directorate annual reports are found at the following web address: https://www.cmtedd.act.gov.au/open_government/report/annual_reports
As required by Australian Auditing Standards, the ACT Audit Office checks financial statements included in annual reports (and information accompanying financial statements) for consistency with previously audited financial statements. This includes checking the consistency of statements of performance with those statements previously reviewed (where a statement of performance is required by legislation).
Organisational Overview and Performance
B.1 Organisation Overview
The Workers Compensation Act 1951 (the Workers Compensation 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 (the Fund) was established under the Workers Compensation Act effective 1 July 2006. It provides a safety net mechanism 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 Workers Compensation 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; or
- a worker is suffering from an imminently fatal asbestos-related disease as a result of exposure to asbestos fibres whilst employed as a worker in the Australian Capital Territory.
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).
Functions
The Fund meets the cost of any awards and claims for workers’ compensation, including the payment of weekly compensation, rehabilitation costs and medical expenses, as well as compensation settlements and any common law judgments or settlements.
A public servant is appointed by the Director-General, Chief Minister, Treasury and Economic Development Directorate, to manage the Fund. Mr John Fletcher, General Manager, ACT Insurance Authority, is the current 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). The Authority’s reporting on these operations is included in the relevant sections of the ACT Insurance Authority Annual Report.
Internal Accountability
The Default Insurance Fund Advisory Committee is established under Schedule 3 of the Workers Compensation Act. Their role is to monitor the operations of the Fund and, if requested by the Minister or the Fund Manager, advise on matters relating to the operation of the Workers Compensation Act.
The Committee comprises the Executive Director, Continuous Improvement and Workers’ Compensation (Chair), the Fund Manager and three members appointed by the Minister.
The membership of the 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);
- Rosalind Read – Construction Forestry Maritime Mining and Energy Union ACT (CFMEU) (Employee Representative); and
- John Fletcher – Fund Manager.
The Committee met on four occasions during 2017-18. At each meeting, a report on the status of the Fund was provided and a schedule detailing the status of all open claims was considered.
B.2 Performance Analysis
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 Fund acts as the default insurer for the injured worker. The 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 Fund meets the cost of all legislated entitlements for injured workers including weekly compensation, medical expenses, rehabilitation costs, and lump sum settlements.
Table 1: Uninsured Employer Fund Claims
Uninsured Employer Fund - Claims | |
---|---|
Total claims opened during the reporting period | 11 |
Total claims closed during the reporting period | 13 |
Current open claims | 31 |
Revenue
The Workers Compensation Act, 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.
In considering an appropriate levy for 2017-18, the Fund Manager took into consideration a range of issues including a sensitivity analysis of the volatility of the Fund, the potential for an increase in claims costs, claim numbers in the current and future insurance years and any changes to Workers’ Compensation legislation.
On 1 July 2017, the Workers’ Compensation Amendment Act 2016 (No 2) was introduced. This amendment included providing benefits to workers in relation to claims for imminently fatal asbestos-related disease (IFARD) through the UEF.
The Fund Manager imposed contributions from insurers and self-insurers equal to 2.9% of the gross written premiums for 2017-18, an increase from the 2016-17 rate of 1.4%.
For the reporting period 2017-18, a total of $28.252 million of levy revenue has been recorded on the operating statement. This revenue comprises $5.849 million in levy revenue invoiced to licensed insurers and self-insurers and an amount of $22.403 million that establishes a receivable on the balance sheet to meet the cost of future claims payable at the commencement of the IFRAD scheme.
Expenses
The total expenses for 2017-18 were $32.294 million.
Balance Sheet
As at 30 June 2018, the Fund holds total assets of $39.271 million consisting of $14.441 million in cash and cash equivalents and current receivables of $1.668 million along with non-current receivables of $23.162 million and total liabilities of $39.271 million predominately consisting of $39.164 million in provision for claims payable.
