COMPARISON OF WORKERS' COMPENSATION ARRANGEMENTS

CALCULATION OF INDUSTRY RATES

VICTORIA

Each industry's True Risk Rate is calculated based on the ratio of the industry's costs (payments made over the last

three years, outstanding liabilities and a proportion of the Authority's operating expenses) to remuneration over the

last three years. The final industry rate is the point on a predetermined scale that is next above the True Risk Rate.

NEW SOUTH WALES

In NSW there are 537 industry classes.  Industry premium rates are based on the last three years' claims experience

of each class.  Rates are calculated by external actuaries using objective, data based rating methodology.  An

actuarial credibility model is applied to small industry classes.

SOUTH AUSTRALIA

Each class of industry levy rate is calculated on rate relativities taking account of an employer's individual experience

over a 30 month period to produce rates (within a rate scale between 0.4% and 7.5%, increasing in increments of

0.10 percentage points) that weigh claims cost and claim frequency in a ratio of 3 to 1.

WESTERN AUSTRALIA

Recommended premium rates are determined annually according to independent actuarial analysis of claims and

wages data provided by current and former approved insurers and self insurers.  The actuarial analysis includes:

calculation of relative premium rates

examination of the adequacy of the declared outstanding claims reserves

the analysis of insurers' expense and contingency allowances

a projection of the expected incurred cost of claims for the year

a calculation of the amount of premium expected to meet the expected cost of claims

a calculation of the implied uniform percentage variation in the relative premium rates to generate the 

required premium income.

The objectives of the actuarial assessment are to: provide broad equity across industry classes, to provide relative

stability in the rating structure and to minimise the cross subsidy of rates.

QUEENSLAND

The industry rates are published in an Industrial Gazette as WorkCover Industry Classification (WIC) Rates. These

rates are actuarially calculated taking the industry aggregate claims performance into account, and also include a

provision for outstanding claims liabilities. The average rate paid by all employers in a particular industry is used as

a base rate for new employers.

NEW ZEALAND

In New Zealand, there are 550 industry groups and 130 premium pools. For each industry group, the premium and

experience relativities are compared by individual year as well as a 5 year weighted average. As a result of this

comparison (and taking into account such things as the impact of large claims, the number of years' experiences for

a new industry group, the volume of claims, etc.) the industry rate will either stay within the same premium pool or

be moved up or down a pool.

The premium relativity of each premium pool is the expected ultimate cost of claims expressed as a percentage of

wages for the industry, compared with the expected ultimate cost of claims for all industries. The absolute level of

the premium rates is set so that the expected costs of the Scheme will be met.

The premium rates shown are the fully funded premium rates, together with a 0.05% Occupational Safety and

Health Levy.

Heads of Workers' Compensation Authorities  44