How premiums are calculated

How premiums are set

Premiums are based on general trends in the premium pool (the total premium to be charged across all agencies) and the individual agency’s claim performance.

Every year, agencies submit their payroll and full time equivalent (FTE) estimates to help us calculate their premiums for the following year. The high-level steps to setting premiums are:

Step 1: Forecast the overall scheme performance

Comcare uses independent actuaries—professionals who measure and manage risk and uncertainty—to forecast the lifetime cost of claims arising from injuries and diseases sustained in the financial year.

This is done for the overall insured scheme, including claims management costs, and includes analysis of claims performance up to December of the previous year.

Step 2: Set the final premium pool

Comcare sets the pool to fund the forecasted lifetime cost of claims arising from injuries and diseases sustained in the financial year.

The pool includes a margin to allow for:

• the inherent uncertainty in the forecast of the cost of claims
• Comcare’s ability to fund this uncertainty using the insured scheme’s assets.

Step 3: Determine agency prescribed amounts

The prescribed amount is an agency’s contribution to the premium pool. It is calculated as:

Prescribed amount = prescribed rate x estimated payroll.

The prescribed rate determines your agency’s share of the final premium pool. It is calculated as:

Prescribed rate = previous year’s prescribed rate x pool trend x performance adjustment

Estimated payroll = last reported payroll figure x (1 + inflation rate)

• The pool trend reflects the changes in the scheme’s claim performance since the previous year’s premium pool.
• The performance adjustment alters the previous year’s prescribed rate for changes in your agency’s claims performance relative to the overall insured scheme’s claim performance.

Step 4: Determine agency bonus or penalty adjustments

The previous year’s prescribed rate is revised using the agency’s performance adjustment, as calculated in Step 3.

The difference between revised and initial previous year’s prescribed rate is multiplied by the previous year’s estimated payroll to determine the bonus or penalty.

This allocates the previous year’s premium pool between agencies more equitably by reflecting changes in claims circumstances.

Step 5: Indicative premium notice

Agencies are advised of their indicative premium amount in March.

Step 6: Final premium notice

The final prescribed amount is recalculated using agency provided payroll estimates for the premium year and is sent to agencies in July.