Chapter 4: Seacare scheme performance 2003 – 2004

• 4.1 Seacare scheme performance overview 2003 – 04
• 4.2 Data sources used in this Annual Report
• 4.3 Methodology behind performance reports
• 4.4 Date of extraction of 2003 – 04 data
• 4.5 Seacare scheme performance relative to previous years
• 4.6 OHS positive performance indicators (PPIs)
• 4.7 Claims and injury management performance
• 4.8 Dispute resolution in the Seacare scheme
• 4.9 Rehabilitation/Return to work performance
• 4.10 Long tail claims
• 4.11 Insurance premiums data

4.6 OHS positive performance indicators (PPIs)

In 2002 – 03, the Authority agreed on six positive performance indicators (PPIs) to help identify OHS performance at various levels in the Seacare scheme. This is the first full year where the Authority reports against these PPIs.

Table 15: Performance against PPIs 2003 – 04

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4.7 Claims and injury management performance

Table 16: Period of incapacity for time lost claims (accepted claims) 1999 – 00 to 2003 – 04

Table 16 indicates that historically somewhere between 70 and 80% of claims result in a lost time incapacity of up to three months, somewhere between 7% and 12% of claims result in a lost time incapacity of three to six months and 3% to 10% of claims result in a lost time incapacity of 6 to 12 months. The Table also shows that claims involving continuing incapacity are increasing, and constitute around 4% of claims (based on 2001 – 02 and 2002 – 03 data). Nevertheless the low number of continuing claims in a scheme which is designed to provide continuing benefits suggests that long tail claims or potential long tail claims are being settled as a means of minimising the tail. Information on settlements in the Seacare scheme is included at section 4.8 and in Table 25 of this report.

Given that the date of extraction for 2003 – 04 data is 14 July 2004, it is not possible to reliably use
2003 – 04 data in relation to incapacity beyond three months. Care should be taken when comparing past years’ data with the current year because it is not clear what may emerge in relation to claims lodged in the last three to six months of the current year.

There are 50 claimants who lodged a claim over the past five years who were in receipt of incapacity payments at 30 June 2004, up from 30 at 30 June 2003.

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Table 17: Seafarer days lost 1999 – 00 to 2003 – 04

Note: The figures across the table in brackets are cumulative i.e. the days lost in that year from claims lodged in previous years. Table 17 indicates that the number of days lost in 2003 – 04 (13 003 days) has jumped significantly from days lost in 2002 – 03 (8 046) – a 61.6% increase – and is the highest number of days lost for any of the past five years. The result is that days lost per seafarer has increased from 2.40 days in 2002 – 03 to 3.31 days in 2003 – 04. However, days lost per seafarer in 2003 – 04 are lower than in 2000 – 01 and 2001 – 02.

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Figure 15: Days lost per seafarer 1999 – 00 to 2003 – 04

Source: AMICA and Seacare Authority

Figure 15 indicates that despite the increase in days lost per seafarer in 2003 – 04 relative to 2002 – 03
there is a downward trend in lost days per seafarer over the period 1999 – 00 to 2003 – 04.

Safety training is a key method for preventing injuries on vessels

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Table 18: Cost of claims 1999 – 00 to 2003 – 04

 

Note: Costs include:
(i) payments to employees and/or dependants such as weekly payments;
(ii) payments for goods and services such as medical and hospital treatment, rehabilitation expenses, travelling expenses and property loss; and
(iii) non compensation payments such as investigation expenses, some legal costs, medico-legal reports.
Costs not included are: some legal costs associated with disputed claims, AAT costs which are met from Commonwealth appropriations, and some settlements.

Table 18 indicates that claims over the past five years have cost the industry $18.25 million, an increase from the $16.19 million that claims cost in the five years to 30 June 2003 but slightly down from the $18.78 million which claims cost the industry in the five years to June 2002. Of significance is the cost of 2003 – 04 claims already met in 2003 – 04 ($2.97 million), which is the highest cost for a single year’s claims in any of the past five years. However, the cumulative cost of claims per seafarer in 2003 – 04 is lower than in 2002 – 03 and 2001– 02, though the cost of claims in the claims year is higher in 2003 – 04 than in 2002 – 03.

If the insurance premium income pool data identified by Taylor Fry for the Authority for the four years
1999 – 00, 2000 – 01, 2001 – 02 and 2002 – 03 of $6.95 million, $8.64 million, $9.73 million and $13.5 million respectively is indicative of the five year reporting period it suggests that approximately $48.5 million in premiums has been paid over the last five years to help offset claim costs for which the insurer has responsibility (where the cost of the claim exceeds the policy excess).

