Often, when an employer sees their premium claim costs, they are shocked by one thing more than any other: the SCE.
This blog post will talk about what the SCE is and how it is calculated. The next blog post will discuss what you can do about it.
The SCE: What is it?
The Statistical Case Estimate, or SCE, is used by WorkSafe to estimate what might be paid on a claim throughout its lifetime. In the early stages of a claim, the SCE can far outweigh the actual payments. Of course, it is in the early stages of a claim that they will most often impact on your WorkCover premiums. And of course, we need to remember that your premium claim costs include both the actual payments, and the estimate of what is to come, the SCE.
As a general rule of thumb, as a claim progresses, the SCE will come down over time. This is for a couple of reasons. For starters, as payments are made on a claim, they come out of the future estimate and in to the present. If the SCE was perfect from the outset, you might see a pattern like this:
|Period||Amount Paid||Future Estimate (SCE)||Total|
But the SCE isn’t perfect. It will bounce around in relation to payments. One month the SCE might be $1000, the next it could be $2000, and the next back down to $1500. So if you are to look at a graph of an SCE over time, it might look more like this:
You’ll note that I didn’t put a time frame on that graph. Depending on the claim, the time that it takes the SCE to reduce can vary greatly, from months to years. You’ll also see that the SCE never actually gets to zero. Most often it won’t, or at least not while the claim is still being used in your premium calculations.
The SCE: How is it calculated?
The SCE calculation is a bit of a black box. WorkSafe feed the data in, and out comes an SCE. The ‘S’ in SCE gives a bit away though. It is a statistical model. Based on all of WorkSafe’s historical data, and remembering that WorkSafe goes back to 1985, and receives tens of thousands of claims each year, it is an estimate of what a claim with these particular characteristics will have paid on it.
Good question, and I’m glad you asked. There are two types of characteristics that the model will react to. The first set are static characteristics. This is information about the worker, like age and gender, the type of injury, what part of the body it affects and the industry the worker operates in. The second set of characteristics are more fluid. These include what payments have been made on the claim, has there been a return to work, and if so, was it sustainable, has there been any surgery or hospitalisation, what sort of medial treatment is the worker receiving.
The SCE looks too high, what can I do about it?
There is a school of thought that because the SCE is based on a statistical model, there isn’t really anything you can do about it.
I don’t subscribe to that school of thought. It’s true that only in rare circumstances can you ask your agent or WorkSafe to review and change the SCE, but there are things you can do to improve it.
That will be in the next blog post.
In the meantime, if you have any questions, get in touch.