NCSI ‘alarmed‘ at ECPR rubber stamp

National Council of Self Insurers chair Robin Shaw has criticised Peter Hanks,
QC's endorsement of Vic WorkSafe's efficient component pricing rule (ECPR)
formula (WCR 708).

"The endorsement of WorkSafe's ECPR formula is in reality a proposal for a
new tax on large companies self insuring in Vic. In our opinion, the formula is far
too volatile and confers fee increases on some companies of the order of 600%,
with the majority at least doubling the current fees."

Shaw told WCR Hanks's suggested lift in excess of loss insurance thresholds
would not offset those fee increases. "These latest moves are unlikely to
encourage corporate boards to make long-term investments in Vic, and this
will remain the case as long as there is a perceived bias against self-insurance
(and by inference, large businesses) in Vic govt circles," he said.

Vic self insurers were "frustrated" by the turn of events, Shaw said. Two years
ago the govt referred the contributions formula to a neutral third party - the
Essential Services Cmn (ESC). The ESC generally endorsed the formula proposed
by the Self Insurers Assoc of Vic (SIAV) and, more importantly, the ESC required
accountability from WorkSafe on its expenditure as part of that equation.

"The ECPR approach does not do that. In effect, the Hanks report has discarded
the findings of an independent body brought in by the govt itself that required
transparency from the regulator. It has substituted a discredited economic
model proposed by very the regulator [that] demands massively increased fees."

Shaw said he struggled "to rationalise how such a recommendation came to be
made. The govt called in the ESC, didn't get the answer it wanted, swept the
ESC findings under the carpet and has prevailed on Hanks to recommend the
regulator's preferred model". The Access Economics input to the Hanks review
did not "in my view present a compelling argument in favour of the model, but
rather seems to be simply defensive of it", he said.

SIAV's economic advisor warned that in endorsing the ECPR model, 'the
Hanks review would need to assert either superior insights (or an assessment
of fundamentally different circumstances) to those formed and expressed by
the judgments of economic regulators, tribunals and govts in Aust, NZ and the
UK', Shaw recounted.

"I don't think the Hanks report demonstrates any superior insights to those
of the regulators, govts and judicial bodies here and overseas that have
rejected the ECPR model. Its introduction in the face of evidence that the
ECPR model is discredited will be a most adverse development in the
competitiveness of the Vic economy." Meanwhile, SIAV chair Steve Irving
told WCR the assoc was "concerned" how the Hanks review unfolded. Irving
said SIAV learned late last week that responses to the Hanks report had to
be submitted by last Friday, "when SIAV had been previously advised by
WorkSafe Minister [Tim Holding] that the response period extended to the
end of Oct. This seems to be a poor way to handle such a crucial review".

A spokesperson for Holding was unavailable at presstime.

Workers Compensation Report, Issue 712, October 28, 2008