While the full cost of insurer claim payments was not available at the time of reporting, insurers reported that the cost of payments for long tail claims (claims of one or more years’ duration) being managed by insurers over the five year period to 30 June 2003 was $11.26 million.

Premiums are assessed on the basis of present and future liabilities, so care needs to be taken when comparing premium income in a particular year with insurer payments at any particular time, as future claim costs (future liabilities) can escalate.

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4.7.1 Claims management – duration indicators

For the first time the Seacare Authority is publishing claims management or claim duration data. A number of measures have been identified to show the performance of employers and employees in managing claims. The data is reported in Tables 19 to 21 below.

Table 19: Injury occurrence to claim lodgement 2003 – 04

 

Table 19 shows that in some 51% of cases the claim was lodged within a month of the injury. However, in 49% of cases the claim was lodged somewhere between one month and 12 months after the injury, which could result in delays in employers commencing an injury management process, and in processing claimant entitlements.

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Table 20: Claim receipt by employer to assessment of capability of undertaking rehabilitation 2003 – 04

 

Table 20 shows that in 63% of cases the employer made an assessment of the employee’s capability of undertaking rehabilitation within 31 days (the statutory time is 28 days). However, in 33% of cases the assessment took place somewhere between one month and 12 months after the employer became aware of the claim (4% not accounted for due to rounding out).

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Table 21: Receipt of claim to end of compensation (a proxy for a return to work) 2003 – 04

 

Table 21 shows that in 53% of cases compensation has ceased within one month of the date of receipt of the claim by the employer i.e. that approximately half of claimants are returning to work within one month.

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4.8 Dispute resolution in the Seacare scheme

Reviewable decisions by the AAT

The AAT is the second tier review for seafarer disputed claims (the first tier is reconsiderations by the employer with the assistance of Comcare). The AAT review process usually operates as follows. Firstly, an AAT conference is held to enable applicants to discuss with their employer and an AAT member or conference registrar (an AAT official), why they think the employer determination is wrong. The conference gives the parties an opportunity to agree to what the decision should be. If at the end of the conference process agreement has not been reached, then a compulsory conciliation conference will be listed. If the matter fails to settle at a conciliation conference, the matter will proceed to a hearing unless both parties and the AAT agree that a mediation should be held. In 2003 – 04 88 preliminary conferences involving seafarer matters were held (compared to 66 in 2002 – 03), 16 conciliation conferences were conducted
(compared to 21 in 2002 – 03) and four matters were heard by the AAT (compared to 11 in 2002 – 03).

Table 22: Outcome of AAT review of decisions 1999 – 00 to 2003 – 04

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A new data set analysing the details of AAT reviews is included at Table 23 below. However, the data in Table 22 continues an historical time series for comparative purposes. The key observations from Table 22 are that there was a substantial increase in the number of matters referred to the AAT for review in 2003
– 04 compared to 2002– 03, from 37 to 66 (an increase of 78.4%) and that there has been a substantial reduction in the time taken to finalise matters at 345 days (down from 476 days in 2002 – 03).

Table 23: Summary of applications to the AAT for a review of a decision under the Seafarers Act
2003 – 04

Table 23 shows that in 2003 – 04 35 or 67.3% of matters were finalised by consent of the parties, four or
7.7% were heard and determined by the Tribunal and 13 or 25% were otherwise finalised (all in fact by withdrawal by the applicant). The large number of conferences held (104) and the small number of matters which proceed to hearing (4) suggests that many applicants are not satisfied with the claims management process at the first level of review (employer reconsiderations) and proceed to the AAT where access to a third party conciliator appears to result in resolution of many disputed claims.

The total number of claims reported to AMICA in 2003 – 04 was 208. In 2003 – 04, 66 new applications were made to the AAT for review of a decision. The number of applications relative to claims made is a useful indicator of the propensity to use the AAT, and is generally regarded as the most effective measure of claim disputes. Using this analysis, 31.7% of claims made by seafarers resulted in an application to the AAT for a review of a decision. Put another way the dispute rate in the Seacare scheme is 31.7% in 2003
– 04, compared to 23% in 2002 – 03 and 28% in 2001 – 02.

