The Pot Luck for Injured Persons in Australia

 Last year there was a somewhat heated battle over the allocation of the GST receipts between States. At one point the South Australian Premier Jay Weatherill said “….every Australian should be able to expect a similar level of services wherever they live.” This struck a chord and prompted me to examine the state of services provided to injured persons in Australia.

At present, support provided to injured persons comes from:

• Compulsory insurance schemes established by State Government legislation. These schemes provide for injuries from workplace and motor vehicle accidents

• Voluntary insurance provided by private insurers for injuries from other types of accidents

• Social Security as provided by the Federal Government, for injuries not covered by formal insurance

Even where insurance is compulsory, the extent of coverage varies in the case of injuries from motor vehicle accidents, depending on whether or not the scheme is fault-based. In these schemes some 30% of injuries are not fully covered.

Because insurance for other injury types is voluntary the coverage is low – certainly less than 50%.

Some 56% of serious injuries are not related to workplace or motor vehicle accidents.  

As well as coverage, the levels of benefits provided vary.

In the no fault compulsory schemes the level and duration of income support varies by jurisdiction, as well as access to and quantum of additional lump sums, whether prescribed or through common law.

A large proportion of benefits paid in respect of “other” injuries (i.e. not workplace or motor vehicle related) are determined at common law. Each jurisdiction has its own Civil Liability Act that is modified from ‘pure’ common law, and these modifications vary between jurisdictions.

Suffice it to say that for all sources of injuries there are gaps in the support provided by compulsory State-based insurance and voluntary private insurance. Such gaps will, to an unknown extent, be filled by the Federal Government. A proportion of injured persons will bear the cost directly.

One of the consequences of these differences in the level of support between States is that each jurisdiction is relieving the Federal Government of expenditure to an extent that is not commensurate to their proportion of injured persons. 

This raises the question of whether allowance should be made for this disparity in the allocation of GST proceeds between jurisdictions. Should those jurisdictions that provide lesser support receive a smaller share of the GST proceeds?

The more important issue is: should we tolerate the differences, or should we try to do something about it?

Is uniformity possible?

If we are to address the question of uniformity we must consider two fundamental principles, namely;

1. Do we accept that all types of injuries should be eligible for support?

It is hard to see why the cause of injury is relevant as to whether the cost of treatment and income replacement is provided.  

       2. Do we accept that injuries should be covered on a no-fault basis?

This is already accepted for workplace injuries and for injuries from motor vehicle accidents in some jurisdictions.

For an injured person, their needs are not determined by the question of who caused the injury, but on the severity of the injury itself. In my view the idea of fault with respect to injured persons is medieval in nature and is out of place in a caring society. 

The Social Security system accepts these fundamental principles.

This raises the question as to why an alternative scheme is needed. Should existing state-based schemes be terminated and all injured persons included in the Social Security system?

In my view this would be a retrograde step, because of the importance I place on insurance principles.

At present, I do not believe that the existing Social Security system fully operates on insurance principles, although there are some signs of movement towards their acceptance.

The discipline imposed by the adoption of insurance principles cannot be overstated. They are critical to the sustainability of any scheme.

Those familiar with accident compensation will quickly realise that I am heading towards the scheme that has been operating successfully in New Zealand since 1974.

The NZ Scheme provides benefits on a no-fault basis for all injuries. All but 2% of payments relate to income support and medical and the like payments i.e. lump sums are very limited.

The existence of the NZ Scheme answers, in the affirmative, that uniform treatment of injured persons is possible.

Is uniformity plausible?

The question of plausibility is under two headings: cost and practicality.

Cost

I have attempted some “ballpark” estimates of cost of a NZ-type scheme in Australia. This suggests the following:

• For workplace injuries the claims costs would reduce by around 25% due to the removal of lump sums and legal expenses
• For motor accident injuries the claims costs would reduce by around 15%, notwithstanding the extension to full no-fault
• Because of the extension to other injuries the overall claims cost would increase by some 27% relative to costs in the current compulsory and voluntary insurance arrangements.

Obviously, the efficacy of legislation and competence of management will be critical to the ultimate cost.

More details are given in the extended version of this paper, together with a discussion on funding.

Claims cost for the NZ Scheme represents 1.6% of Gross Domestic Product. By comparison claims cost for the proposed scheme in Australia is 1.4% of GDP. Australia has a considerably higher GDP per capita than New Zealand.

New Zealand has taken the view that their scheme is worth the cost so why can’t Australia?

Practicality

Even were the financial considerations pertaining to an all-injuries support scheme in Australia considered to be manageable, there would be many practical/political obstacles to be overcome.

Certainly the removal of lump sums, whether prescribed or through common law, would be contentious. While the role the legal profession has been eroded in the last couple of decades, its complete abolition will be vigorously resisted.

Defining the roles and relationships of the Federal and State Governments will be hard, but the NDIS example may help.

Private insurers will be losing business in the “other” injury group. Will they have a role to play?

There will be many other issues, both general and detailed. However, they should not be insurmountable. Problems are not stop signs, they are guidelines.

Read the extended version of this article.

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