Default Insurance Fund Manager
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 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 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 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 Fund. Mr John Fletcher, General Manager, ACT Insurance Authority, is the current DI 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 reporting on these operations is included in the relevant sections of the ACT Insurance Authority 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. Its 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, Workplace Safety and industrial Relations (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, Workplace Safety and industrial Relations (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 meets on a quarterly basis. 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||13|
|Total Claims closed during the reporting period||15|
|Current Open Claims||25|
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. The target date for achieving a fully funded UEF is 2019-20.
In considering an appropriate levy for 2015-16, 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 per cent of the gross written premiums in 2015-16.
In 2015-16, a total of $2.457 million has been collected as levy revenue from insurers and self-insurers. Levy revenue of $0.817 million has been applied to match the cost of current year expenses with a decrease of $1.640 million in the UEF’s unfunded component identified as non-current receivables.
The total expenses for 2015-16 were $0.792 million.
The fund holds $8.218 million in cash and cash equivalents and total receivables of $1.413 million as at 30 June 2016.
The total outstanding claims provision for the UEF as at 30 June 2016 is $9.015 million.
The fund total equity as at 30 June 2016 is $0.541 million.
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 2016 there was 1 open claims against NEM and 1 open claims against HIH.
The Fund Manager is the fund representative on the committee of inspection for the HIH liquidation.
|Collapsed Insurer Fund - Claims|
|Total Claims opened during the reporting period||1|
|Total Claims re-opened during the reporting period||0|
|Total Claims closed during the reporting period||0|
|Current Open Claims||2|
The fund is not levying insurers and self-insurers for the CIF at present.
The fund received a further payment from the HIH Liquidator of $0.653 million in 2015-16.
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.
The total expenses paid by the Fund during the year were $0.118 million, $46,000 in supplies and services and $72,000 in Claims Expense. The claims expense consisted of $22,000 compensation payments and a movement in the provision for claims payable of $50,000 as the result of the 2015-16 actuarial valuation.
As at 30 June 2016, the CIF had cash and cash equivalents totalling $17.908 million with an estimated outstanding claims provision of $1.046 million.
The fund total equity as at 30 June 2016 is $16.86 million.
The DI Fund financial statements are reported in Volume 2 of the 2015-16 Chief Minister, Treasury and Economic Development Directorate Annual Report.
Further information may be obtained from:
ACT Insurance Authority
+61 2 6207 0268