I. INTRODUCTION

4.1 In this Section we refer briefly to some of the available statistical information on the extent of accidental death and injury in New South Wales. We also refer to statistics on the major compensation systems under State law - compulsory third party and workers’ compensation insurance. Statistics do not of themselves provide the answers to policy questions, but they may be useful for several purposes. These include:

• assessing the extent to which current accident compensation arrangements serve the needs of accident victims and of the community generally;
• identifying policy issues arising out of the current arrangements;
• designing rehabilitation and other support systems for accident victims; and
• planning accident prevention programs.

4.2 We present statistical information under three headings

• road accidents;
• work-related accidents; and
• other accidents (including, for example, accidents occurring at home, at school or during recreational activities).

In relation to road and work-related accidents we deal with the extent of death and injury and the operations of the two compulsory insurance systems. Much less information is readily available on other accidents and we examine that category only briefly. First, however, we explain the reasons for choosing a three-fold classification and point out the limitations on statistical information concerning accidental death and injury.

A. The Three-Fold Classification

4.3 Classifying accidents into three categories (road, work-related and other) is convenient principally because it reflects current legal distinctions and compensation arrangements. These have been discussed in Section 3. Adoption of the classification for the purpose of presenting statistics does not necessarily imply a preference in principle for the current arrangements.

4.4 The three-fold classification is also useful in considering possible sources of finance for any new compensation schemes. At present, the sources of funds for compensating accident victims vary according to whether the particular accident occurred on the roads, at work or elsewhere. Even a comprehensive compensation scheme, providing coverage to all members of the community, may distinguish for funding purposes between categories of accidental injury or death. For example, under the comprehensive scheme in New Zealand funds are derived from three distinct sources. Levies upon employers and the self- employed are paid into an “earner’s fund” which pays benefits to earners suffering accidental injury. Levies on motor vehicle owners are paid into a “motor vehicle fund” which pays benefits to victims of car accidents, except where the injury was caused to an earner at work or in commuting to work. Government revenues create a third “supplementary fund”, which provides benefits for injuries not covered by the other two funds, for example, non-earners injured at home.

4.5 A third justification for the classification is that statistical information is gathered separately for different kinds of accidents. Quite detailed statistics are collected, for example, on road accident victims. The Workers’ Compensation Commission of New South Wales compiles data on work-related injuries and diseases reported to it under the Workers’ Compensation Act 1926. Scattered studies have been done on other accidents, but no systematic official record is kept of either their incidence or their severity.

B. The Quality of Statistical Information

4.6 Statistics on accidental death and injury are often incomplete or difficult to compare. For example, very little information is systematically gathered on deaths and injuries occurring otherwise than at work or on the roads. Nor is reliable information available on work-related injuries suffered by self-employed persons, since such cases are not generally reported to the Workers’ Compensation Commission. Where information is collected throughout Australia the statistics are not always recorded uniformly. Consequently figures from different States that appear to measure the same phenomenon often turn out not to do so and comparisons become misleading. For example, it is impossible to obtain precisely comparable figures on work-related injuries in Australia, since the States adopt different practices in reporting the number of people injured at work. ¹ Even the concept of “injury” in relation to road traffic accidents is not defined uniformly throughout Australia. An “injury”, as reported by the New South Wales Traffic Accident Research Unit, means one which has been observed by the police and described in the police report. ² By contrast, road traffic “injuries” reported by the Australian Bureau of Statistics refer to cases where the injured person has been admitted to hospital. ³ Statistical information must therefore be treated cautiously, especially where comparisons are made between different jurisdictions.

II. ROAD ACCIDENTS

A. Extent of Death and Injury

4.7 It is commonplace to observe that the advent of the motor car has brought death and injury on a large scale. The figures reveal a very serious social problem. During 1980, 1303 people were killed and nearly 39,000 people were recorded by the police as injured on New South Wales roads. ⁴ More than half the victims were under 25 years of age, indicating that young adults are especially vulnerable to road accidents. ⁵ Of the fatalities, 264 were male drivers aged between 15 and 24 years and 106 were male passengers in the same age group.

