Explaining Premiums

NBMs and SAMs are trained in how premiums work and are often called on to give sessions with customers about this complex area.  To assist them, they provide customers with the Guide to Understanding 1997-98 Premiums.

The premium system is one of the key elements in the Government's strategy to reduce the number and duration of workers' compensation claims.

Because the premium system is responsive to customers' claims experience, there is a strong financial incentive for them to put effective health and safety and return to work programs in place to assist in controlling workers' compensation costs.

The philosophy underlying the premium system fits in with the Government's commitment to making managers accountable for their resources.

The premium system is “fully funded”, covering all costs associated with a claim.  This means that, if a claim is paid for in 1993 and there are further costs in 10 years time for that claim, costs will be met by the premium paid in 1993.

The premium pool can be defined by the following calculation:

Estimated Claims Liability + Estimated Administrative Costs

Based on the past experience of a customer with claims for compensation (often from 1 March of a particular year to 28 February of the next year - this may vary), the anticipated cost of claims for the next financial year are estimated (estimated claims liability).

These are then added to the estimated full cost of Comcare administering the claim (both salary and operational costs).  This results in the premium pool for that financial year.

This is probably as simple an explanation as can be provided.

However, the Guide to Understanding 1997-98 Premiums does provide a clearer indication of what customers are told about their premium.  This guide should be available from the SAMs, NBMs and the Premiums Group.