Key trends in workers compensation and employee benefits in Australia

Howden’s People Risk Market Outlook 2022/2023 captures key insights into Australia's insurance markets for workers compensation and employee benefits.

Written on 15 June, 2022
Amy Cai

Howden’s People Risk Market Outlook 2022/2023 captures key insights into Australia’s insurance markets for workers compensation and employee benefits.

 

Key trends in workers compensation

  1. Economic headwinds and offsets

Domestic and global equity markets are all experiencing a downturn in performance, especially compared to the previous year. As such, the workers compensation market will likely see low investment yields over the next financial year.

On the other hand, inflation is beginning to rise significantly. Australia’s inflation was last read by the ABS to be at 5.1%, which is already the highest inflation rate in 13 years. This rate is expected to continue to grow.

The workers compensation market may benefit from higher inflation, but only if this also drives higher wages growth.

 

  1. Employment rate and wage growth

Australia’s unemployment rate has fallen to 3.9%, the lowest since 2008 and signifying a tightening labour market.

Over the last year, as businesses are improving to pre-pandemic positions, this has driven salary increases across most service industries.

Australia’s wage growth has fallen short of markets like the US and UK and still lags behind CPI, however 2022 is expected to see an acceleration in wage growth, which will also lead to higher premiums.

In an ever-tightening labour market, it is expected that employers will explore more innovative ways to retain and attract staff.

  1. COVID-19 has led to changes in medical and claims services

COVID-19 has seen the increase of telehealth services and online health services, which have brought about efficiencies and lower price points. These services will likely have a positive impact on workers compensation costs.

The resumption of elective surgery in Victoria and NSW will likely see many workers compensation patients prepare for surgeries which were deemed non-essential through prior lockdowns.

This will likely see a backlog of elective surgery, and employers are encouraged to plan accordingly and support their employees’ return to work plans.

  1. Psychological workers compensation claims are on the rise

There has been an increase in psychological workers compensation claims. In Victoria, psychological injury accounts for 22% of all claims and is expected to reach 30% by end of this decade.

In 2021, one in five Australians were reported to have a mental health condition.

The increasing prevalence and cost of mental illness in the workplace will have a significant impact on claim durations and costs.

Time lost from psychological injury is on average more than twice that of any other serious injury claims, and the average cost of a mental illness claim is $36,000, compared to $13,000 for all serious injury claims.

It is therefore more important than ever before for employers to implement mental health initiatives in the workplace.

 

Key trends in employee benefits

  1. Societal shift in benefit expectations

The Australian labour market is not only experiencing severe shortage, but also seeing the rise of the gig economy. This has meant that the employment lifecycle has significantly shortened, and an employee’s perception of “work” has also changed to being more flexible and hybrid.

In light of this, Australian companies are being challenged to improve their employee value proposition, in a way that differentiates them from other companies.

  1. Indirect health concerns caused by COVID-19 are emerging

While Australia has emerged from COVID-19 with relatively low case numbers and casualties, there are still health consequences coming out of the past two years inadvertently caused by the pandemic.

There has been a significant reduction in routine General Practitioner consultations, which may help to screen for early signs of various diseases or begin proactive treatment.

The access to cancer screening services was temporarily impeded during the pandemic, with women aged 50-69 recording 20% fewer mammograms between January and September 2020, compared to the same period in 2018.

Long COVID-19 is also likely to impact the wellbeing and productivity of workers in the years to come, with women in low-paid and frontline roles being disproportionately affected.

Workplaces therefore need to be ready for an increasing health focus towards prevention to cross the line between work and life.

 

  1. Diversity, equity and inclusion

The future generation of employees will likely have a different set of guiding principles from the employees today. This includes the expectation that diversity and inclusion are absolute must-haves in the workplace.

Future workers will likely take on more unique career paths, with success driven by the individual and their ability to learn in the workplace.

Employers are increasingly expected to review their company policies and practices to ensure there are no unintended biases and employee benefits are aligned to their diversity, equity and inclusion policy.

  1. Leave policies

In response to changing social expectations around the flexibility of work, employers are adjusting their leave positives to offer their workplace leave above the legislative requirements.

Leave policies have evolved to include superannuation being paid during parent leave, paid parental leave expanding to cover pregnancy loss, fertility treatment or surrogacy.

  1. Salary Continuance Insurance is on the rise

Outside of leave benefits, salary continuance insurance is the most common non-cash benefit for employees.

There is a continued increase in Australian employers purchasing salary continuance cover for the first time, as a result of increasing rates of illness and injury, as well as employers looking to enhance their EVP.

 

 

To read the full Howden Market Outlook, click here.