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 Fund acts as the default insurer for the injured worker. The 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 Fund meets the cost of all legislated entitlements for injured workers including medical expenses, rehabilitation costs, weekly compensation and lump sum settlements.
As at 30 June 2018 there was one open claim against NEM and one open claim against HIH.
The Fund Manager is the fund representative on the committee of inspection for the HIH liquidation.
Table 2: Collapsed Insurer Fund - Claims
Collapsed Insurer Fund - Claims | |
---|---|
Total claims opened during the reporting period | - |
Total claims re-opened during the reporting period | - |
Total claims closed during the reporting period | 1 |
Current open claims | 2 |
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 $0.055 million, $42,000 in supplies and services and $13,000 in Claims Expense. The claims expense consisted of $70,000 compensation payments and a decrease of $57,000 in the provision for claims payable as the result of the 2017-18 actuarial valuation.
Balance Sheet
As at 30 June 2018, the CIF had cash and cash equivalents totalling $7.289 million with an estimated outstanding claims provision of $0.891 million.
The fund total equity as at 30 June 2018 is $6.397 million.
B.3 Scrutiny
There were no inquiries or reviews from the ACT Auditor-General, the ACT Ombudsman, or any Legislative Assembly Committees in 2017-18. The only scrutiny from the Auditor-General during the reporting period was for the audit of the 2016-17 Financial Statements.
B.4 Risk Management
The Fund is part of the ACT Insurance Authority. As such, it is covered in the ACT Insurance Authority’s risk management arrangements.
B.5 Internal Audit
The Fund is part of the ACT Insurance Authority. As such, the internal audit functions were provided by the Chief Minister, Treasury and Economic Development Directorate Audit and Risk Committee (the Committee). The Committee’s functions are governed by the Audit Committee Charter.
During 2017-18 the committee reviewed the findings of the Internal Audit of Default Insurance Fund and Nominal Defendant Fund conducted by the private audit firm, Protiviti during 2016-17.
B.6 Fraud Prevention
The functions of the Fund are supported by the ACT Insurance Authority who adhere to its own Fraud and Corruption Prevention Plan.
B.7 Workplace Health and Safety
The Fund does not directly employ personnel. The functions of the Fund are supported by the ACT Insurance Authority who adhere to the provisions outlined in the Work Safety Act 2011.
B.8 Human Resource Management
The Fund does not directly employ personnel. The functions of the Fund are supported by the ACT Insurance Authority.
The ACT Insurance Authority’s Annual Report section on Human Resources Management applies to the Fund.
B.9 Ecologically Sustainable Development
The ACT Insurance Authority’s Annual Report section on Ecologically Sustainable Development applies to the Fund.
Financial Management Reporting
C.2 Financial Statements
The Fund’s financial statements are reported in Volume 2 of the 2017-18 Chief Minister, Treasury and Economic Development Directorate Annual Report.
C.3 Capital Works
The Fund did not have any capital works expenditure during the reporting period.
C.4 Asset Management
The Fund has no physical or intangible assets under management. The Fund has some capacity to invest funds over the medium and long term.
C.5 Government Contracting
The Fund engages consultants to perform specialised functions of actuarial services and legal advice.
The procurement selection and management processes for all contractors including consultants complied with the Government Procurement Act 2001 and the Government Procurement
Regulation 2007.
Procurement processes above $25,000 have been reviewed by Goods and Services Procurement, and if necessary, by the Government Procurement Board consistent with the provisions of the Government Procurement Regulation 2007. The Authority has complied with all employee and industrial relations obligations in relation to contractors employed.
Table 3: Contracts with a value of $25,000 or more are listed in the table below
Contract Title | Procurement Methodology | Contractor Name | Contract Amount | Execution Date | Expiry/ |
---|---|---|---|---|---|
Actuarial Services to the | Public | Taylor Fry Consulting | $100,000 | February | February |
Further information may be obtained from
John Fletcher
General Manager
ACT Insurance Authority
+61 2 6207 0268
john.fletcher@act.gov.au