Many business owners presume WorkCover insurance is just like the other types of insurance most businesses hold: public liability, professional indemnity and so on. It is my opinion that employers need to shift their mindset regarding how they think of WorkCover. So much so that in my book WorkCover that Works I make the case that WorkCover insurance is very much like taxation.
Here are five big differences between WorkCover insurance and other commercial insurance products to help you stop comparing apples with oranges.
1. WorkCover insurance is compulsory
WorkCover insurance is a government-regulated form of insurance. It is compulsory for employers who expect to pay more than $7500 in rateable remuneration (basically, money paid to employees) in a financial year, or who have apprentices or trainees. Your WorkCover insurance premium ensures the workers employed by you are protected in the event they are injured at work.
You don’t get to decide whether or not to take out a WorkCover policy. Either your business is required to have it or is not eligible to take out a policy.
2. Insurance rates are set by the government
When it comes to WorkCover, each year the Victorian Government releases industry rates that are used to determine how much you’ll pay. Legislation determines your level of coverage. You cannot negotiate a better deal, not even through an insurance broker. Restrictions are in place that affect how often you can move your policy to another provider. And WorkSafe dictates many of the service standards in place at the WorkSafe agents. That’s all very different to other forms of insurance.
3. You can’t lodge a claim
With car insurance, you take out a policy so you can make a claim to recover your asset if needed. But with WorkCover insurance, and from the perspective of the business owner, while you take out the policy, your employee can claim against you. In fact, WorkCover insurance doesn’t allow you, the employer, to claim for almost anything unless it relates to a claim by one of your workers.
4. You must manage the claims process
The claims process of WorkCover insurance also differs from other areas of insurance. In the event of an injury, you don’t ‘let the two insurance companies battle it out’, as might happen after a car crash. There is only one insurer – WorkSafe. They’re not squaring off against another insurer to try and pin the claim on another party. They – and you – are stuck with it. In fact, if the claim has significant costs attached to it, WorkSafe will potentially recoup those costs from your business through premium increases in the years that follow.
In addition, WorkCover insurance is not as simple as other forms of insurance where you lodge a claim and then let the insurer take over. The worker may be working towards a goal that is not in the best interests of the employer. The WorkSafe agent (insurer) may also be working towards targets that don’t quite align with your interests. There are many stakeholders who become involved in a WorkCover claim and they are usually working to serve their own interests rather than yours. Employers must take a hands-on approach to their claim strategies.
5. A single claim can send your premium through the roof
I recall a talk by Terry Towell, the former managing director of Allianz Australia, where he described insurance as ‘peace of mind’. Customers pay a modest fee each year to know that an unforeseen accident won’t result in catastrophe. If your house burns down, the insurer looks after you and covers the costs. You’re not paying for the insurance per se. You’re buying peace of mind.
And I agree with Terry completely. That’s exactly why I have insurance on my home, car and business – it helps me sleep at night! So surely WorkCover is still a bit like insurance, right? Don’t employers pay a modest insurance premium each year so that they don’t have to pay the full cost of a claim?
Claims costs impact the calculation of WorkCover insurance premiums. Some employers will experience premium increases that significantly outweigh the actual amounts paid on the claim, even if it’s the first claim they’ve ever had. For some businesses, a single claim could more than double their annual premium. What sort of insurance is that?
I am regularly called upon by business owners who have experienced a WorkCover claim. They’re tearing their hair out because their WorkCover insurance and case manager aren’t behaving the way they expect them to. The claims process feels sluggish and their premiums begin climbing significantly.
Only after I’ve lifted the curtain for these employers on how WorkCover really works do they realise their biggest mistake was presuming the system would guide and protect them the same way their other business insurances do. Business owners must align themselves with a trusted advisor regarding their WorkCover situation who understands the system and can offer advice that serves the best interests of the company.
Do you have a trusted advisor regarding WorkCover issues who can support the decision-making process and strategy of your business? Is it time you got one?