4.8 In Australia during 1980 there were 3,272 road deaths and over 32,000 persons suffered sufficiently serious injuries in road accidents to warrant admission to hospital. ⁶ The Australian road death and injury toll corn pares unfavourably with that of countries with a high level of use of motor vehicles. World statistics covering the last half of the last decade show that Australia suffered 3.5 deaths per 100 million vehicle kilometres, a substantially higher proportion than the United States of America (2.0), Great Britain (2.3) and Canada (2.9). The situation in New South Wales is slightly worse than the Australian average, with 3.6 deaths per 100 million vehicle kilometres. ⁷

4.9 No clear information is available as to the number of serious injuries caused by road accidents. The New South Wales figures show that of the total of 38,816 persons recorded as injured in road accidents, 11,463 (29.5%) were admitted to hospital and a further 21,212 (54.6%) were treated at hospital but not admitted. ⁸ International comparisons do tend to suggest, however, that Australia not only has a comparatively high accident rate, but also has a relatively high rate of serious injury. The ratio of persons killed in road accidents to every one thousand injuries is higher in Australia than in many Western countries: in 1976 the figure for Australia was 41.3, compared with 26.9 in Canada, 19.7 in Great Britain and 15.9 in the United States. ⁹ If the death-to-injury ratio is higher in Australia it seems reasonable to conclude that the serious injury-to-injury ratio is likely to be higher also.

4.10 A further indication of the potentially disabling effects of road accidents can be seen in the various Australian studies of the causes of paraplegia and quadriplegia. Two New South Wales surveys of quadriplegics and paraplegics conducted by the Department of Social Security, indicated that 42.4% and 50.2%, respectively, had become disabled as the result of a motor accident. Other English and Australian surveys of quadriplegics have reached similar conclusions, as shown in Table 4.1. Motor vehicle accidents therefore appear to be the major single cause of catastrophic injury in the form of paraplegia and quadriplegia. Table 4.1 also shows that a significant proportion of catastrophic injuries occur neither on the roads nor at work and therefore are unlikely to attract compensation under present arrangements other than social security.

Table 4.1: Accidental Injury: Results of Surveys on the Causes of Quadriplegia and Paraplegia

REPORTS
	England 1973	Queensland 1973	NSW undated - 2 samples (a)		Victoria 1975
	%	%	%	%	%
Motor vehicle accidents	41.3	41.5	52.4	50.2	42.1
Falls	20.0	11.0	9.3	9.2	22.8
Diving accidents	14.6	23.7 b	6.4	6.3	18.6
Occupation - related injuries	8.1	13.6	15.8	10.1	8.8
Other sporting injuries	7.3	6.8	7.1	3.4	7.7
Gun-shot wounds	4.5	3.4	13.5	18.9	-
Other	4.2	-	5.5	1.9	-

(a) The figures from the New South Wales Surveys include both paraplegics and quadriplegics. The others are restricted to quadriplegics.

(b) The author of this study attributes the high proportion of diving accidents to the distinctive recreation patterns of Queenslanders.

Source: Department of Social Security, Survey of Quadriplegics (Research Series: No.2 December 1977). ¹⁰

B. Compulsory Third Party Motor Vehicle Insurance

1. PREMIUMS AND CLAIMS

4.11 The published Annual Reports of the Government Insurance Office of New South Wales (the “GIO”) provide information on premiums and claims under the compulsory third party motor vehicle insurance system. While the GIO is not the only third party insurer in New South Wales, it transacts about 98% of the compulsory third party insurance in the State. Table 4.2 shows, among other things, that premiums received by the GIO exceeded $311 million in 1980-81, having grown three-fold since 1974-75. Premiums received continue to exceed claims paid which have also grown three-fold since 1974-75.

