Insurers leave workers’ compensation market

THE number of insurance companies in Western Australia offering workers’ compensation portfolios has almost halved in the past 10 years according to WA Government market share figures obtained by WA Business News.

The market has consolidated from 18 insurers in 1994 to just 10 last year.

WA Insurance Council of Australia WA manager Daryl Cameron said the industry’s consolidation has resulted from many companies’ inability to remain competitive, or viable, in the 1990s.

The result has been a steady succession of mergers, collapses and buyouts – the most spectacular of which was the collapse of HIH Insurance in 2000.

AMP’s workers’ compensation portfolio was merged with GIO General in 2000, FAI’s workers’ compensation portfolio was merged with HIH in 2000, and Mercantile Mutual’s portfolio was merged with QBE in 1999.

HIH, CIC Insurance and FAI Insurance all went into liquidation in 2001.

The remaining insurers with workers’ compensation portfolios fall into two categories. There are four large companies with the resources to cater for the bigger end of the market, and five small organisations, which mostly target niche markets.

CGU Worker’s Compensation – formerly SGIO Insurance – holds the biggest market share with 23.6 per cent, however QBE Insurance and GIO General have made significant ground in the past decade.

QBE Insurance has almost tripled its market share, from 7.6 per cent in 1994-1995 to 19.3 per cent, while GIO General has doubled from 8.9 per cent in 1994-1995 to 18.4 per cent last financial year.

At the smaller end, commercial insurer Zurich has the biggest share of the market at 6 per cent, tripling in size since 1994-1995, while niche religious insurer Catholic Church Insurance has remained steady over the same period with 0.7 per cent of the WA market. 

Mr Cameron said workers’ compensation insurer numbers in WA had reached their optimum operating levels. But he warned that a continuation of the decline of the past 10 years could compromise the competitiveness and effectiveness of the industry.

“You wouldn’t want them to go any lower,” he said.

Mr Cameron said he did not think the downward trend of insurer numbers would be affected by the State Government’s proposed reforms to workers’ compensation laws.

The draft reforms were recently released for final consultation before the bill is put to parliament in March.

The changes consider the 2001 Guthrie Report on workers’ compensation and aim to improve support and compensation for injured workers while providing stable and cost efficient insurance protection for employers.

It’s understood the insurance industry is generally accepting of the changes, but will reserve final judgement until its members have fully worked through the proposed system.

Business and industry, on the other hand, including the WA Chamber of Commerce and Industry, say the changes are not needed and the Government has gone back on its word not to increase insurance premiums.

A CCI statement says: “The proposed changes have been modified but still represent an unnecessary major overhaul and introduce a level of complexity that will be difficult for employers to manage.”