Workers’ compensation and insurance

265. Age restrictions on workers’ compensation payments and insurance cover can mean that, in certain circumstances, workers aged over 65 are unable to access compensation or insurance cover in the event of a workplace accident.

266. Workers’ compensation is compensation payable to an employee who suffers an injury or disease arising from or during his or her employment. In addition to workers’ compensation, a range of types of insurance cover may be available such as income protection insurance, travel insurance and personal accident and public liability insurance.

267. Where a worker is aged over 65 and is unable to access workers’ compensation or insurance in the event of a work-related accident, this may act as a disincentive for mature age workers to remain in the workforce. In addition, employers may have concerns about retaining or employing workers not covered by insurance. This may act as a barrier to employment—both for the worker and the employer.

Workers’ compensation

268. At the Commonwealth level, workers’ compensation benefits can only be paid until age 65 or, in certain cases, for up to two years afterwards. However, there is no age limit to incapacity or medical compensation payments.

269. The original rationale for such restrictions was that, once an injured worker reached the retirement age of 65, the worker would have access to superannuation or other forms of income support, such as the Age Pension. A number of issues relevant to this Inquiry arise from these restrictions.

270. First, difficulty in accessing workers’ compensation may act as a disincentive for mature age workers to remain in the workforce. Secondly, where a mature age worker is unable to access workers’ compensation and the worker is injured while at work, he or she will progressively become ineligible for the Age Pension due to the incremental increase in Age Pension age.^[355] As a result, he or she may be forced to access other forms of income support such as the Disability Support Pension, superannuation and other forms of private savings. Where this results in a depletion or exhaustion of superannuation or private savings, he or she may then be required to access additional income support on a long-term basis rather than self-funding retirement. This outcome is at odds with government policy objectives outlined earlier in this Issues Paper aimed at keeping people in work rather than in receipt of the Age Pension, and supporting people into self-funded retirement. In order to address these issues the ALRC considers a number of possible reform approaches below and welcomes stakeholder feedback on the most appropriate approach.

Commonwealth scheme

271. Each state and territory has its own workers’ compensation scheme and the Commonwealth has three schemes. The Safety, Rehabilitation and Compensation Act 1988 (Cth) (SRC Act) establishes the workers’ compensation scheme covering Commonwealth employees and statutory authorities, the ACT Government and its agencies, and the employees of licensed corporations. Benefits under the SRC Act include weekly or fortnightly payments based on the employee’s normal salary and all reasonable medical expenses.

272. The SRC Act also establishes Comcare, which is responsible for workplace safety, rehabilitation and compensation and the Safety, Rehabilitation and Compensation Commission (SRC Commission)—a statutory body with regulatory functions relating to workers’ compensation and occupational health and safety (OHS).

273. The Military Rehabilitation and Compensation Act 2004 (MRC Act) provides rehabilitation, medical treatment and compensation for members and former members of the Australian Defence Force and their dependants in respect of injury, disease or death related to service rendered on or after 1 July 2004.^[356]

274. Seacare is the national scheme of OHS, workers’ compensation and rehabilitation arrangements that applies to defined seafaring employees.^[357] The Seacare scheme is overseen by the Seafarers Safety, Rehabilitation and Compensation Authority which monitors and administers the operation of the Seafarers Rehabilitation and Compensation Act 1992 (Cth) (Seafarers Act).^[358]

National Action Plan

275. Safe Work Australia is the statutory agency tasked with improving OHS and workers’ compensation arrangements in Australia.^[359] Safe Work Australia’s Strategic Issues Group for Workers’ Compensation was responsible for developing the National Workers’ Compensation Action Plan 2010–2013. Relevantly, one of the key deliverables under the Action Plan is to ‘investigate and report on national consistency for a number of agreed terms within workers’ compensation legislation’, including ‘retirement age for workers’ compensation premium purposes’.^[360] In order to progress reforms under the Action Plan seven temporary advisory groups (TAG) were established with representatives from each jurisdiction as well as employer groups and unions. The ALRC understands that the project to investigate retirement age has commenced and that the work being undertaken by the relevant TAG may provide an appropriate opportunity to consider the issues raised in this section.