Table 4.2: Compulsory Third Party Motor Vehicle Insurance: Premium and Claim Statistics

Government Insurance Office of New South Wales 1974-1981

Year	Premiums Received	Earned Premiums	Claims Paid	Estimate of out-standing claims	Claims incurred	Loss Ratio %
$ million
1974-75	101.0	81.4	73.0	248.4	117.8	144.8
1975-76	164.3	136.0	93.8	328.4	173.8	127.8
1976-77	179.4	169.4	119.2	408.4	199.2(b)	117.8
1977-78	209.1	194.0	128.0	602.2(a)	321.8(b)	165.8
1978-79	237.3	224.0	159.5	854.0	411.3(b)	183.6
1979-80	270.2	251.9	199.6	991.0	336.6(b)	133.6
1980-81	311.4	291.1	228.7	1,216.0	453.7(b)	155.9

(a) Figure supplied by the GIO

(b) Figures calculated from claims paid and estimates of outstanding claims.

Source: Annual Reports of the Government insurance Office of New South Wales.

Terminology

4.12 To understand the other figures in Table 4.2 it may be helpful to explain the terminology which is in common (but not necessarily precisely uniform) usage in the insurance industry.

• “Premiums received” indicates payments actually received by the insurer, not including income derived from investments.
• “Earned premiums” represents the premium income received with respect to which insurance cover has been provided during the year. Because third party premiums are paid by motor vehicle owners throughout the year, a proportion of the premiums received in a given year relates to periods in respect of which coverage against risks has not yet been provided. Similarly, a proportion of the premiums received during the previous year relates to coverage provided during the current year.
• “Claims paid” is the amount actually paid out during the year by the insurer in respect of claims. The claims have not necessarily been finalised.
• “Estimate of outstanding claims” is the amount considered necessary by the insurer for the purpose of meeting outstanding claims - that is, claims that have been incurred (although not necessarily reported) but not yet finalised.
• “Claims incurred” is a figure used to indicate the estimated cost of the claims occurring during the year, taking into account that they might not be finalised for many years. The claims incurred during any year are calculated as follows: claims paid during the year, plus the estimate of outstanding claims at the end of the financial year less the estimate of outstanding claims at the beginning of the year. The reliability of the figure for claims incurred depends upon the accuracy of the estimates of outstanding claims made by the insurer.
• “Loss ratio”, broadly speaking, is the ratio of claims incurred to earned premiums. In certain classes of insurance business, the loss ratio may be used as a measure of the profitability or unprofitability of that business although it does not take into account earnings from investment income. The GIO, because its third party business is not “fully funded” (see para.4.16, below), does not report loss ratios and those in the Table have been calculated by us.

Increases in Claims

4.13 Table 4.2 shows that, over a seven year period, claims paid increased at a reasonably regular rate, albeit subject to some variations. Claims incurred have varied more markedly, the figure actually dropping between 1978-79 and 1979-80. One reason for the variation in claims incurred may be differences in the approach taken by the GIO to the estimate of the future cost of current claims (including claims likely to be made in respect of accidents that have already occurred). Estimates may be affected, for example, by such matters as assumptions about inflation rates or the effect of changes in the legal principles governing the assessment of damages.

4.14 The increases in claims paid and claims incurred over the seven year period are attributed by the GIO primarily to large increases in damages awards and settlements. ¹¹ It is clear that the number of very large verdicts and settlements has increased substantially. According to information supplied by the GIO, in 1980 it participated in 160 settlements and verdicts in which the amount paid exceeded $100,000. In 1981 the figure had reached 272. Again, in 1980 there were 10 settlements and verdicts over $500,000, of which only one exceeded $1,000,000. In 1981 the corresponding figures were 16 and eight The GIO argues that the increase in major awards has a “flow-on” effect, resulting in higher pay-outs in the less serious cases.

Average Payment

4.15 It is not possible to obtain precise figures on the average amount paid ill respect of claims made in any given year. Some indication of the increase in the average claim may be obtained by comparing the number of claims finalised in a year and the amount paid out in respect of those claims by way of verdicts or settlements. Table 4.3 shows the number of claims finalised for each of the years 1978 to 1980 and the total amounts paid out in respect of those claims. The amounts paid include hospital and medical costs paid in advance of final verdict or settlement, whether they were paid in the same year or earlier.

