This guide explains key concepts used to determine
annual workers’ compensation premiums for
Australian Government agencies.
It sets out:
> the drivers of estimates of claim costs and
> what agencies can do to reduce premiums.
The premium is the amount an agency is required to pay Comcare. Premiums fund the costs of
claims, including Comcare’s claims administration costs.
The premium rate is a percentage of the agency’s payroll for that fi nancial year.
The prescribed amount is the main component of the premium. This amount is the product of the
premium rate for the agency and the agency’s payroll for that fi nancial year.
The bonus or penalty is an adjustment amount due to a revision of the premium rate for the
An injury year is a calendar year in which injuries occur (regardless of when a claim is made
Lifetime claim cost means payments to date plus an estimate of possible future costs for a claim.
THE WORKERS’ COMPENSATION FRAMEWORK FOR
AUSTRALIAN GOVERNMENT AGENCIES
Federal workers’ compensation legislation established
Comcare to work with Australian Government agencies
and their employees to prevent injuries in the workplace,
process claims and pay the costs of workers’
compensation. The legislation:
> provides for an integrated safety, rehabilitation and
compensation system for agencies and employees
> empowers agencies to work with their employees to
maintain an injured employee at work or to achieve
an early, safe and durable return to work through
high-quality return to work programs
> provides benefi ts for injured employees, such as
income support (until retirement age if necessary),
medical and home help assistance, and other
> requires Comcare to fund costs through annual
THE PREMIUM AND CLAIM PERFORMANCE
Every year, Comcare notifi es each agency of their
premium for the coming year. Comcare supplies a
Premium quick reference sheet with the premium notice.
This reference sheet summarises the agency’s premium
and claim performance over recent years. It shows the
premium amount payable and four years of information
on premium rates, claim cost and frequency. Information
for all agencies combined is also shown for comparison.
This is in addition to claim performance information that
agencies can monitor throughout the year online on
Comcare’s Customer Information System (CIS), at
The premium for each agency responds to trends in
their claim performance, as well as trends across the
whole system. This acts as a direct fi nancial incentive
to agencies to reduce workers’ compensation costs by
effective health, safety and rehabilitation measures.
HOW CLAIM PERFORMANCE IS ASSESSED AND REASSESSED
Claim performance is assessed using measures of claim frequency and claim cost. Claim frequency
is an estimate of the number of accepted claims from injuries which occur in the injury year,
expressed as a frequency per $million of payroll. Claim cost is the total estimated lifetime costs of
accepted claims for the injury year.
Comcare sets a premium for the coming year while the claims for past injuries are still being
accepted and those already accepted are at a very early stage of their potential development.
Premiums are intended to respond to trends in each agency’s claim performance, but early
assessments of claim performance are uncertain.
Comcare’s premium model takes this uncertainty into account in assessments of an agency’s claim
performance. The premium calculation balances stability in the premium from one year to the next
against responsiveness to each agency’s claim performance, which can change signifi cantly from
one injury year to the next. The premium responds to trends in claim performance but it is not meant
to match claim performance in a single year.
If all claims were short term, the payments made to date on each claim would be a suitable measure
of each agency’s claim cost performance. However, the legislation provides benefi ts that may
continue for many years after an injury. While most claimants have only days or weeks off work,
some will accumulate many months off work and a small percentage will continue to receive benefi ts
and accumulate time off work over many years.
Because claim costs will continue for many years for some claims, using only payments to date for
each claim would be a misleading, unfair way to assess each agency’s claim record. If this method
were used, claims that will eventually accumulate signifi cant costs over many years could appear
similar to short-term claims that will have no future costs.
To assess each agency’s claim performance fairly, an estimate of the lifetime cost of each claim is
needed. Lifetime cost means payments to date plus an estimate of future costs for each claim.
Comcare uses sophisticated software to estimate the lifetime cost of each claim. However, no method
can reliably forecast the lifetime costs for every claim, especially early in the life of the claim.
At the time a claim is accepted, the estimate of the lifetime cost must be based on the minimal
information available about the claim. This includes the claimant’s age, gender, normal weekly
earnings, type of injury, and the delay between their injury and acceptance of their claim. The
estimate of lifetime cost can only refl ect average outcomes of similar past claims.
As months and years pass, the initial indicators become less important and the emerging
development pattern for the individual claim becomes more important. Important factors include:
> the claimant’s cumulative time off work and the pattern of time off work (the number and length
of periods off work)
> whether the claimant is at work or off work, and how long that has been the case
> if the claimant is on a graduated return to work program, the number of hours they spend at work
> the claimant’s pattern of medical and rehabilitation costs
> whether a third party recovery action has been initiated, and the progress of that action.
