Premium affordability in personal injury schemes is a “massive issue”, with many employers seeing workers’ compensation as a tax, incoming Actuaries Institute President Daniel Smith warns.

“When you talk about increasing taxes, people naturally get upset,” he told insuranceNEWS.com.au.

The institute conducted a survey at its recent injury schemes seminar, where 32% of 51 delegates considered affordability the main challenge in the personal injury area.

In some states personal injury premiums have risen substantially, or the solvency of workers’ compensation schemes has deteriorated.

“In SA, their scheme has been under extreme pressure in terms of the benefits it offers, and they need to effectively increase premiums to make the scheme sustainable,” Mr Smith told insuranceNEWS.com.au.

“NSW has also been under pressure for a considerable time, where premiums have arguably not been sufficient to match the benefits that are being paid.”

There is a delicate balancing act between social justice and economic efficiency, according to Mr Smith, who becomes institute President on January 1.

Insurers believe they must adjust to a climate of lower investment returns and higher risk from personal injury schemes, the survey shows.

About 38% of respondents say a surge in claims, driven by trends such as more stress cases, will pose the greatest financial risk over the next five years.

“The concern for the schemes is they could have a blowout in costs if people start receiving more benefits for psychological injury,” Mr Smith told insuranceNEWS.com.au.

About 43% of respondents say improved claims management is critical to ensuring injury schemes’ long-term funding viability.

Peter McCarthy, chairman of the institute’s general insurance practice committee, says most schemes and insurers are already investigating ways to improve claims management, such as increasing staff capability, triaging claims and focusing on health outcomes.

“However, in some cases there is still a significant contrast in the quality of claims management practices and claims outcomes.”

He says the national disability insurance scheme has changed the direction of injury schemes by catering more to individual health needs and outcomes.

However, recent reports that the national scheme could cost billions of dollars more than expected highlight the financial risk it must manage.