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 WorkCover releases half-year results

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Number of posts : 10
Registration date : 2007-06-04

PostSubject: WorkCover releases half-year results   Mon Jun 04, 2007 1:30 pm

RELEASE DATE 29/03/2007

WorkCover’s unfunded liability has increased to $722.7 million
after a loss of $28.6 million for the half-year to 31 December, 2006.
The Scheme is 66.1 per cent funded.

WorkCover’s financial result for the July-December 2006 period is
primarily due to an increase in the estimate of costs for income
maintenance (weekly payments). The Scheme’s funding ratio has increased
despite this loss because of an increase in the asset base, largely due
to continued, strong investments. WorkCover remains cash flow positive.

The result compares with WorkCover’s funding position at 30 June
2006, when the Scheme was 65 per cent funded, with an unfunded
liability of $694 million.

The average levy rate for 2007-08 will remain at 3.0 per cent.

“Earlier today, the Government acknowledged the need for
substantial change to the WorkCover Scheme and announced that it
intends to commission an independent review of the South Australian
workers rehabilitation and compensation legislation,” said WorkCover
Board Chair, Bruce Carter.

“The Government’s review is supported by the WorkCover Board and is
consistent with the Board’s position, outlined in our annual report
released last December. Our position is that legislative change is
required to ensure the Scheme is effective in supporting injured
workers to recover and return to work at a reasonable cost to employers
who fund the Scheme,” said Mr Carter.

“We’ve significantly reformed the management of the Scheme over the
past couple of years, largely focusing on improving return to work
outcomes through stronger claims management.

“We appointed a single, proven claims agent, Employers Mutual, in
January 2006 and we remain confident that their expertise will greatly
enhance the performance of the Scheme. However, it has become
increasingly clear that we have a different legislative framework here
in South Australia compared with those States that have been so
effective in improving return to work outcomes,” Mr Carter said.

“Our legislation has remained largely unchanged since the
late-1980s. This is in contrast to other schemes’ legislation which
have been regularly reviewed and updated in line with changes to the
business and social environment, and scheme costs.

“The WorkCover Board, in November 2006, proposed to the Government
a range of legislative changes it believes will enable the South
Australian Scheme to improve from having the worst return to work
outcomes in the nation.

“Achieving balanced and sustainable improvement will require a
substantial collaborative effort of the Scheme’s stakeholders and we
therefore welcome the Government’s intention to consult with
stakeholders during this review,” Mr Carter said.

WorkCover CEO, Julia Davison, said the organisation would continue
its urgent focus on better recovery rates and return to work outcomes.

“Our recent improvements combined with this crucial legislative
reform will ensure our Scheme continues to support injured workers and
delivers better value for employers in this State, by achieving
earlier, safe return to work,” Ms Davison said.

Media contact: Danielle Martin, telephone 8233 2381 or 0418 295 324.

Background information on WorkCover

WorkCover is funded by employers to manage a balanced and
financially sound system that rehabilitates, compensates and returns
injured workers to safe workplaces and the community.

WorkCover began operations in 1987 and is constituted as a
statutory authority under the WorkCover Corporation Act 1994 with a
Board appointed by the Governor on the recommendation of the
responsible Minister (now the Minister for Industrial Relations).

WorkCover is responsible for administering the Workers
Rehabilitation and Compensation Act 1986. WorkCover manages South
Australia’s Workers Rehabilitation and Compensation Scheme on behalf of
about 65,000 employers, providing rehabilitation and compensation
support for an estimated 500,000 employees (about 60 per cent of the
state’s workforce).

In 2005-06, there were 22,930 claims incurred by workers employed
by registered employers and 14,064 claims by workers employed by
self-insurers (37,465 in total).

* 79 per cent of WorkCover claimants do not have any lost time from work (less than two weeks)

* 49 per cent of WorkCover claimants return to work within 1 month

* 71 per cent of WorkCover claimants return to work within 3 months

* Out of every 100 injured workers, 82 leave the Scheme within 12 months.

What is the unfunded liability?

In simple terms, the unfunded liability reflects the balance
between the assets of WorkCover and the liabilities of WorkCover,
including the actuary’s estimate of the claims liability of the Workers
Rehabilitation and Compensation Scheme over 40 years.

The actuary uses complex calculations, based on a range of
assumptions, to make an estimate of the value in current dollars of all
the costs associated with current claims. This is an amount the actuary
expects will be paid over the life of those claims, but is not payable
today, tomorrow or even this year.

This estimate of the Scheme claims liability is then compared with WorkCover’s assets to arrive at our funding position.

Over time, WorkCover has collected substantial funds to meet the
future costs of claims already incurred – currently the Scheme has more
than $1.3 billion invested through an investment strategy that has
out-performed most similar funds.
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