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Legislative Assembly for the ACT: 2001 Week 2 Hansard (28 February) . . Page.. 414 ..

MR OSBORNE (continuing):

As members are aware, group training companies such as the Construction Industry Training and Employment Association, CITEA, are non-profit organisations that train and employ entry-level apprentices and trainees. CITEA employs about 130 such young people each year.

The workers compensation premium for these trainees is set by insurance companies as a percentage of CITEA's payroll. Since 1998 this premium has steadily increased with each passing year. The increases are: 1998, 10.2 per cent; 1999, 12.4 per cent; 2000, 22 per cent; and 2001, 25 per cent. CITEA's workers compensation policy for 2001 required renewing as at 1 February 2001. Based on a payroll of $2.5 million, a total account of $550,000 is to be paid up-front by today.

As a non-profit association, CITEA is obviously finding it extremely difficult to pay this amount. Current inquiries by CITEA regarding a loan indicate a market rate of 8 to 10 per cent. This is an untenable situation for CITEA as it would require its current host employer charge out rate to be increased by a minimum of 8 per cent. Host employers would not accept this increase in the current economic climate as some are struggling with their GST payments et cetera and would return the apprentice trainees to CITEA.

Faced with making such a large payment, CITEA has a number of options to consider. Firstly, it could obtain an interest-free loan over a period of 18 months or more. To date, no such loan has been found to help alleviate the problem. A second option would be for CITEA to terminate the training contracts of a number of apprentices and trainees. Obviously, this option would only be considered as a last resort. However, it is a real option. The search for a more acceptable option has led to the drafting of this motion. If passed, CITEA would not only be able to continue training all of its current apprentices/trainees, but would be able to engage about 20 more.

The main reason given for such a high premium and premium increases is that the apprentices are more likely than experienced workers to have an accident in the workplace and thus need a larger than usual pool of funds from which to draw compensation payments. I heard comment this morning that an amount of outstanding claims is still being processed and the premiums need to be high in order to cover them. My understanding is that when a worker is injured and a claim is likely, the insurance company immediately makes some kind of quick assessment and attaches a dollar figure to it. That figure is accrued in subsequent years until the value of the claim is made and compensation is paid out.

My advice, Mr Temporary Deputy Speaker, is that in most cases the value that the insurance companies initially comes up with greatly exceeds the amount that is actually paid out. This means that the stated figures from insurance companies about accrued claims need to be taken with a grain of salt.

Another comment I have heard today is that CITEA would be unable to obtain insurance at a maximum rate of 15 per cent. I am not an expert on the act, but my understanding is that the insurance companies operating in the ACT are unable to refuse an application to write a workers compensation policy if they are requested to do so. If the government caps the rate of premium at 15 per cent, then that is the rate. Of course, all insurance companies could pack up and leave town, but that is most unlikely. Workers compensation policies in the territory are worth about $5 million in premiums each year.

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