Table 4.3: Compulsory Third Party Motor Vehicle Insurance: Amount Paid Per Completed Claim

Government Insurance Office of New South Wales 1978-1980

	1978	1979	1980
Number of Settlements	13,835	14,331	14,177(a)
Number of Verdicts	1,096	906	849(a)
Total	14,931	15,237	15,026
Amounts paid in Settlements and Verdicts	$117.6 m	$142.6 m	$171.9 m
Amount paid per Completed Claim	$7,882	$9,357	$11,439

(a) Includes interstate cases.

Source: Information supplied by the Government Insurance Office of New South Wales.

2. THE FINANCIAL BASIS OF COMPULSORY THIRD PARTY INSURANCE

4.16 Most private enterprise insurance operates on what is described as a “fully funded” basis. This requires, in principle, that the premiums collected in any year are sufficient to meet all claims arising from accidents occurring in that year, whether or not the claims are actually paid in that year. Under a fully funded scheme the insurer should provide reserves sufficient to meet the estimated cost of outstanding claims. Traditionally, investment income is not allowed for, but such income (together with the reserves) is of course available to meet claims. By contrast a pay-as-you-go system operates on a cash flow basis without reserves and therefore depends on future premium income to meet outstanding claims already incurred.

4.17 Table 4.2 shows that at 30 June 1981 the GIO estimated its outstanding third party claims as amounting to $1216 million. At that time the GIO had set aside reserves of only $986 million to meet these claims, producing a short- fall, on its calculations, of $230 million. ¹² If the GIO’s estimates of outstanding claims are accurate, this indicates that compulsory third party insurance in New South Wales is not conducted on a fully funded basis, but is only partially funded. One factor in this is that since January 1977 third party premiums in New South Wales have been tied to the Consumer Price Index. The policy of indexing premiums is embodied in legislation ¹³ and reflects a political decision to control the level of premiums. Since the policy was implemented claims paid and claims incurred have outstripped the general inflation rate. Because the system is now only “partially funded” the GIO does not rely on loss ratio calculations in reporting on this class of insurance business. However, the calculations are included in Table 4.2 to show the variations in the relationship between earned premiums and claims incurred. The high loss ratios do not mean that claims actually paid exceed premium income. As previously noted, premium income continues to exceed claims paid by a substantial margin, although the GIO has expressed its concern that this state of affairs will not continue.

3. PREMIUM RATES

4.18 Compulsory third party motor vehicle insurance premiums have increased in all States in recent years. In New South Wales, as previously mentioned, premiums have been tied to the Consumer Price Index since 1977. Nonetheless, if an earlier date, such as December 1974, is taken as the starting point for comparison, premiums in New South Wales have risen somewhat faster than the inflation rate. Between the December Quarter 1974 and the December Quarter 1981 the Consumer Price Index rose from 168.1 to 345.4, an increase of 105.5%. During the slightly longer period, December 1974 to April 1982, as shown in Table 4.4, compulsory third party premiums in New South Wales rose by 156.5%. The Table shows the position in other States and Territories and reveals very different rates of increase in premiums. Victoria, Tasmania and Queensland have experienced relatively low increases, notwithstanding that Victoria and Tasmania now have no-fault schemes funded out of the premiums.

Table 4.4: Compulsory Third Party Motor Vehicle Insurance: Comparative Rates of Premiums

Australian States and Territories 1974-1982

	Premiums
State or Territory	December 1974	April 1982	Increase
	$	$	%
New South Wales	58.15	149.15	156.5
Victoria a	87.50	155.20	77.4
Queensland	40.10	70.10	74.8
South Australia	58.00	130.00	124.1
Western Australia	27.60	113.05	309.6
Tasmania a	35.00	65.00	85.7
Australian Capital Territory	60.00	157.00	161.7
Northern Territory (a)	45.40	130.00	199.6

(a) The premiums recorded in the Table include the premiums or levies in respect of the no-fault schemes operating in those jurisdictions.

Source: Information supplied by the Statutory authority in each State and Territory.

