How contributions are calculated

An explanation of how we calculate the cost of your contribution.

Workers compensation

The factors considered when calculating TMF workers compensation contributions are:

  • actual cost of claims for a fund year
  • agency risk exposures
  • claims costs for previous years (number of years varies by type of insurance)
  • performance from similar industries and other jurisdictions
  • impacts to claims from legislative reforms and initiatives

General lines

For general lines, the following rating factors for their respective classes of risk are considered:

Liability

  1. Claims experience
    • Projected number of small claims by average cost per claim
    • Projected number of large claims by average cost per claim
  2. Admin costs (primarily made up of service provider expenses)

The contribution is subject to a cap increase or decrease of 35% each fund year. Note, this may not apply in special cases such as mergers of agencies, large exposure changes or changes in deductible amounts. 

Property

There are three main rating factors:

  1. Agency asset value
  2. Agency experience contribution
  3. Admin costs (primarily made up of service provider expenses)

Contribution is subject to a cap increase or decrease of 35% each fund year.
Note, this may not apply in special cases such as mergers of agencies, large exposure changes or changes in deductible amounts.

Miscellaneous

  1. Claims experience
  2. Exposures contribution
  3. Admin costs (primarily made up of service provider expenses)

Contribution is subject to a cap increase or decrease of 35% each fund year.
Note, this may not apply in special cases such as mergers of agencies, large exposure changes or changes in deductible amounts.

Motor Vehicle

  1. Claims experience plus number and category of vehicles in the fleet
  2. Admin costs (primarily made up of service provider expenses)
  3. Contribution calculation process

Invoicing Explained

The way you are being invoiced for your TMF contribution hindsight adjustment is changing. From 11 December, you’ll receive invoicing direct from icare covering the Workers Compensation Hindsight Adjustments.

You will be receiving two distinct invoices/credit notes: one to cover the 5 years Final Hindsight and one to cover the 3 years interim Hindsight. These invoices replace the existing invoices that you would have received from our insurance providers QBE, EML, and Allianz.

What you need to do

The way you pay your invoices has also changed. Previously you’d paid the invoices to QBE, EML or Allianz but now you'll make payments directly to icare. Check you've correctly entered icare’s bank account details into your accounting system for payment.

We recommend using the reference number from each Tax Invoice to help with the processing of your payment.

icare issued Motors Hindsight Adjustment invoices/credit notes will be available in February 2018 and, from July 2018, your annual contribution Tax Invoice will come directly from icare. 

Update: Workers Compensation Hindsight Adjustment Notices

icare issued the workers compensation 3 and 5 year hindsight adjustments as two emails respectively on Wednesday 13 December. icare’s bank account details were included on all invoices, and figures on some invoices appeared as a negative. This has generated some enquiries.

We would like to clarify as follows:

  • Credit notes on which the total adjustment figure has a negative value (-) mean that you are getting a refund and this amount will be credited to your account 
  • Tax Invoices (where there is no minus in front of the total adjustment figure) require you to make payment to icare’s bank account details on the invoice

Please email our Client Services team with any queries you may have.

Download the "Invoicing explained" guide

Workers Compensation Hindsight Methodology

Calculating annual contributions is a three stage process.

Step 1: Determine Target Contribution

Agencies are grouped into ‘pools’. The pools are Education, Health, Police, RMS, Fire, Ambulance, Sydney Water and the Primary Pool of agencies’. Each pool will have a ‘Target Contribution’ which is determined by an actuary, this is a forecast of the total claims costs, expenses and recoveries for the fund year.

Step 2: Allocate the cost to agencies within the pool – Deposit Contribution

Each agency (or facility or business unit) in the pool must make an annual payment toward the ‘target contribution’, this is known as the ‘Deposit Contribution’. The amount is determined by actuaries based on a number of claim metrics including number of claims, volume of payments and cost per claim. The calculation method ensures that individual large claims do not distort the individual’s hindsight result.

Step 3: Calculate the Hindsight Contribution amounts

The Hindsight Contribution amount is determined less any deposit and interim hindsight (three year hindsight) contributions already paid for the year. Some agencies will pay more, some will receive hindsight refunds in the form of credit notes.

Agencies are able to directly influence whether or not they receive a hindsight refund through effective risk management: for example, by potentially minimising claims through risk prevention programs and reducing the cost of claims through effective RTW strategies.

    Frequently Asked Questions

  • What claim metrics are used to determine the hindsight contribution?
    The portfolio has been split into a number of segments representing Weekly, Medical, WID and Other payments. Within these segments, claims cost drivers such as reported claims and active claim numbers are used to allocate the pool OSC to an agency level.
  • How has the hindsight calculation methodology changed?
    The methodology has remained largely unchanged. The main change has been the mechanism to allocate pool costs to the agency level. However, the principle of the allocation process, namely, allocating costs to the agencies that contribute the most to the total cost remains unchanged.
  • In the past the WCPM was used. Is the WCPM still being used?
    No. The WCPM had not been recalibrated for several years. Rather than go through the exercise of recalibrating this model a decision was made to move to a new cost allocation model which simplifies the cost drivers that determine the hindsight. There are pros and cons in each method but the new methodology is expected to better align the drivers of claims experience and the hindsight results.
  • Has the new model resulted in a lower or higher hindsight for my agency just because the model has changed?
    The results under the new model have been checked against previously forecast results. In most cases the results were similar. Where there are discrepancies the differences have been investigated to ensure that the result was fair and reasonable.
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