Volunteers

276. As outlined earlier, 32.5% of Australians who volunteer are aged 55 and over.^[361] However, volunteers are not eligible for workers’ compensation at a Commonwealth level. By comparison, volunteers in some jurisdictions are so eligible, either because they are deemed to be employees under the relevant legislation or the legislation specifically provides compensation for certain categories of volunteers.

277. It may not be necessary for volunteer coverage at a Commonwealth level as, for example, national not-for-profit organisations are often based in one jurisdiction. However, in light of differences in coverage between jurisdictions, the ALRC would be interested in stakeholder feedback on whether volunteers should be eligible for workers’ compensation at a Commonwealth level.

Retirement provisions

278. Most jurisdictions have retirement provisions that restrict access to workers’ compensation, in particular income replacement payments, when a worker reaches the age of 65. At the Commonwealth level, benefits can be paid until age 65 or in certain cases for up to two years afterwards. There is no limit, however, to total incapacity or medical payments. For example:

• General: Compensation is not payable to an employee who has reached 65 years of age, however if an employee who has reached 63 years of age suffers an injury, compensation is payable for a maximum of 104 weeks which may extend beyond age 65.^[362]
• Military personnel: Compensation is not payable to an employee/former member who has reached 65 years of age, however if an employee/former member who has reached 63 years of age suffers an injury, compensation is payable for a maximum of 104 weeks, which may extend beyond age 65.^[363]
• Seacare: If an employee suffers an injury before reaching 64 years of age, compensation is not payable for the injury after age 65. If an employee suffers an injury after 64 years of age, compensation is payable for 12 months after date of injury, which may extend beyond age 65.^[364]

279. A number of state and territory jurisdictions have similar provisions. By comparison, neither Queensland nor Western Australia has retirement provisions.^[365] However, in these jurisdictions there is a range of other restrictions, such as to the benefit period and the maximum amount of compensation an employee can receive during the life of the claim, in terms of weekly payments for loss of earnings.^[366]

Options for reform

280. There appear to be a number of possible options for reform at a Commonwealth level in order to address issues arising from age-based restrictions on workers’ compensation.

281. First, all age-based restrictions could be removed from the SRC Act, MRC Act and Seafarers Act. While removal of age based restrictions would clearly benefit mature age workers, the ALRC is conscious of the cost implications of such a move. For example, statistics indicate that, of claims for Australian Government premium payers accepted during 2010–2011, age groups 35–44 and 65 years and over had the highest average total cost of claims.^[367] As a result, a second approach may be to remove age-based restrictions but impose benefit period restrictions—such as is the case under the SRC Act with respect to employees who have reached 63 years of age—on all employees. The current benefit period restriction under the SRC Act is 104 weeks; however this period could potentially be increased, for example to 260 weeks.

282. Finally, the ALRC is conscious that limiting benefits or payment periods would affect entitlements for all employees. As a result, a third approach could involve amendment of the retirement provisions to increase the relevant age at which compensation is no longer payable to 67 years of age, in line with the planned increase of Age Pension eligibility to 67 years of age. This would mean that compensation would not be payable to an employee who has reached 67, however if an employee who has reached 65 suffers an injury, compensation is payable for a maximum of 104 weeks, which may extend beyond the age of 67.

Insurance

283. At the Commonwealth level, the insurance industry is governed by two primary pieces of legislation—the Insurance Act 1973 (Cth) and the Insurance Contracts Act 1984 (Cth).^[368] Chapter 7 of the Corporations Act 2001 (Cth) governs the regulation of insurance intermediaries such as agents and brokers.

284. The Australian general insurance industry is regulated by the Australian Prudential Regulation Authority (APRA) under the Insurance Act. APRA has the authority to set prudential standards for the general insurance industry and has developed a detailed framework of prudential standards and practice guides for the general insurance industry.

