submission aon risk services australia limited · exception of south australia) than the industry...

Seacare scheme – Reforms to Work Health and

Safety and Workers’ Compensation

Submission

Aon Risk Services Australia Limited

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1 Instructions for submitters Please provide your feedback on the Government’s proposed reforms to the Seacare scheme on the following pages. Headings are provided for each of the key Seacare reform priorities. A summary page is also provided upfront if you wish to summarise your views across the reform priorities. It is not necessary to complete all sections. Unused headings may be left blank.

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2 Summary

Aon is one of Australia’s largest insurance brokers with a specialist team of workers’ compensation and

health and safety professionals. We represent a number of clients involved in the maritime industry and

manage the purchase of workers’ compensation insurance on their behalf. The views put forward in this

submission are those of Aon and do not reflect the view of all clients whom we represent.

Having considered the reform options proposed and issues faced by our clients operating in the

maritime industry we support the abolition of the Seacare Scheme (Option 2) with regulatory

responsibility returning to the State and Territory governments.

We believe the abolition of the scheme will deliver:

Lower cost for employers operating in the Scheme

Greater certainty surrounding scheme coverage

Along with the abolition of the Seacare Scheme the OHS(MI) Act should be repealed and the State /

Territory work health safety laws should apply to ensure both workers compensation and work health

safety are regulated at a State / Territory level.

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3 Work Health and Safety

Whilst our position is that the scheme should be abolished and absorbed under the existing State /

Territory schemes, should this not occur we support the repeal of the OHS(MI) Act and adoption of the

Work Health and Safety Act (harmonized) in principle.

The areas where we have comments or feel further clarification is required are detailed in the table

below.

Table 1: Comments Relating to Section 6 of Consultation Paper

Consultation

Paper

Reference

Comment

6.1

One of the benefits outlined in this section identified that AMSA, as the inspectorate for the

scheme, will be able to draw on the resources, expertise and experience of other WHS

regulators who apply the same laws.

Given that this will be a new system / approach required to be adopted by employers under

the Seacare scheme, these employers will require sufficient education, consultation,

engagement and governance, particularly during the transition period. This will require

adequate resourcing by the respective regulators to deliver on this.

Do AMSA and the existing regulators have adequate resources to support this?

Has consideration been given to funding the additional resources to role this out

effectively?

6.2

Consideration should be given to expanding / providing clarity on the definition of a

workplace, particularly where workers are attending shore for work related activities and

accommodation during the work cycle.

Does the workplace extend to non-work task activities such as accommodation whist

on the course of the work cycle (similar to FIFO work arrangements where the

workplace ceases when they are at their original place of residence)

If the above applies, this will need to be clearly communicated to employers / PCBU’s

Employers / PCBU’s will also need to have a clear understanding that these duties of care are

a duel responsibility of all employer / PCBU stakeholders relevant to the particular work

activity and that effective management is achieved through consultation and collaboration.

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Consultation

Paper

Reference

Comment

6.4

There are a number of existing codes of practice and guidelines which link back to the

OHS(MI) Act and its respective requirements. If these codes / guidelines are to remain as

stand-alone industry specific guidelines, they will require a review to ensure alignment with

current industry practice and risk management methodologies.

It may be identified that the information contained within the existing codes of practice (such

as Manual Handling Maritime Industry) closely aligns to more recent codes of practice and

may be absorbed with minor modifications.

Given that this approach is aimed at adopting the harmonised WHS Act, Regulation and

Codes of Practice, the same process should be followed for the development of industry

specific codes of practice in collaboration with the relevant state based regulators, this is

particularly important given that a collaborative effort between AMSA and the state based

regulators has been proposed. It is agreed that this should only include relevant industry and

regulatory segments that are competent in the maritime field.

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4 Workers’ Compensation

Having considered the reform options proposed and issues faced by our clients operating in the

maritime industry we support the abolition of the Seacare Scheme (Option 2) with regulatory

responsibility returning to the State and Territory governments.

We believe the abolition of the scheme will deliver:

Lower cost for employers operating in the Scheme

Greater certainty surrounding scheme coverage


Territory schemes, should the scheme continue we have provided commentary on some of the

proposed reforms.

4.1 Lower cost for employers operating in the Scheme

As noted in section 4.4 of the consultation paper, the average premium rate paid by employers in the

SeaCare scheme between 2012-13 and 2014-15 was 3.04%1, this is significantly higher (with the

exception of South Australia) than the industry rates published for the relevant State/Territory Schemes

as shown in the table below.

