The Australian Chamber of Commerce and Industry said the sudden rush of complicated claims would hit smaller businesses hardest, putting extra demands on firms that are already suffering from the effects of the coronavirus crisis.
The warning came as the World Health Organisation declared the disease to be a global pandemic, and as the Australian federal government unveiled a $17.6 billion stimulus package to fend off a virus-induced recession.
In the United States, President Donald Trump announced an unprecedented 30-day ban on flights to and from Europe in an effort to contain the spread of the disease, prompting sharemarkets around the world to plummet.
Workers’ compensation is a mandatory form of employer insurance, usually administered by state government bodies, which is designed to compensate workers for injury or illnesses suffered or contracted in the workplace.
Jennifer Low, ACCI’s head of workers’ compensation policy, said employers were increasingly flagging the issue with the industry body.
Unlike other forms of insurance such as business interruption and travel, which often exclude pandemics, she said workers’ compensation would cover COVID-19 if it could be shown the disease was contracted at the workplace.
“There’s no current exemption for coronavirus, which means the usual disease criteria would apply, and at this point in time it is anticipated there would be a number of accepted claims so long as it could be traced back to the workplace,” she said.
Paradoxically, the workers’ compensation situation will be worse as long as the spread of the virus is relatively contained, because in that situation it will be easier to determine where the disease was contracted.
If it was contracted in the workplace, it could trigger workplace compensation payments.
“It has the potential to be quite severe, if we can trace it,” Ms Low said. “So the longer we get the health results that [the authorities] want, which is lower number of community transmissions, the more likely we are to see claims.”
She called for more workers’ compensation schemes to put out information on their approach to the pandemic.
Government insurers respond
Comcare, which administers the workers’ compensation scheme for federal government agencies, said in a statement: “For [coronavirus] coverage to exist, a determining authority would need to be satisfied that the employment significantly contributed to the employee contracting the virus.
“For viruses, it can be difficult to accurately determine the exact time and place of contraction. As a result, it may be difficult to determine that employment significantly contributed to the virus.
“However, where an employee’s employment puts them at greater risk of contracting the virus, the significant contribution test may be easier to meet.”
Comcare said travel to at-risk parts of the world or contact with known carriers would increase the chances of a successful claim. A claim would be more likely to succeed if an employer allows activities that contravene the Health Department’s recommendations.
The New South Wales State Insurance Regulatory Authority echoed Comcare’s point that place of transmission would be difficult to determine, and that each case “would need to be considered on its individual merits, having regard to the individual circumstances and evidence in relation to the claim”.
Workers’ compensation rules differ from state to state, but policies can cover lost income, medical and rehabilitation fees, and damage to personal property in the case of a workplace accident. They can also pay death benefits in the case of death.
In Victoria, income replacement during sickness only kicks in once paid sick leave has been exhausted.
Small businesses vulnerable
Ms Low said small businesses would be worst hit by a flood in claims.
“Where you have a large number of claims, and if those claims result in significant cost, that will be reflected in premiums,” she said.
“For larger companies they might be able to wear those costs, but for small businesses that are struggling or never see claims before, this sudden influx of claims could really hit them.”
She said an additional complication was that workers in self-isolation were unable to or reluctant to get medical checks.
“Workers are flagging concerns about attending GP appointments over the risk of being exposed to other people with the virus,” she said.
“You are required to attend medical appointments regularly, or your wages or medical expenses can be suspended.”
A flurry of workers’ compensation claims would add further pain to businesses already facing interruption to their business as a result of the pandemic, which are unlikely to be covered by insurance policies.
The Insurance Council of Australia said most “business interruption” insurance had exclusions for infectious diseases. Event cancellation insurance was also unlikely to be covered.
The ICA declared an “insurance catastrophe” on Wednesday in preparation for a potential flurry of claims.
“The main purpose is to assist in better understanding the impact of COVID-19 on consumers and business, and to assist government in their responses,” ICA spokesman Campbell Fuller said.
“It means insurers will start providing information and data so the Insurance Council can best help government in its deliberations.
“In this instance it’s a fairly low-key declaration. It’s more of a reference declaration, designed to assist in better understanding the true impact of the disease.”