Calculation of industry rates

Each jurisdiction calculates its industry rates differently. Some calculate certain claims performance elements, while some other jurisdictions also include current industry premium rates. The Northern Territory does not provide industry premium rates because the legislation gives insurers the power to set their own industry premium rates and these do not have to be gazetted. The information below outlines how each jurisdiction calculates their industry premium rates.

New South Wales 

There are currently 538 Workers Compensation Industry Classification Rates. Rates are reviewed on an annual basis. Each industry’s rate is calculated based on an actuarially verified methodology considering 5 years of wages and claims data.

Victoria

Each industry’s rate is calculated based on claim cost rates and claim frequency rates over a 5-year period with 12 months of development. The rates are calibrated to achieve the average premium rate.

Queensland

There are currently 560 WorkCover Industry Classifications. Rates are calculated annually based on an actuarially verified methodology considering 7 years of wages and claims data.

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:

  • a calculation of relative premium rates
  • examination of the adequacy of the declared outstanding claims reserves
  • an 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 cost of claims, and
  • a calculation of the implied uniform percentage variation in the relative premium rates to generate the required premium income.

South Australia

From 1 July 2015, South Australian industry classifications have been aligned to the Australian and New Zealand Standard Industrial Classification system. Each employer location is allocated to an industry classification that corresponds to the predominant activity for that employer at that location — see  Industry classification rates .

Tasmania

WorkCover Tasmania is required to publish suggested premium rates for employers and licensed insurers. The objective is to ensure full funding, minimisation of cross subsidisation and increased transparency in the premium setting process. The actuarial analysis includes:

  • analysis of claim numbers, claim frequency and claim size
  • calculation of required premium pool
  • examination of effect of legislative change
  • analysis of economic assumptions and insurers expense and profit assumptions, and
  • a comparison with insurer filed rates.

Australian Capital Territory

The Australian Capital Territory releases suggested reasonable rates by ANZSIC class. These rates are determined annually according to independent actuarial analysis of wages and premium data provided by current and former approved insurers and self-insurers.

New Zealand

In New Zealand there are 540 classification units and 142 levy risk groups. For each classification unit the levy relativities are compared by year for the last 4 years. As a result of this comparison and taking into account such things as the impact of large claims, the number of years experience for a new classification unit, the volume of claims etc., the classification unit will either stay within the same levy risk group or be moved to another.

The credibility-adjusted levy rate relativity of each levy risk group is the expected ultimate cost of claims expressed as a percentage of wages for the levy risk group, compared with the expected ultimate cost of claims as a percentage of wages for all levy risk groups. All the expected ultimate cost of claims and wage quantities used for this calculation are weighted averages of the most recent 6 years of experience. The levy rate relativities are credibility-adjusted (as required) to the self-insurers, then to the levy risk groups, then to the industry groups, and finally to the aggregate rate. The absolute level of the levy rates is set so that the expected costs of the scheme will be met. The classification unit levy rates shown are fully-funded levy rates.