Many jurisdictions allow employers to self-insure for workers’ compensation. This allows companies to manage and pay for their employees’ claims for work-related fatality, injury and illness, rather than paying premiums to insurers to take on those responsibilities.
Self-insured companies must conform to each jurisdiction’s specific legislative requirements, such as the level of benefits payable to injured employees. However, self-insurance gives them financial freedom to fund and manage their own workers’ compensation liabilities.
All workers’ compensation jurisdictions in Australia and New Zealand, except Seacare and the Department of Veterans’ Affairs, allow employers to self-insure if they meet certain requirements, the most critical of which is the financial capacity to fully fund future liabilities. Regulatory authorities in each jurisdiction also need to be satisfied that self-insuring employers have adequate work health and safety, injury management and return to work arrangements, as well as the capacity to effectively manage workers’ compensation.
Once employers self-insure they no longer pay workers’ compensation premiums. However, they are still required to pay a levy that is a fair contribution towards the overheads of administering the scheme.
Self-insuring employers can self manage the claims management and rehabilitation of their injured workers and have responsibility for meeting all of their claim liabilities. Self-insurers have to reapply to self-insure after a period of time.
The tables contained in this chapter outline:
7.1 Workers’ compensation and self-insurance coverage
7.2 Criteria for becoming a self-insurer
7.3 Application and approval process, ongoing costs and duration of license
7.4 Work health and safety requirements and auditing
7.5 Bank guarantees, prudential margins and excess of loss requirements
7.6 Restraints on company structure
7.7 Outsourcing of case management
7.8 Other ongoing license requirements
7.9 Reporting requirements, and
7.10 Requirements for surrendering a self-insurance licence and penalties for exiting the scheme.
The laws and regulations that must be satisfied to become a self-insurer vary significantly between jurisdictions. If an employer operates in more than one jurisdiction, it must apply separately for self-insurance in each of the jurisdictions in which it operates, except for the Comcare Scheme, which is a national scheme.
As at 31 December 2021 there was no mutual recognition between the jurisdictions. Therefore, if an employer qualifies for self-insurance in one jurisdiction it does not automatically qualify for recognition in another jurisdiction.
All jurisdictions impose a number of requirements that must be satisfied in order for organisations to be eligible to self-insure. In addition, all jurisdictions apply financial/prudential requirements to establish the long term financial viability of the organisation.