Table 2: Comparison of Industry Rates across workers’ compensation jurisdictions

State Classification 2015-16 Industry Rate (ex GST)

Vic

I48100 Water Freight Transport 1.224%

I48200 Water Passenger Transport 1.331%

WA

63010 International Sea Transport 2.760%

63020 Coastal Water Transport 2.410%

63030 Inland Water Transport 2.170%

Tas

4810 Water Freight Transport 1.880%

4820 Water Passenger Transport 1.880%

1 It is noted that the rate quoted is the ‘average five day deductible equivalent premium rate’ however it is

unclear how this value would be calculated given employer in the Seafarers scheme typically carry claims excesses of $25,000 to $50,000 and do not lodge under excess claims with their insurers. As such, the average rate of 3.04% may be understated.

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State Classification 2015-16 Industry Rate (ex GST)

SA



Qld



NSW2

630100 International Sea Transport 2.344%

630200 Coastal Water Transport 2.556%

630300 Inland Water Transport 2.419%

ACT Not applicable

NT Not published

It is acknowledged that one reason why the premium rates are lower in the State / Territory schemes is

due to a less beneficial compensation benefit structure. Primarily, this relates to Seafarers’ weekly

compensation being calculated at 100% of their pre injury earnings for the first 45 weeks providing no

financial incentive to return to work and the overall entitlement period extending to retirement age. By

comparison, the State / Territory Schemes generally reduce an injured workers weekly compensation

payment after 14 or 26 weeks and cease it entirely between 2 and 5 years with the exception of

seriously injured workers who either receive compensation until retirement age and/or have the right to

pursue a common law claim against their employer.

Whilst one view is that this approach involves providing employers with premium savings at the expense

of an injured worker’s compensation benefits, an alternate perspective is that it is simply bringing the

benefit structure of a scheme covering 6,863 workers in line with the benefit structures of the

State/Territory schemes that collectively cover 10,131,100 workers3.

We also note that in our experience small employers have significant difficulty in obtaining insurance

under the Seafarers scheme at a reasonable cost as a result of the small insurance pool available to

underwrite losses. This is not the case for larger operators as their insurers will generally recoup the

cost of claims plus an underwriting margin over a 3-5 year period.

2 Industry rate varies from that published in the Insurance Premiums Order as GST has been removed

3 Safe Work Australia: Comparison of Workers’ Compensation Arrangements in Australia and New

Zealand July 2014.

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We note that section 5.2 of the consultation paper estimates that employer are likely to face a one off

cost of $50,000 as a result of transitioning to a new scheme. Based on our experience this may be

overstated as the vast majority (if not all) employers in the Seacare scheme would already hold a

State/Territory workers’ compensation insurance policy and comply with State/Territory work health

and safety laws as:

They have land based employees who fall outside the Seacare scheme and/or

Within their fleet they have a mixture of ‘Seafarers covered’ and ‘State / Territory covered’

vessels depending on the trading patterns of said vessels.

4.2 Greater certainty surrounding scheme coverage

A key challenge faced by employers operating in the Seafarers scheme is determining when it applies to

their workers. The reasons for this are:

There is a requirement to reference multiple pieces of legislation (including repealed legislation)

and regulatory declarations

The composition (ie Australian resident vs non-resident) of the vessels crew needs to be known

and this information is not always available to employers who are supplying only some of the

crew (eg catering staff only)

When assessing whether the vessel is engaged in interstate or intrastate trade, the Seafarers Act

is silent on whether this relates to only the voyage on which the injury occurred or the vessels

trading patterns more generally and if so over what period of time.

Many enterprise agreements stipulate that the scheme is to apply to workers when this is at

odds with the legislation (eg on vessels engaged in intrastate trade)

Recent legal precedents have dramatically shifted the scope of the scheme’s coverage beyond

what was commonly understood by industry

If the Seafarers Scheme were to be abolished employers would revert to the ‘State of Connection’ test

that has been adopted by all of the State / Territory schemes which is:

A worker’s employment is connected with —

(a) the State in which the worker usually works in that employment; or

(b) if no State or no one State is identified by paragraph (a), the State in which the worker is

usually based for the purposes of that employment; or

(c) if no State or no one State is identified by paragraph (a) or (b), the State in which the

employer’s principal place of business in Australia is located.

It is however likely that some amendment of the State / Territory workers’ compensation acts would be

required as this test goes on to reference “In the case of a worker working on a ship, if no State or no

one State is identified by subsection (4), a worker’s employment is, while working on a ship, connected

with the State in which the ship is registered or (if the ship is registered in more than one State) the State

in which the ship most recently became registered” however this may be inadequate to address the

scenario where the Ship is registered in a foreign country, which is often the case.