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Table 24: Seacare scheme dispute rate (number of applications to AAT as a proportion of total claims lodged) 1999 – 00 to 2003 – 04

During 2004 the Seacare Authority analysed settlement (by lump sum payment) of matters referred to the AAT for review to ascertain the extent of settlements and the cost of such settlements in the Seacare scheme. The results of that analysis are summarised in Table 25 below.

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Table 25: Seacare scheme – claim settlements data 1998 – 99 to 2002 – 03

 

Note: The lower number of matters reported as settled in Table 23 compared to Table 25 is explained by the fact that settled matters in Table 25 are matters where there was a lump sum settlement outcome

The data in Table 25 shows that:

• there have been on average, 11 claims settled per year over the five year period;
  
• the number of claims settled by payment of a lump sum over the five year period as a proportion of all accepted claims is 6.5%;
  
• the number of claims settled by payment of a lump sum as a proportion of all claims referred to the AAT for review is 19.5%;
  
• the number of claims settled by payment of a lump sum as a proportion of long tail claims is 13.7%;
  
• the number of claims settled by payment of a lump sum has fallen sharply in the three years to
  2002 – 03 (settled claims over 2000 – 01 to 2002 – 03 represent only 22% of settled claims over the five years to 2002 – 03);
  
• the total costs of lump sum settlements, including legal costs over the five year period is $4.26m, of which $3.83m (or 89.9%) was the settlement award to the employee, and $0.43m (or 10.1%) represents legal costs (both to the insurer and the employee);
  
• the average lump sum payment is $69,554 over the five year period;
  
• the average legal cost per lump sum settlement is $7,821 over the five year period; and
  
• the average cost per lump sum settlement is $77,375.

The key observations to be made from Table 25 are:

• lump sum settlements arising from matters referred to the AAT for review represents a relatively small proportion of claims (19.5%), but are clearly one way of resolving long tail claims (with 13.7% of long tail claims settled each year);
  
• there appears to be a decline in the use of lump sum settlements as a means of addressing claims, suggesting that employers/insurers are finding alternative means of addressing potentially long tail claims eg better injury management and perhaps the use of alternative duties. On the other hand,
  it may be that the higher use of settlements in the earlier years was a reaction to the larger number of long term claims that employers were required to address following the move to company employment after 1998; and
  
• while the total cost of lump sum settlements over the five year period appears high ($4.26m) given the size and cost of the scheme (total scheme costs were $16.19m over the same period), the key
  observation is that the average settlement cost is relatively low at $77,375, and that the size of the lump sum being received by employees at $69,544 is also relatively modest.

The principal conclusion to be drawn from the data and analysis is that the extent of the use of settlements which result in a lump sum payment, and their overall impact on the scheme is relatively low and probably reducing over time.

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Figure 16: Claims reviewed as a proportion of all claims lodged 1999 – 00 to 2003 – 04

Source: Seacare Authority and Comcare

Reconsiderations by employers

Under subsection 78(4) of the Seafarers Act an employer must, upon receipt of a request by an employee for a reconsideration of a determination (of a claim), arrange for an industry panel, or for a Comcare officer, to assist in reconsidering a determination made about a claim for compensation. This review is tier one of a two tier review process under the Seafarers Act. As there are no industry panels established pursuant to section 78 of the Seafarers Act, Comcare conducts all such reviews for employers. In 2003 – 04 Comcare reviewed 34 such cases, involving ten maritime employers. In 100% of cases, the Comcare recommendation was to affirm the employer determination.

Figure 16 indicates that Comcare reviews, as a percentage of claims lodged have remained relatively stable over the period 1999 – 00 to 2003 – 04. AAT reviews on the other hand have been declining as a percentage of claims since 1999 – 00 but have increased considerably in 2003-4.

While it would be expected that there would be a lower number of tier two reviews (in that some disputes would be resolved at the tier one stage) the data (as represented in Figure 16) shows the contrary. The
key explanations for this are first, that AAT matters can arise from claims made in earlier financial years so the application year will not necessarily match reconsiderations arising from claims lodged in a particular financial year; and second, AAT matters can arise from decisions other than an employee requested reconsideration eg an employer initiated reconsideration which does not require a Comcare assisted review, or can arise from an employer decision to refuse a request for additional time to complete the request for a reconsideration i.e. the AAT matter arises from a procedural issue associated with the operation of section 78 of the Seafarers Act. AAT matters can also arise from the application of section 91 of the Seafarers Act (cost of proceedings before the AAT).