Exploring the Impact of Financial Crises on Workers Compensation Schemes (Victoria)

Transcription

1 Exploring the of Financial Crises on Workers Compensation Schemes (Victoria) Glenn Ockerby Peter McCourt WorkSafe Victoria PricewaterhouseCoopers 1

2 Overview October 2008 Limited knowledge Literature review Historical review Develop hypotheses about impact Inform scheme management November 2009 Start to assess impact Thanks to schemes for participating 2

3 Context Claims RTW Premium 3

4 Context Claims RTW Premium 4

5 7.5% 7% 6.5% 6% 5.5% 5% 4.5% 4% 3.5% 3% 2.5% 2% 1.5% 1% 0.5% 0% -0.5% -1% Unemployment & GDP has seen a sharp turnaround in recent months Q4 Australian Unemployment Rate (qtr) 5.7 Real GDP Growth Rate (annual), 0.62 Real GDP Growth Rate (qtr),

6 While Australian States have been impacted by the GFC, BC has fared worse 8.5% 8.0% 7.5% 7.0% 6.5% 6.0% 5.5% 5.0% 4.5% 4.0% BC NSW SA VIC 3.5% Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Sep-09 Unemployment rate Note: BC = British Columbia 6

7 Context Claims RTW Premium 7

8 We Decrease anticipate in claims or reduction + Increase in higher in claims. cost This average claims cost as claims as workers who may workers bounce with an injury back do become with or economic believe they growth - not make a claim or make will become unemployed smaller - Decrease in CP/1000 likely to occur as rate of decrease + in claims claims to maintain is higher than rate make of decrease a claim in employment Increase in injuries as relationship with employer employers view Number of Standard OHS Claims Claims expenditure as CP/1000 Incurred discretionary Jurisdiction Jurisdiction Jurisdiction Number of Unemployment GDP + When GDP and Workers Rate - employment Scheme shrinkage as number of recovers claims - Lower - Higher OH&S risk, risk hours worked and number of young, or new to increase workers job workers remain workers decreases reducing tend to withdraw or lose employed jobs first Not within during our recession 8 Note: CP/1000 hazard = standard exposure claims per 1,000 workers influence

9 BC NSW SA* 9 VIC Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Claims lodged (indexed) Sep-07 Dec-07 Mar-08 Jun-08 Sep-08 Dec-08 Mar-09 Jun-09 Claim levels Note: * SA affected by changes in scheme design

10 Note: assumed linear relationship between exposure and injuries, assumed independence of variables 5% drop in Victorian claims is partly explained by reduced Scheme size 31,000 30,000 29, , , ,000 26,000 25,000 Year ending May 2008 Change in Scheme Size Change in total employment Change in average hours/job Change in claim rate Change in underlying claim rate 28,119 Year ending August 2009 ~30% of the change in injuries can be explained purely by a change in average working hours 10

11 At the aggregate level, CmH supports our key hypothesis Stress Trauma Gradual Onset May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09 Apr-09 May-09 Jun-09 Jul-09 Aug-09 CmH (indexed at May 2008) Note: CmH = Claims per million hours worked, calculated using a 12-month rolling total 11

12 Stress CmH (indexed at May 2008) We expected stress to increase with concerns over job security May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Construction -2% Manufacturing -4% Health -1% Public Admin +4% Change in average hours / job 12

13 Gradual onset claims have fallen in industries which have grown the most Construction +2% Manufacturing -6% Public Admin + 12% Health + 8% Change in employment 13 Gradual Onset CmH (indexed to May 2008) May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09

14 Traumatic injury rates have not consistently risen or fallen 125 Traumatic CmH (indexed to May 2008) Public Admin + 12% Construction + 2% Manufacturing -6% Health + 8% 80 May-08 Jul-08 Sep-08 Nov-08 Jan-09 Mar-09 May-09 Jul-09 Change in employment 14