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4.3 Comments in relation to Option 3 Reform the Scheme


Territory schemes, should the scheme continue we support reform in principle and provide comments

on the proposed changes in the table below.

Table 3: Comments Relating to Section 7 of Consultation Paper

Consultation

Paper

Reference

Comment

7.3.4 In removing coverage of injuries sustained between a Seafarers place of residence and ‘usual

place of work’ careful consideration should be given when defining the ‘usual place of work’

bearing in mind that the employer will often arrange and pay for travel to/from the vessel.

For example is the ‘usual place of work’ the vessel or the mustering point.

7.3.5 Consideration should be given to placing a time limit on the period over which the employer

is required to provide the injured worker with suitable duties as occurs in many of the

State/Territory schemes by either specifying a period (eg 52 weeks in Victoria) or stipulating

how long a worker’s pre-injury position must be held open (eg 2 years in NSW).

An unfortunate reality of workplace injuries is that some workers will never have the physical

ability to return to their pre-injury position and their employer may not have an alternate

position available for them. Equally, employers operating in a commercial environment

cannot sustain suitable duties that may not necessarily be a normal role in their business for

an indefinite period of time. This generally leads to a separation of employment following

which it can become impractical for the employer to be responsible for the injured workers’

rehabilitation. A more suitable approach would be to place responsibility on:

The employer to provide suitable duties for a period of time

The insurer to provide the workers with injury management and rehabilitation

planning

We note the proposed approach is aligned to the Comcare Scheme however a key difference

between Seacare and Comare is that under the Comcare Scheme the employer and insurer

are one and the same (ie the Commonwealth Government or a licenced self insurer) whereas

in the Seacare Scheme they are separate and distinct parties.

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Consultation

Paper

Reference

Comment

7.3.6 In determining the period over which pre-injury earnings are to be calculated we note that

the commonly adopted approach by the State/Territory Schemes is to adopt an average over

12 months.

The introduction of new ‘step-down’ provisions is a positive step forward however the

proposed entitlement structure fails to address the long tail nature of the scheme with

benefits continuing until retirement age. With reform of the scheme under consideration, we

consider this an excellent opportunity to restrict the entitlement period to between 2 and 5

years for all but the most seriously injured workers. This approach would more closely align

the benefit structure to that offered by the State / Territory schemes.

7.3.10 We question whether such a small increase to the statutory threshold would make any

difference to the number of claims qualifying for redemption given the significant pre-injury

earnings of workers within this Scheme.

A more practical approach would be to specify the circumstances in which a claim can be

redeemed and then provide a framework, with no financial limits, through which redemption

is to occur to ensure the interests of workers are protected. The circumstances could

consider issues such as:

Period of time to have elapsed since the injury occurred

Prospects of rehabilitation

Approval of the terms of settlement by an independent third party

Importantly, the redemption of a claim should only occur where it is mutually agreed by the

injured worker and the employer/insurer. One party should not be in a position to force

redemption upon another.

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5 Cost Recovery No comments

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6 Coverage

Should the scheme be reformed, consideration should be given to specifying a period of time over which

a vessel’s activities are to be examined for the purpose of determining whether they are ‘wholly or

substantially engaged in voyages and other tasks within the coastal waters of a single state or territory’.

A period of twelve months would be practical as this is generally the period over which insurance

policies are issued. However, we would note that in this industry the historical operation often has little

resemblance to a vessel’s use over a forthcoming twelve month period.

The adoption of a 3 nautical mile boundary is likely to lead to a large number of vessels falling into the

scheme and will be difficult to administer as:

Large numbers of vessels (particularly those supporting offshore oil and gas mining activities)

are likely to be trading exclusively in one State but outside the 3 nautical mile boundary

Employers are unlikely to retain the information needed to conduct an assessment of the time a

vessel spends inside/outside the 3 nautical mile boundary in a format that can be easily

interrogated.

As an alternate, the Seafarers Act could adopt the ‘adjacent areas’ definition utilised by the

State/Territory workers’ compensation acts which defines the geographical limit of coverage through

reference to Offshore Petroleum and Greenhouse Gas Storage Act 2006, Seas and Submerged Lands Act

and Petroleum (Timor Sea Treaty) Act 2003.

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7 Governance No comments

submission aon risk services australia limited · exception of south australia) than the industry...

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