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Why is the SCE so high?

When I was at WorkSafe, I would get a lot of queries from employers, via their agents, asking a variation of a very sensible question: Based on [x], the SCE on this claim looks way too high, can you explain it?

The [x] varied, but examples might be:

    •  I’ve spoken to the worker, and he’s fully recovered and won’t be off work any more
    •  We had signs saying workers shouldn’t carry boxes up the stairs, there’s no way we would get a common law claim out of this
    •  She returned to work last week and is doing really well

As we’ve discussed in the past, your WorkCover premium is based on three factors. One of these is your claims performance. Specifically, this means the amount paid on your claims.

In the previous blog post, we spoke about what the statistical case estimate (SCE) is and touched on how it is calculated. In this post, we’ll talk about what options you have to influence it.

The SCE Characteristics: Recap

The SCE is a statistical model, drawn from WorkSafe’s 30+ years of claims experience. It looks at the data captured about a claim, and compares it to all other similar claims, and from that makes an estimate of the likely future costs.

I like to think of the characteristics that it looks at in two groups. The first are the static characteristics. These are things like the sex of the worker, the type of injury sustained, the worker’s age, and what part of the body that was affected. The second set of characteristics are variable and change over time. They include what payments have already been made, has there been any hospitalisation or surgery, has the worker returned to work, and if so, is it sustained, and is there any ongoing medical treatment.

Overall, the SCE is pretty good at estimating what WorkSafe’s future claims liability is going to be. A couple of times a year WorkSafe have their outstanding claims liability assessed by external actuaries. When you compare the SCEs in totality with the actuarial assessment, they match pretty well.

What they don’t do particularly well is estimate the future costs of an individual claim. Which is why you have the questions like those above.

The SCE: Requesting a review

In the last post, I alluded to the fact that in some rare circumstances you can ask your agent or WorkSafe to review the SCE on a claim. In fact, you can ask your agent to review an SCE at any time, but the answer you get probably won’t satisfy you. This is because the agents don’t set the SCE. It’s done using the computer algorithm that runs the statistics.

But, in some circumstances you can request a change. If you believe that there has been an error in recording the circumstances of a claim, you can request that they be fixed. For example, if the worker’s date of birth was coded incorrectly, or the nature of the injury was coded incorrectly, you could request that these be changed.

Remember: the SCE model is hard to predict. A coding change could result in a lower claim cost, but it’s just as likely that it will end up higher.

If a coding change results in an altered SCE, it may trigger a recalculation of your WorkCover premium.

The SCE: How to manage it

Often, the answers WorkSafe would give to the questions I posed at the top would be pretty unsatisfying. But it comes down to this:

The SCE responds well to information that can be verified in the data that WorkSafe collects.

That means the payment history of the claim, the medical certificates, a common law lodgement, or a good return to work. It responds well to these things because they are recorded and observable facts, and because they are general enough to be able to be compared against similar information and similar claims.

The SCE doesn’t respond well (or at all) to information like the conversations you’ve had with the injured worker, whether there are signs up at your workplace, or if the worker’s back has been responding really well to pilates. None of this information is recorded in WorkSafe’s data, and it is so specific to one worker that it can’t be compared against other similar claims to know what impact it might have on future costs.

Managing the SCE is in many ways a third or fourth order priority.

Your first order of priority is managing safety at your workplace. Maintaining a safe work environment and ensuring you have well trained staff, equipped with the right tools and safety gear is the best way to avoid claims and have a happy and healthy workforce.

The second priority is that when someone is injured at work, you manage them and their claim well. You encourage appropriate treatment and implement a good return to work plan. The SCE responds particularly well to a good sustainable return to work.

In fact, I’d go so far as to say that those first and second priorities should be your third and fourth priorities too. If you do those things, the SCEs will take care of themselves.

If you have any questions, make sure you get in touch.

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