4. COSTS OF ADMINISTERING THE THIRD PARTY INSURANCE SYSTEM

4.19 It is difficult to ascertain the costs of administering the compulsory third party insurance system. Legal and other costs are incurred, for example, in investigating the causes of road accidents and in conducting litigation to resolve compensation claims. It is not only necessary to ascertain who was responsible for the accident, but to assess the injuries or other losses sustained by the plaintiff with a view to determining the appropriate level of damages. Moreover, while only a small proportion of common law actions proceed to a full hearing and judgment a significant proportion of the time of courts is taken up with road accident cases. Additional costs of the system include the administrative expenses of third party insurers, for example, in collecting premiums and paying benefits.

Legal Costs and Disbursements

4.20 Some bodies have made estimates of the legal costs and disbursements incurred in common law negligence actions under the compulsory third party insurance system. The Woodhouse Committee, for example, undertook surveys of insurers’ files for this purpose. Surveys were conducted in South Australia, Queensland and Victoria, the relevant information not being available in the files of the GIO in New South Wales. ¹⁴ For the purposes of the survey, “legal costs” included the amount allowed by the insurer for the legal costs and disbursements of the claimant, as well as the insurer’s own legal costs and disbursements. “Disbursements” included loss assessors’ costs and expenses relating to such matters as medical examinations, consultations with expert witnesses and investigation of the accident. The Committee found that, as a percentage of the “net payment” to the claimant (that is, the total payment, less the amount allowed by the insurer for the claimant’s legal costs and disbursements), all legal costs and disbursements amounted to 18.1% in South Australia, 22.8% in Queensland and 26.9% in Victoria. The Committee compared these figures unfavourably with the overall cost of the assessment and distribution of compensation by the Ontario Workmen’s Compensation Board which was said to amount to 7% of premiums. ¹⁵ It may be, however, that the comparison is of limited utility since the Canadian figures refer to costs as a percentage of premiums, rather than net payments to claimants.

4.21 More recently, a Board of Inquiry in Victoria expressed the view in 1978 that the Woodhouse Committee’s estimate of 26.9% of net payments for legal costs and disbursements in Victoria was too high, although the Board acknowledged that adequate statistics had been impossible to obtain. After reviewing insurance records and discussing the matter with experienced solicitors, the Board concluded that it was necessary to distinguish between large and small claims, in estimating the proportion of legal costs and disbursements.

“[I]t is clear that on a percentage basis cost results of under 10 per cent of total payout may be achieved once the sum at stake rises above $20,000. However since the vast majority (more than 90 per cent) of cases involve less than $10,000, it may safely be said that in that majority, legal expenses can exceed 20 per cent of total payout.” ¹⁶

None of these estimates includes the costs of court administration, such as the salaries of judges and court officials.

Overall Costs of the System

4.22 In New South Wales no precise information is readily available in the overall costs of the compulsory third party insurance system. The GIO does have certain information concerning the break up of claims paid, but it is insufficient to enable an accurate assessment to be made. Further work is therefore required in this area.

4.23 For comparative purposes reference can be made to the estimate of the Pearson Royal Commission in the United Kingdom that the “operating costs of the tort system” amounted to about 85% of the value of tort compensation payments or 45% of the total of compensation and operating costs. ¹⁷ Two-fifths of the “operating costs” were accounted for by the administrative expenses of insurers, while the other three-fifths were roughly broken up between commissions, claimants’ legal fees and profits.

5. PROPORTION OF ROAD ACCIDENT VICTIMS RECOVERING COMPENSATION

4.24 There is no information available as to the proportion of road accident victims in New South Wales who actually recover compensation through the third party insurance system. The survey conducted by the Pearson Royal Commission in the United Kingdom indicated that 25% of road accident victims surveyed received compensation through the common law (tort) system, ¹⁸ although the Commission suggested that the proportion of people suffering serious injuries who receive common law damages might be significantly higher. If the apparently low percentage receiving compensation in Britain reflects the situation in New South Wales, there would be a number of contributing factors. Some victims have no common law claim because they cannot prove fault. Other victims may not institute or carry through proceedings because of fear of litigation, concern about costs or ignorance of their entitlement. Some may receive adequate compensation from other sources, such as sick pay or workers’ compensation, or not consider their injuries sufficiently serious to warrant making a claim.

