What is the temporary freeze on the voluntary movement of policies?

With the introduction of the new Workers Compensation Scheme arrangements there will be a temporary freeze on the voluntary movement of policies from one Agent to another Agent on and from 2 July 2005 up to and including 29 June 2006.

Policies due for renewal during the freeze period must be renewed with the employer’s current insurer.

When the temporary freeze is lifted, employers may move their policy to an Agent of their choice. A new employer, taking out workers compensation insurance for the first time, can choose their preferred Agent.

Why is there a temporary freeze on the voluntary movement of policies?

The temporary freeze was implemented to ensure that the NSW workers compensation market remains stable during the establishment of the new arrangements.

The freeze will also help minimise any disruption during the establishment of the new Scheme arrangements.

The temporary freeze will also assist Agents in the Scheme to maintain consistent service levels to employers and workers during the establishment of the new arrangements.

Why can WorkCover implement a temporary freeze on the voluntary movement of policies?

On July 1 2005 a new insurance entity, the Nominal Insurer became operational.  This insurance entity has replaced the six companies who were licensed to issue NSW workers compensation policies and administer claims. WorkCover will be responsible for overseeing the Nominal Insurer arrangements.

 Under the new Scheme, former workers compensation insurers as well as new organisations, will enter into an agency agreement with the Nominal Insurer and will manage claims and policy services on its behalf. These organisations will become Agents operating within the NSW Workers Compensation Scheme.

A tender process to select Agents is currently underway and until contracts are awarded, workers compensation insurers who offer workers compensation policy and claims management services have been appointed as temporary Agents.

Temporary Agents are subject to the direction and control of the Nominal Insurer (clause 240(3) Workers Compensation Amendment (Insurance Reform) Regulation 2005).

To minimise disruption and to help stabilise the market during the establishment of the new arrangements, employers will be unable to move their policy from their existing Agent to a different Agent during the freeze period.

The Nominal Insurer is authorised to issue instructions to any employer regarding the insurance arrangements of the employer (subsection 154B (3) of the Workers Compensation Act 1987.)

This Act allows the Nominal Insurer to impose a freeze on policy movements for a specified period.  The Nominal Insurer has exercised this power and has imposed a freeze on and from 2 July 2005 up to an including 29 June 2006.

The combined effect of the Act and the Regulation means temporary Agents and employers are bound by this instruction.

Can employers change their name in order to commence a new workers compensation policy with a different Agent?

Current legislation regarding the establishment of workers compensation policies remains in effect. An existing business that undergoes a name change, will be required to renew their workers compensation policy with the same organisation.

Generally, a change in company name for an existing business is not considered as a new business in the workers compensation market.

Are there any exemptions from the temporary freeze on the voluntary movement of policies?

There are some employers who may be exempt from the temporary freeze. An employer who is required to short term or cancel a policy due to grouping requirements will not be affected by the market freeze.

Grouping applies to related employers who have related companies with combined wages of more than $600,000 annually.  Employers in this category must be insured with one Agent and have a common renewal date for all workers compensation insurance policies.

Agents are responsible for verifying relevant information and approving applications for exemptions, if satisfied it is for the purposes of meeting grouping requirements. Details of all applications should be retained by Agents and made available to the Nominal Insurer upon request.

New employers, taking out workers compensation insurance for the first time may chose any Agent.

The temporary freeze on the voluntary movement of policies has been implemented to ensure a smooth transition to the new Scheme arrangements.

When will the freeze be lifted?

The freeze will be lifted after 29 June 2006 allowing employers to renew their workers compensation policy with the Agent of their choice.

Although employers may move their policy to a different Agent after the freeze is lifted, new claims lodged during the freeze period will remain with the initial Agent.

When the freeze is lifted, there will be increased competition in the market and employers will have greater choice.