Marsh has warned its clients that “marked” rises in NSW workers’ compensation premiums may result from reforms that took effect this month.

“It seems to be the bigger the company, the higher the impact,” the broker’s Workplace Strategies Principal Rob Peseta told insuranceNEWS.com.au.

“We thought there would be premium rises for about 16-20% of employers that are the poorest performers, but this is not the case. Some employers were not expecting to see these rises.”

He says in some cases employers with good claims performance records appear to have been captured by the new model, and he has called on WorkCover NSW to explain this.

Marsh says the problem must be resolved this month, when new premium rate notices are usually issued.

While it is early days for the new system, there appears to have been “extreme” reaction in the market to estimates of the new rates, according to Mr Peseta.

“These are the most extensive reforms to take place in the past 25 years,” he said.

Marsh has urged all medium and large businesses to review their 2015/16 premium calculations, because some scheme agents are making mistakes in calculations and alarming employers.

“We’ve seen isolated examples of incorrect or poor calculations,” Mr Peseta said. “It certainly adds to the turmoil.”

He understands WorkCover NSW has seen a number of “unhappy clients” who fall into this category.

A WorkCover NSW spokesman told insuranceNEWS.com.au the organisation “is aware that there have been some misinformation created in the market by miscalculations of premiums under the new model. 

“If any employer has any queries or concerns about their premiums for 2015/16, they are encouraged to contact their scheme agent to discuss and confirm that their calculations are correct.”

Final premiums are being checked as scheme agents correct their data anomalies and as usual premium notices will be released in late July.

WorkCover does not expect an increase to the overall premium pool with the new model.  The scheme actuary has set the pricing components to collect the same premium level as the current year. 

“The old premium model was heavily influenced by claims estimates and it is misunderstanding of the base claims cost that has caused some confusion.”

Manipulation of claims estimates in previous years would also have a detrimental impact on the new premium calculation. “This is impacting some accounts that on face value have an acceptable loss ratio but the underlying performance is poor.”

Mr Peseta says NSW scheme agents are only now releasing premium simulations, so many employers are learning of the impact without notice and with little ability to manage proposed increases.

The release of the new premiums order last month included “radical changes” for medium and large employers.

The definition of claims costs has changed, and now only paid claims are included in premium calculations, with the requirement for all claims to go to insurers also removed.

Previously, employers were obliged to include unpaid claims, but there is no room for forward estimates now, Mr Peseta says.

Under the new system, it is possible employers will not bother to lodge claims with insurers, he says.

This could be “really risky”, with claims going “off the books”.

“The injured workers could therefore be out of the system with no transparency,” he said.

Marsh is working to clarify the situation with scheme agents and WorkCover NSW, and clients are urged to contact brokers.

WorkCover NSW says official rates remain unchanged at 1.4% of wages and premium rate rises are capped for the first two years, so employers can adjust to the new rewards-based model.

“No individual employer will have their final premium rate go up by more than 30%,” the spokesman told insuranceNEWS.com.au.

“The 70% of employers that perform better than the scheme average will pay less than the industries’ average premium rate.”

Every employer will receive a 10% discount to invest in safety. Employers that remain claims-free will receive a further 5% discount at the end of the year – known as the employer safety reward.

See previous story.