III. WORK-RELATED ACCIDENTS AND DISEASES

A. Extent of Death and Injury

4.25 Itisimpossibletoascertainpreciselythenumberofpeoplewhoarekilledorinjuredat work, or who suffer from work-related disease in New South Wales. Detailed information is compiled by the Workers’ Compensation Commission, but this information inevitably is not altogether complete and may unwittingly give a false impression in certain respects. First, the statistics cover only persons within the scope of the Workers’ Compensation Act. As has been explained (para.3.36, above) this excludes most self-employed persons, who constitute approximately 13% of the New South Wales work force. A substantial group of people may therefore suffer work-related injuries yet not be included in the workers’ compensation statistics. Secondly, some persons entitled to claim may not do so and their injuries will not be recorded. Thirdly, some work-related diseases may not become apparent until many years after exposure to the risk, and therefore may not be attributed to working conditions. Finally, workers’ compensation statistics are over-inclusive in that they cover injuries that might not necessarily be regarded, in ordinary language, as “work-related”. For example, injuries sustained by a worker during a journey between home and the place of employment are compensable under the Workers’ Compensation Act and therefore must be reported. Similarly, injuries suffered by a worker while temporarily absent from the place of employment during a break are usually covered.

4.26 Not withstanding these qualifications, the statistics make it clear that work can be a very dangerous activity. In 1979-1980, as Table 4.5 shows, 320 people died and over 133,000 were incapacitated for more than three days as the result of work-related injuries or diseases. Of the 133,461 reported cases of death or incapacity for three days or more in that year, 10.3% were classified as “Injury by disease”, 8.1% were accidental injuries sustained on journeys and 81.6% were classified as accidental injuries suffered in the course of the worker’s employment. ¹⁹

4.27 The evidence supports the conclusion that on average work-related injuries tend to be less serious than injuries caused by road accidents. In New South Wales one person is killed in road accidents for approximately every 30 who are injured. As Table 4.5 indicates, however, for every four hundred workers incapacitated for at least three days in work-related accidents only one is killed. Of course the total numbers of deaths and serious injuries caused by work-related accidents are high.

Table 4.5: Workers’ Compensation: Number of Deaths and Injuries (including diseases) Reported to the Workers’ Compensation Commission

New South Wales 1978-1980

	1978	1979	1980
Death	333	341	320
Incapacity for 3 days or more	124,791	125,540	133,141
Incapacity for less than 3 days	47,225	50,215	52,361
Minor Injuries - medical treatment	71,980	74,115	76,915
Total	244,329	250,210	262,737

Source: Workers’ Compensation Statistics - New South Wales, Years ended 30 June 1978, 1979 and 1980, Table XIV.

B. The Workers’ Compensation Insurance System

1. PREMIUMS

4.28 In assessing the premiums paid by employers under the workers’ compensation system in New South Wales, it is necessary to take account both of premiums paid to licensed insurers and the estimated premiums required to insure the 42 licensed self-insurers. Table 4.6 shows that the cost of the system on this basis was $413 million in 1979-1980. The reductions in premiums paid to licensed insurers in recent years in the face of inflation has been due to widespread discounting below officially recommended premium rates, a state of affairs that is unlikely to continue. The GIO advises that discounting in relation to workers’ compensation premiums has been severely curtailed in recent times.

Table 4.6: Workers’ Compensation: Premiums ^(a) to Licensed Insurers and Estimated Premiums ^(a) to Insure Licensed Self-Insurers

New South Wales 1978-1980

Year ended 30 June	1978	1979	1980
	$ million
Premiums to licensed insurers	312.3	311.6	300.6
Estimated premiums to insure licensed self-insurers	85.5	102.8	105.4
Other (b)	6.1	5.7	7.1
Total	403.9	420.1	413.0

(a) The premiums paid or estimated are for indemnity in respect of both workers’ compensation liability and common law liability to pay damages.

(b) For example, contributions under the Workers’ Compensation (Dust Diseases) Act 1942.

Source: Annual Reports of the Workers’ Compensation Commission of New South Wales.

