Workers Compensation Amendment
(Insurance Reform) Bill 2003

Explanatory note
This explanatory note relates to this Bill as introduced into Parliament.

Overview of Bill

The object of this Bill is to amend the Workers Compensation Act 1987 (the
1987 Act) to provide a new framework for workers compensation insurance
arrangements, with the following features:

(a) The Workers Compensation Nominal Insurer (the Nominal Insurer) is
established as a statutory legal entity that will operate as a licensed insurer
in place of the existing managed fund licensed insurers to issue workers
compensation policies of insurance and deal with claims under those
policies as insurer. The Nominal Insurer will be able to appoint agents
(scheme agents) to exercise any of its functions.

(b) The WorkCover Authority (the Authority) will act for the Nominal
Insurer.

(c) The Workers Compensation Insurance Fund (the Insurance Fund) will
take the place of the existing managed funds of licensed insurers and be
the fund into which workers compensation insurance premiums will be
paid and from which claims for workers compensation (and associated
common law claims) will be paid by the Nominal Insurer.

(d) The Insurance Fund (like the existing managed funds of licensed insurers)
will be subject to a statutory trust that ensures it is held for the benefit of
workers and employers. The State will have no responsibility for the
liabilities of the Insurance Fund and no entitlement to its assets or any
surplus.

(e) The Uninsured Liability and Indemnity Scheme currently administered by
the Authority will be replaced with a scheme under which the Nominal
Insurer becomes the insurer for claims made against uninsured employers
and which provides for the subsequent reimbursement of the Insurance
Fund.

(f) The Insurance Fund will be audited by the Auditor-General under a
special audit power but will not form part of the Total State Sector
Accounts.

(g) Under transitional arrangements the existing managed fund licensed
insurers will continue to act as agents for the Nominal Insurer in respect
of policies of insurance that they have issued, until other agency
arrangements are made.

The Bill also makes other miscellaneous (including amendments of a
consequential nature) to the Workers Compensation Act 1987 as well as to the
Acts listed below:

Freedom of Information Act 1989
Public Finance and Audit Act 1983
State Records Act 1998
Workplace Injury Management and Workers Compensation Act 1998 (the 1998
Act)

Outline of provisions

Clause 1 sets out the name (also called the short title) of the proposed Act.

Clause 2 provides for the commencement of the proposed Act on a day or days
to be appointed by proclamation.

Clause 3 is a formal provision that gives effect to the amendments to the
Workers Compensation Act 1987 set out in Schedules 1 and 2.

Clause 4 is a formal provision that gives effect to the amendments to the Acts
specified in Schedule 3.

Schedule 1 Principal amendments to Workers
Compensation Act 1987 relating to
insurance
Schedule 1 [2] inserts proposed Division 1A into Part 7 of the Act (proposed
sections 154A–154N) to give effect to the new workers compensation insurance
arrangements referred to in the overview above.

Subdivision 1 of the proposed Division (proposed sections 154A–154C)
contains provisions relating to the Workers Compensation Nominal Insurer.

Proposed section 154A provides for the establishment of the Nominal Insurer
and its status. Proposed section 154B provides that the Nominal Insurer is taken
to be a licensed insurer under the Act and specifies the other functions of the
Nominal Insurer. Proposed section 154C refers to the Authority’s role in acting
for the Nominal Insurer.

Subdivision 2 of the proposed Division (proposed sections 154D–154F)
contains provisions relating to the Workers Compensation Insurance Fund.

Proposed section 154D provides for the establishment and operation of the
Insurance Fund. Proposed section 154E specifies the amounts to be paid into the
Insurance Fund and the manner in which the assets of the Insurance Fund are to
be applied. Proposed section 154F provides for the inspection and auditing of the
Insurance Fund by the Auditor-General and for the Auditor-General to
subsequently report to the Minister.

Subdivision 3 of the proposed Division (proposed sections 154G–154N)
contains provisions relating to scheme agents. Proposed section 154G provides
for the Nominal Insurer to enter into agency arrangements for the appointment
of persons to act as scheme agents for the Nominal Insurer. Proposed section
154H makes it clear that an agency arrangement does not limit or affect the
Authority’s functions with respect to a licensed insurer or scheme agent.

Proposed section 154I provides that the Authority’s functions in relation to
insurers may be exercised in relation to scheme agents. Proposed section 154J
makes it an offence for a scheme agent who is authorised to issue policies of
insurance on behalf of the Nominal Insurer from refusing to issue policies of
insurance to any employer or to renew a policy of insurance issued to an
employer. Proposed section 154K provides that the records and documents made
or kept by a scheme agent in exercising functions on behalf of the Nominal
Insurer are the property of the Nominal Insurer and also makes it an offence for
a scheme agent not to comply with any directions given by the Nominal Insurer
in relation to any records and documents. Proposed section 154L makes
provision for the remuneration of scheme agents out of the Insurance Fund.

Proposed section 154M provides for application of certain provisions of the
1987 Act and the 1998 Act to scheme agents in the same way as those provisions
apply to insurers. Proposed section 154N enables regulations to be made with
respect to scheme agents.

Schedule 1 [1] inserts definitions into the 1987 Act for the purposes of the
proposed workers compensation insurance arrangements.

Schedule 2 Miscellaneous and consequential
amendments to Workers Compensation
Act 1987
Schedule 2 [1] removes definitions that will no longer be necessary as a
consequence of the amendments made by the proposed Act.

Schedule 2 [2] updates the references to the particular Divisions of Part 7 of the
1987 Act that do not apply in respect of the coal industry.