Assessments of each injury year’s claim cost
performance change and become more reliable over
time as more information about the development of
each claim becomes available and the estimate of
lifetime cost for each claim is updated. Estimates of
lifetime costs increase or decrease for each claim,
depending on the changing pattern of actual costs and
time off work for the claim.
The premium model applies a ‘cap’ to claims for an
injury year to spread across all premium payers the
impact of the largest individual claims.
When an injury year is assessed or reassessed, a
claim cost cap for that injury year is set at a level
where the sum of the claim costs above the cap is
5 per cent of the sum of the costs of all claims. Then
the premium calculation uses the ‘below the cap’ cost
of each claim plus 5 per cent.
For example, the cap amount in 2012–13
premium calculations is $571,000 for injuries
suffered in 2011.
Also, some claims are accepted long after the injury
date. Often these claims are high-cost claims. The
claim frequency measure includes an estimate of
claims not yet accepted. Reassessments of past injury
years refl ect the acceptance of those claims as well as
the development of existing claims.
Claims for injuries suffered in each injury year are
assessed four times for premium calculations. For
example, injuries suffered in 2008 were initially
assessed for premium calculations in 2009, then
reassessed in 2010 and 2011, and reassessed for
the fi nal time for the premium calculations in 2012.
THE PREMIUM IS ASSESSED AND REASSESSED
The 2012–13 premium amount for each agency is the sum of two parts:
> The main component is called the prescribed amount. This amount is the product of the
premium rate for the agency for 2012–13 and the agency’s payroll for 2012–13.
> The other component of a premium is called the bonus or penalty. This amount is based on a
revision of the agency’s premium rate for 2011–12.
The core component of the premium is the premium rate. Comcare sets a unique rate for each
agency for each fi nancial year which responds to trends in claim performance as explained above.
The premium rate also responds to overall trends in the number and cost of claims and the total
amount that Comcare must collect for that fi nancial year from all agencies combined.
Bonuses and penalties make premiums fairer for each agency. Estimates of the lifetime cost of each
claim become more reliable over time as more information about the development of the claim
becomes available. A bonus or penalty is an adjustment using later, more reliable estimates of
The bonus or penalty in the 2012–13 premium refl ects a revision of the agency’s 2011–12
premium rate based on the development of the agency’s claims for injuries suffered in 2008, 2009
and 2010. If the agency’s rate for 2011–12 is revised downwards, the amount is called a bonus
and reduces the 2012–13 premium. If the agency’s rate for 2011–12 is revised upwards, the
amount is called a penalty and increases the 2012–13 premium.
Generally, the bonus or penalty amount refl ects the effectiveness of the agency’s programs to
manage return to work and rehabilitate injured workers. The success of return to work programs is
the key driver in reducing the ongoing costs of claims for past injuries. However, reassessments
of past injury years also refl ect the late acceptance of claims. Some or all of the change for a past
injury year may be due to claims for injuries that were suffered in that injury year but only accepted
after last year’s premium was calculated.
HOW AGENCIES CAN REDUCE PREMIUMS
To reduce future premium rates, agencies must:
> reduce the number of claims by preventing injuries
> reduce the claim costs. Payments for time off work make up the largest component of the cost
of claims. Therefore, the best way for agencies to reduce claim costs is to manage the early,
sustainable return to work of each claimant. While most claimants have less than one week off
work, the few claimants who will be on benefi ts for more than one year create most of the claim
PAYMENTS AND APPEALS
Each agency must pay its premium to Comcare by 31 July or 30 days after Comcare sends the
premium notice, whichever is later. Comcare will charge interest on any amount not paid by the due
Within 14 days of the premium notice, the principal offi cer of a premium-paying agency may, by
written notice of objection, ask Comcare to review the premium. The notice of objection must set out
the grounds of the objection and should be addressed to:
Chief Executive Offi cer
GPO Box 9905
Canberra ACT 2601
Comcare will review the premium and notify the agency of whether the amount is confi rmed
or varied. Within 14 days of that advice the principal offi cer may, by another written notice of
objection, request the Safety, Rehabilitation and Compensation Commission to review the premium.
An agency’s request for a review of its premium does not alter the due date for payment of the
premium. If a review reduces a premium, Comcare will refund the difference with interest.
FURTHER INFORMATION AND ASSISTANCE
Agencies have internet access to information on individual claims performance and agency-level
trends through Comcare’s on-line Customer Information System.
Further information on claim issues can be obtained through Comcare’s Recovery and Support
Services group on 1300 366 979.
Comcare’s Prudential Management Team can explain the premium amount for a particular agency.
Agencies can contact the Prudential Management Team on 02 8218 3792.
PUB26 (June 2012)
1300 366 979 | COMCARE.GOV.AU