Page 4561 - Week 12 - Thursday, 15 October 2009
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Unfortunately, there was a problem with this amalgamation. Mr Hargraves described it when introducing the current bill. He said that the 2005 amendments resulted in unintended anomalies that have moved the uninsured employer arm of the fund far beyond its intended purpose.
What this means is that the 2005 amendments allowed directors of companies to effectively rort the default insurance fund scheme. In certain situations, a principal contractor would hire a subcontractor who did not have insurance. In that situation, if an employee of the subcontractor was injured, the workers compensation liability would revert to the principal contractor.
However, under the amalgamated legislation the principal contractor could then rely on the default insurance fund to pay out the compensation. This is even though the principal contractor should have shown due diligence and checked that the subcontractor had insurance. This loophole means that other employers in the ACT, the compliant employers, effectively foot the bill as they underwrite the fund by paying a premium.
That is obviously not the way we want the default insurance fund to be working in the ACT. We support the bill before us today, which will make an amendment to close this loophole. The primary change is that the fund will no longer indemnify a principal contractor if the principal or subcontractor does not have a compulsory insurance policy in force. It will still provide indemnity where the employer has compulsory insurance, but their insurance fails for some reason—that is, if a HIH-type situation occurs.
As I have said, we are satisfied with this change. There is a question, though, about why the default insurance fund was in this situation in the first place. It is interesting that the bill we are debating today will actually change the section of the Workers Compensation Act that sets out the purpose of the default insurance fund. As it is currently expressed in the legislation, the purpose of the fund does include a willingness to meet the costs of workers compensation claims made by workers if an employer does not have a compulsory insurance policy. It clearly says this in section 166A of the act. The introduction speech for the 2005 amendments also made it clear.
It is not really the correct language to say, as Mr Hargreaves put it, that the current situation is an unintended anomaly. It is more accurate to say that the original government intention was to allow claims to the default insurance fund when an employer did have a compulsory insurance policy. But the government did not envision the mischief that we now need to correct. Other stakeholders have also told me that although the government worked well with them on workers compensation issues, there was some very poor implementation through the legislation in 2005. In any case, it is good now that the bill before us is making an improvement and we support this amendment.
I will also briefly comment on the other main part of this bill. The bill will amend the long-term funding scheme of the default insurance fund. Because the fund currently pays out claims as they arise, it means insurers receive very uneven bills. It can be hard for them to conduct forward planning. The revised funding model will allow the
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