Schedule 2 [9]–[27] replace provisions relating to the Uninsured Liability and
Indemnity Scheme (ULIS) set up under Division 6 of Part 4 of the Act with new
arrangements under which the Nominal Insurer becomes the insurer for claims
made against uninsured employers. Under the new scheme, if a claim is made
against the Nominal Insurer by an injured worker whose employer is uninsured
or cannot be identified, the Nominal Insurer will make the payment from the
Insurance Fund to the worker and then require the relevant employer to
reimburse the Insurance Fund. Schedule 2 [3]–[6], [7] and [8] are consequential
on the replacement of ULIS.

Part 7 of the 1987 Act currently imposes a number of regulatory requirements in
relation to licensed insurers (such as the supply of business information and
records to the Authority). Schedule 2 [29] and [39]–[41] extend these regulatory
requirements to scheme agents and in some cases to self-insurers.

Schedule 2 [30] provides that the register of insurance policies of a person who
ceases to be a licensed insurer must be delivered to the Nominal Insurer instead
of the Authority.

Section 163 currently imposes requirements on insurers as to the keeping
records in relation to insurance policies and claims. Schedule 2 [31] increases
the penalty for not complying with these requirements from 20 to 1,000 penalty
units (ie from $2,200 to $110,000).

Schedule 2 [32] increases the penalty for the offence under section 169 of
breaching an insurance premiums order from 100 penalty units to 1,000 penalty
units (ie from $11,000 to $110,000).

Schedule 2 [33] deletes a transitional provision relating to the cancellation of the
licences of insurers under previous legislation. Schedule 2 [35] and [36] are
consequential amendments.

Schedule 2 [42] corrects a reference in relation to specialised insurers.

Schedule 2 [43] increases the penalty (from 50 to 200 penalty units) for certain
offences by licensed insurers and scheme agents in relation to the payment of
commission to insurance brokers and intermediaries.

Schedule 2 [46] enables the Authority to give directions to insurers (including
specialised insurers and self-insurers) with respect to claims procedures.

Schedule 2 [47] deletes provisions relating to the statutory funds of licensed
insurers (along with provisions that relate to the Premiums Adjustment Fund) as
a consequence of the new insurance arrangements. Schedule 2 [28], [34], [37],
[38], [44], [45], [48]–[50], [68] and [69] are consequential on the deletion of
these provisions.

Schedule 2 [51] excludes specialised insurers and self-insurers from the
operation of section 202 which currently provides for the audit or inspection of
the accounting and other records of insurers. Schedule 2 [54] specifies a penalty
(1,000 penalty units) for the offence of obstructing a person from carrying out
such an audit or inspection.

Schedule 2 [55] enables the Authority to conduct performance audits of the
worker compensation activities of insurers. Schedule 2 [52] and [53] remove
provisions that currently relate to the auditing of the statutory funds of licensed
insurers.

Schedule 2 [56] and [57] amend section 208 of the Act (which presently
requires all licensed insurers, including specialised insurers, to pay contributions
(ie “catch-up premiums”) into the Premiums Adjustment Fund) to provide that
the requirement to pay catch-up premiums into the new Insurance Fund will
apply only to specialised insurers.

Schedule 2 [58]–[65] make consequential amendments to section 208AA of the
Act so as to provide for contributions to be paid into the Insurance Fund to cover
the insured liabilities of exiting employers.

Schedule 2 [66] deletes provisions relating to the Insurers’ Contribution Fund.

Schedule 2 [70] and [71] are consequential amendments.

Schedule 2 [67] will enable the Nominal Insurer to apply the Insurance Fund to
meet claims under the policies of insurance of defaulting insurers.

Schedule 2 [72] inserts savings and transitional provisions as a consequence of
the enactment of the proposed Act. In particular, the existing managed fund
licensed insurers will continue to act as agents for the Nominal Insurer in respect
of policies of insurance that they have issued until other agency arrangements
are made. Provision is also made in relation to the transfer of the assets and
liabilities of the Premiums Adjustment Fund and the Insurers’ Contribution
Fund to the Insurance Fund and in relation to pending claims under ULIS.

Schedule 2 [73] enables regulations of a savings or transitional nature to be
made as a consequence of the enactment of the proposed Act.

Schedule 3 Amendment of other Acts
Schedule 3.1 amends the Freedom of Information Act 1989 to exempt the
Nominal Insurer from the operation of that Act but only in relation to certain of
its functions.

Schedule 3.2 amends the Public Finance and Audit Act 1983 to make special
provision with respect to the status of the Insurance Fund.

Schedule 3.3 amends the State Records Act 1998 to provide that the Nominal
Insurer is not a public office for the purposes of that Act.

Schedule 3.4 makes a number of miscellaneous amendments to the Workplace
Injury Management and Workers Compensation Act 1998 that are generally
related to, or consequential on, the new workers compensation insurance
arrangements to be included in the 1987 Act. Schedule 3.4 [1], [4] and [5] are
consequential on the replacement of the Uninsured Liability and Indemnity
Scheme under the 1987 Act. Schedule 3.4 [2] confers on the Authority the
function of acting for the Nominal Insurer. Schedule 3.4 [3] makes it an offence
for a scheme agent not to comply with the requirements of the 1998 Act in
relation to workplace injury management. Schedule 3.4 [6]–[10] extend certain
provisions of the 1998 Act to the Nominal Insurer and scheme agents. Schedule
3.4 [11] authorises the Authority and the Nominal Insurer to collect, analyse, use
and disclose information in relation to certain matters. Schedule 3.4 [12]–[15]
are consequential on the deletion of the provisions under the 1987 Act relating
to the statutory funds of licensed insurers.

Note: If this Bill is not modified, these Explanatory Notes would reflect the Bill as passed in the House. If the Bill has been amended by Committee, these Explanatory Notes may not necessarily reflect the Bill as passed.

 

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