ReturnToWork SA has produced a draft policy that would stop SMEs in the state self-insuring.

It wants the minimum financial guarantee for self-insurers to increase from $860,000 to $4.5 million. The workers’ compensation authority has also flagged a change requiring self-insurers to have at least 500-1000 employees.

ReturnToWork SA says self-insurance is a “long-term commitment” and the current financial guarantee is “manifestly inadequate” against the liability implications of catastrophic injuries, which have an average liability of $4.3 million.

Self-Insurers of South Australia Manager Robin Shaw told insuranceNEWS.com.au the proposals are a “backward step” for the state’s already struggling manufacturing industry.

He says the proposed minimum head count would “kill off 20-25 self-insurers” and the higher financial guarantee would limit manufacturers’ ability to invest.

“[The guarantee increase] will affect their ability to borrow money,” he said, noting many medium-sized manufacturers are already highly geared.

“The potential impact of the proposal will equate to a substantial number of jobs [being lost].”

Mr Shaw says self-insurance is a “self-fulfilling model” that motivates companies to care for workers’ health and safety.

ReturnToWork SA says raising the guarantee to $4.5 million brings it more closely in line with the Australian Prudential Regulation Authority’s minimal capital requirement for insurers of $5 million.

“The low likelihood of an event [such as serious injury] is not a legitimate argument when the employer is not part of a pooled risk environment,” the draft policy says.

ReturnToWork SA CEO Greg McCarthy told insuranceNEWS.com.au feedback so far has highlighted a “number of issues”.

“In finalising the policy we will consider the impact on individual self-insured employers and the economic conditions for SA more broadly,” he said.

“We will continue to talk to stakeholders and consider all submissions we receive. We have assured stakeholders we are listening. The closing date for submissions is March 11.”