285. The Insurance Council of Australia (ICA) is the representative body of the general insurance industry in Australia and oversees the General Insurance Code of Conduct—a self-regulatory code that binds all general insurers who are signatories to it.^[369]

Income protection insurance

286. Income protection insurance (otherwise known as personal accident, sickness and disability insurance) protects the insured in the event of being unable to work due to sickness or injury (the ‘prescribed risk’). The benefit is provided by way of regular periodic payments, that is, a wage substitute. Income protection insurance is of particular importance to certain individuals such as sole traders, where workers’ compensation is not available.

287. Income protection insurance is generally unavailable to persons aged over 65.^[370] This leaves those people who choose to continue to work after that age unable to cover themselves in this way in the event of illness or injury. By comparison, some income protection policies have a limited benefit period and only provide a wage subsidy for a limited time spent out of the workforce (generally two or five years).^[371] This could have adverse implications for mature age workers who are forced to exit the workforce and upon the expiry of their benefit period must attempt to re-enter employment. Anecdotal evidence provided to the ALRC indicates that age discrimination affects people seeking employment from the age of 45.^[372] This, compounded by illness or injury and a substantial period out of the workforce, could present a barrier to older workers.

288. In addition, premiums for cover by income protection policies generally increase exponentially with age. These gaps in the availability of income protection insurance for workers aged over 65 may necessitate reliance upon retirement savings or the Age Pension for any illness or injury sustained through work and consequently acts as a disincentive to paid employment. It may also discourage mature age workers from embarking on self-employed enterprises as a transitional phase to retirement.

Travel insurance

289. Travel insurance provides for the payment of agreed sums to cover losses or expenses incurred in the course of travel, including medical expenses. Anecdotal evidence suggests that age limitations and higher insurance premiums are placed on travel insurance policies thereby excluding insurance for some mature age persons.^[373]

290. The higher cost, or unavailability, of travel insurance for some mature age persons may act as a barrier to work where a person is required to travel as part of his or her employment or wish to volunteer overseas or interstate.

Insurance cover in the workplace

291. Personal accident and public liability insurance is generally taken out by organisations that have volunteer members. In some cases, the insurance policy may not cover volunteers over a certain age or be severely limited in covering older persons. This may act as a barrier to mature age persons participating in a volunteer capacity,^[374] as demonstrated by the case study below:

In one case, a group of retired workers in a small country town offered to assist the state government to keep their railway station open by volunteering to build up the existing platform to the required height. However, their offer of voluntary assistance was refused because, due to their age, they could not be covered by the government’s insurance provisions.^[375]

292. There may be increased costs to insuring a workplace with mature age workers. This may lead to employers discriminating against mature age workers and job seekers^[376] as the cost to the employer is increased and therefore act as a barrier to employment.

National Insurance Disability Scheme

293. The recently announced National Disability Insurance Scheme^[377] will not extend to provide support to people over the age of 65. This could potentially present a barrier to work for mature age people with disability.

Age Discrimination Act exemption

294. The issues identified above are of a private nature—insurance contracts are made between insurers and the insured rather than through any legislative instrument. The current exemption in the Age Discrimination Act 2004 (Cth) enables insurance companies to determine the premium of a policy or whether a policy is available to a person due to their age.^[378] The discrimination must be:

• based upon actuarial or statistical data on which it is reasonable for the discriminator to rely; and
• reasonable having regard to the matter of the data and other relevant factors; or in a case where no such actuarial or statistical data is available, and cannot reasonably be obtained, reasonable having regard to any other relevant factors.^[379]

295. Although s 54 of the Age Discrimination Act provides for the Australian Human Rights Commission and its President to have the power to require the production of actuarial or statistical data where a person has acted in a way that would, apart from the above exemptions, be unlawful,^[380] the data relied upon by insurance companies to set their age caps and premiums is not publicly available.

296. The current consolidation of anti-discrimination legislation is considering the exemption on which insurance companies rely. The ALRC is monitoring progress of the consolidation process including the exemption for insurance.

Options for reform

297. While age-based limitations and premiums in insurance are not legislated, there may be other mechanisms of regulation that could remove the insurance-related barriers to work for mature age persons. One such mechanism is through the Insurance Reform Advisory Group, which will consider the insurance needs of older Australians.^[381] Alternatives may include making statistical or actuarial data publicly available or through industry Codes of Practice.