15 Context Claims RTW Premium 15

16 Sustainable RTW outcomes may deteriorate due to reduced job opportunities - Decrease due to a reduction in the number of injured workers finding employment post injury RTW Injured workers sustainably back at work post injury Job Vacancies Level & Availability of Work to Injured Workers Jurisdiction Unemployment Rate + - As a GFC evolves, any Those new claims injured from workers those off currently work prior in work to GFC and injured are likely to be remain from Overall those off deterioration work who longer have skills increasing RTW and results employer continuance relationships and employment rates motives that better facilitate return to work Not within our influence 16

17 Continuance rates 0-26 weeks BC SA NSW VIC Continuance rates 0-26 weeks / average duration (indexed at July 2006) Jul-06 Oct-06 Jan-07 Apr-07 Jul-07 Oct-07 Jan-08 Apr-08 Jul-08 Oct-08 Jan-09 Note: *BC continuance rate indexed by % of successful RTW work outcome ** rates by report date where possible 17

18 RTW outcomes in industries hit hardest with job losses have been worse Manufacturing -6% Trade -1% Construction +2% Community Services +2% Change in employment week contionuance rate (indexed at April 2008) Apr-08 May-08 Jun-08 Jul-08 Aug-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Feb-09 Mar-09

19 In Manufacturing, the deterioration in jobs and RTW occurred simultaneously 47% 46% 45% 44% 43% 42% 41% 40% 39% 38% 37% 36% Hours 13 weeks 13,500 Feb-04 May-04 Aug-04 Nov-04 Feb-05 May-05 Aug-05 Nov-05 Feb-06 May-06 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 Nov-08 Feb-09 Continuance Rate Total Hours Worked (Centred 12-month average) 13,000 12,500 12,000 11,500 11,000 19

20 Context Claims RTW Premium 20

21 Our hypothesis was the premium may contract Overall real Reduction Decrease reduction in in in number GDP amount due of of to employers reduced due demand to company Decrease and in remuneration availability/cost due premium revenue closures collected or decrease significant of credit in size/scale to fund business of employers to a decrease in the number of lag to impact effects workers employed Number of Scheme Employers $ Premium Actual Premium Collected Employers Remuneration Base Reduction due to difficulties in making successful Decrease collection Inflation in remains remuneration positive through bad as employers but debt at lower attempt levels than to reduce or previous avoid operating years costs Wages Rates Number of Scheme Workers Not within our influence Jurisdiction GDP Growth Rate Jurisdiction Prices Jurisdiction Unemployment Rate 21

22 Victoria s premium revenue has consistently gone down since 2004 Premium Revenue (indexed at 2004) SA QLD NSW VIC Note: Premium revenue recognised in year, across policy years

23 As with claims, we can explain this at the industry level $1,700m $1,680m $32,677K $1,660m $1,640m $1,620m $8,382K $331K $367K $728K $1,837K $1,977K$3,377K $19,296K $4,444K $945K $529K $1,600m $1,580m $1,673M $1,648M $1,560m $1,540m $1,520m $1,500m FY Manufacturing Transport & Storage Mining Communication Agriculture Utilitiies Recreation Trade Finance & Property Services Public Administration Construction Community Services FY 2009 Note: Premium revenue by policy year, not as reported in annual report

24 $1,700m Wage growth eclipsed the contraction in hours $1,680m $1,660m $104m $1,640m $1m $1,620m $21m $1,600m $1,580m $1,560m $1,648m $58m $1,673m $1,540m $1,520m $1,500m FY 2008 Change in total jobs Change in average hours Change in premium rate Note: Premium revenue by policy year, not as reported in annual report Change in average wage rate FY

25 Context Claims RTW Premium 25

26 Summary The economic downturn has not been as dire as predicted in October 2008 Key hypotheses on scheme effects have held up Claim rates have dropped partly through reduced exposure RTW, continuance rates and durations have deteriorated However, premium has held up 26

27 What does the future look like? Unemployment rebounds slowly over 8 years in 1991 recession Claim / claim rate bounceback increase exposure Long duration continuance rates a recession cohort 27