2. CLAIMS PAID

4.29 The total compensation paid by insurers and self-insurers under the Workers’ Compensation Act has increased rapidly from $91.2 million in 1974-1975, to $188.4 million in 1977-1978 and $286.5 million in 1979-1980. ²⁰ All but a small proportion of the total compensation ($278.2 million in 1979-1980) is paid in respect of death, or incapacity for three days or more. A further break down of the compensation paid for death or incapacity for three days or more is given in Table 4.7. This shows that a relatively small proportion of compensation is paid in respect of fatal cases, but that $103.2 million (37.1%) is paid in the form of lump sums. Lump sum payments include redemptions approved by the Commission ($71 million in 1979-1980), payments for scheduled injuries under s.16 (para.3.43, above) and certain other payments.

Table 4.7: Workers’ Compensation: Compensation Paid for Cases Resulting in Death or Incapacity for Three Days or More

New South Wales 1979-1980

Type of Payment	$ million
Fatal Cases	5.9
Disability Cases compensated by a lump sum settlement	103.2
Weekly payments to workers and dependants	125.6
Medical and hospital expenses	42.7
Other	0.7
Total	278.2

Source: Workers’ Compensation Statistics, New South Wales, Year Ended 30 June 1980 (Catalogue No. 6301.1) Table 15.

4.30 In addition to the total compensation recorded in para.4.29, an amount of $35.0 million was paid by licensed insurers and self-insurers in 1979-1980 in verdicts and settlements under the common law, including legal costs in such cases. ²¹

3. THE FINANCIAL POSITION OF INSURERS

4.31 Reference was made in Section 2 to the high loss ratios incurred in recent times by licensed workers’ compensation insurers and to the disparity between the loss ratios recommended by the Insurance Premiums Committee and the loss ratios actually experienced by insurers as the result of discounting (paras.2.14-2.16, above). However, the figures indicate not only that loss ratios have been high but that in the last two years for which information is available claims paid have been approaching or even exceeding premiums collected. This appears from Table 4.8 which was compiled from reports by licensed insurers to the Insurance Premiums Committee and deals with the position from 1977 to 1981. The figures in the Table exclude self-insurers and “exempt business” (mainly government related) of licensed insurers and is therefore not a complete picture. Nonetheless, it indicates a rapid growth in claims paid (nearly doubling in four years) and shows that premiums collected actually declined until 1981 when the trend was reversed. These figures suggest that, either the heavy discounting of premiums experienced in recent years will end (as appears to be occurring in New South Wales), or the basis on which workers’ compensation insurance is conducted will change. It has been recommended by a Board of Inquiry in Victoria, for example, that workers’ compensation insurance should be conducted in a pay-as-you-go rather than on a fully funded basis. ²²

Table 4.8: Workers’ Compensation: Notional Accounts ^a Prepared from Returns of Licensed Insurers

New South Wales 1977-1981

Year ended 30 June	Premiums Collected	Earned Premiums	Claims Paid	Claims incurred	Expenses	Loss Ratio
	$ million					%
1977	275.25	289.18	150.23	226.28	58.7	78.2
1978	260.39	265.14	181.83	195.47	64.0	73.7
1979	234.77	245.02	208.49	212.29	63.3	86.6
1980	215.94	223.51	234.94	319.97	56.7	143.2
1981	281.53	255.41	293.72	421.89	65.2	165.1

(a) This set of notional accounts is prepared from returns supplied by licensed insurers to the Insurance Premiums Committee. The figures in the Table are derived from these returns, except the earned premium figure which is an estimate made as if all insurers were one company.

Source: R. Sawkins, Analyses of the Statistics Available Under the New South Wales Workers’ Compensation Rates of Premium Scheme (Workers’ Compensation Commission, 1982).

