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 from 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 2001 (Cwlth) 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 DI 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 DI Fund. Mr John Fletcher, General Manager, ACT Insurance Authority, is the current DI Fund Manager. The administrative functions of the DI Fund are undertaken by two staff.
Administrative operations are subject to the same governance controls in relation to risk management, fraud prevention and records management as the ACT Insurance Authority, and reporting on these operations is included in the relevant sections of the Authority's 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); and
- John Fletcher – DI Fund Manager.
The Committee met on four occasions during 2013-14. 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 DI Fund currently administers claims against it, 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.
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|
|Total Claims opened during the reporting period||15|
|Total Claims closed during the reporting period||18|
|Current Open Claims||29|
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 cost of the unfunded component of the current claims provision.
In considering an appropriate levy for 2013-14, 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% of the gross written premiums in 2013-14, a reduction on the 2.0% applied in 2012-13.
The reduction offset the cost of the workers compensation regulatory levy introduced on 1 July 2013. The target date for achieving a fully funded UEF was also adjusted from 2015 to 2020.
In 2013-14, a total of $2.860 million has been collected as levy revenue from insurers and self-insurers. The total levy revenue of $2.860 million and a further $984,000 from reserves has been applied to match the cost of current year expenses with an increase in the UEF's unfunded component identified as non-current receivables.
The total expenses for 2013-14 were $4.503 million.
The total outstanding claims provision for the UEF as at 30 June is $12.659 million.
The fund holds $8.023 million in cash and cash equivalents and total receivables of $4.701 million as at 30 June 2014.
Collapsed Insurer Fund (CIF)
This component of the Fund currently administers claims against it associated with liquidations of two insurers that were previously approved Workers' Compensation Insurers in the Territory:
- National Employers' Mutual Association Ltd (NEM) — 1990; and
- HIH Insurance (HIH) — 2001.
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 2014 there was one open claim against NEM and no open claims against HIH.
The Fund Manager is the fund representative on the committee of inspection for the HIH liquidation which is forecast for completion in the second half of 2015.
|Collapsed Insurer Fund - Claims|
|Total Claims opened during the reporting period||0|
|Total Claims re-opened during the reporting period||0|
|Total Claims closed during the reporting period||3|
|Current Open Claims||1|
The DI Fund is not levying insurers and self-insurers for the CIF at present.
The DI Fund received a further payment from the HIH Liquidator of $2.003 million.
The DI 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.
The total expenses for 2013-14 were a credit of $0.232 million. This was due to changes in actuarial assumptions used to value the outstanding claims provision and subsequent claims expense.
As at 30 June 2014, the CIF had cash and cash equivalents totalling $13.572 million with an estimated outstanding claims provision of $1.221 million.
The fund total equity as at 30 June 2014 is $12.373 million.
The full DI Fund financial statements are reported in Volume 2 of the 2013-14 Chief Minister and Treasury Directorate Annual Report.
External Services Providers
The following external service providers support the operation of the DI Fund:
- The DI Fund Actuary is KPMG.
- The DI Fund legal panel comprises Minter Ellison, DLA Piper, and Sparke Helmore who provide advice and representation services.
Legal work is allocated on a rotational basis taking into consideration the relevant expertise of the specified personnel and allowances for any conflicts of interest that may arise.
The following table identifies all external service providers contracted to the DI Fund during the reporting period.
The increase in legal costs in 2013-14 is due to additional legal representation required when three claims proceeded to hearing in the Supreme Court.
|Name||Description and reason for contract||2013-14 Cost |
|2012-13 Cost |
|Date contract commenced||Type of Contract|
|Sparke Helmore||Legal Advice|
|11 Nov 2010||Open|
|Minter Ellison||Legal Advice|
|11 Nov 2010||Open|
|DLA Piper||Legal Advice|
|10 Nov 2010||Open|
|King & Wood, Mallesons||Legal Advice|
|1 Dec 2007 |
Mallesons have 1 matter remaining from their original contract.
|KPMG||Actuarial Services||$35,454||$16,363||May 2011||Select tender within procurement thresholds|
Disbursements include costs such as medical examinations, investigation reports and counsels' fees.
The DI Fund did not receive any requests under the Freedom of Information Act 1989 or any public interest disclosures during 2013-14.
Reporting areas not applicable to the Default Insurance Fund are listed at page 110 of this report.
Due to the nature of their enabling legislation, functions or administrative support, the entities listed below do not report against the listed sections of the Annual Report Directions.
Governance and Accountability
Legislation Based Reporting
D.3, D.5, D.6, D.7, D.8
Human Resources Management and Reporting
Financial Management Reporting
F.3, F.4, F.6
Further information may be obtained from:
Mr John Fletcher
ACT Insurance Authority
+61 2 6207 0268