4. ADMINISTRATIVE COSTS OF THE SYSTEM

4.32 Different views have been expressed as to the administrative costs of the workers’ compensation system. The Woodhouse Committee calculated that in New South Wales in 1971- 1972 management expenses and commissions amounted to 37.3% of compensation paid through workers’ compensation and common law claims against employers. When legal costs and disbursements and the charges incurred by insurers in relation to the investigation and settlement of claims were taken into account, the expense of delivering one dollar in benefits in New South Wales was 47 cents. ²³ More recently a South Australian committee has estimated that the total costs of administration of the workers’ compensation system in New South Wales in 1976- 1977 were 20.4% of premiums, 25.6% of claims incurred (including allowance for outstanding claims) and 37.7% of claims paid. Thus the committee concluded that, although the Woodhouse Committee estimate appeared too high, it was still costing 37.7 cents in New South Wales to deliver one dollar in compensation to the claimant. ²⁴

IV. OTHER ACCIDENTS

A. Extent of Death and Injury

4.33 Statistics relating to accidental deaths and injuries occurring otherwise than on the roads or at work are sketchy and often unreliable. The evidence tends to support the conclusion that as many deaths and injuries fall into the third category as into the other two combined.

4.34 An Australia-wide survey conducted by the Australian Bureau of Statistics in 1977-1978 found that over half the injuries sustained by persons aged 15 and over were not connected with road or work-related accidents. For the purposes of the survey, an “injury” was defined as any occurrence within two weeks of the interview which resulted in hospital or medical treatment or a stay in bed. The broad findings of the survey are shown in Table 4.9.

Table 4.9: Accidental Injury: Type of Accident Australia 1977-1978

	Under 15			15 or Over
Type	M	F	Total	M	F	Total
	‘000			‘000
Work	-	-	(-%)	44.6	7.9	52.5 (31.3%)
Road	4.0	2.7	6.7 (9.5%)	11.9	5.9	17.9 (10.7%)
Other	35.0	28.6	63.6 (90.5%)	59.1	38.4	97.4 (58.0%)

Source: Australian Health Survey 1977-1978 Australian Bureau of Statistics, Catalogue No.4313-0, Table 2.

These findings are not inconsistent with the surveys on the causes of quadriplegia referred to in Table 4.1.

4.35 Rather similar findings were made in the course of the personal injury survey conducted by the Pearson Royal Commission in the United Kingdom. The survey indicated that 66.9% of all accidents occurred neither at work nor on the roads. ²⁵ Care must be taken in applying this figure to New South Wales, but it supports the contention that the problems of compensation for this class of accident victims may be a serious one.

B. Sources of Compensation

4.36 It seems likely that very few people injured in “other accidents” obtain compensation through the common law negligence action. The survey conducted by the Pearson Royal Commission found that only 1.5% of victims of accidents occurring otherwise than at work or on the roads received common law damages or settlements. ²⁶ If this finding applies to New South Wales the main sources of compensation for such victims would therefore seem to be sickness benefits and invalid pensions paid by the Commonwealth, sick pay from employers and health insurance or subsidised health care. Very little statistical information is readily available on how much is paid from these sources to accident victims, although it will be necessary to collect further information during the course of the Inquiry. Private insurance also may be a significant source of compensation for victims of the third class of accidents. However, only a small volume of personal accident insurance is taken out in New South Wales, premiums in 1979-1980 amounting to $28.7 million and claims paid to $15.9 million. ²⁷

FOOTNOTES

1. H. Luntz, “The Role of Compensation in Health and Safety at Work” [1981] Journal of Industrial Relations 383.

2. Traffic Accident Research Unit, Road Traffic Crashes in New South Wales -Year ended 31st December 1980, p.21.

3. Australian Bureau of Statistics, Road Traffic Accidents Involving Casualties (Admissions to Hospitals) Australia (March Quarter 1981), Cat. No.9405-0.

4. Traffic Accident Research Unit, n.2 above, Summary.

5. Ibid., pp.13-14, 23-24.

6. Australian Bureau of Statistics, n.3 above, p.3

7. Traffic Accident Research Unit, n.2 above, p.9.

8. Ibid., p.21.

9. World Road Statistics 1975-1979, (International Road Federation, New York 1980).

10. The studies from which Table 4.1 was compiled were as follows: L Guttman, Spinal Cord Injuries: Comprehensive Management and Research (Blackwell Scientific Publication, Oxford 1973); N.G. Sutton, Injuries of the Spinal Cord: The Management of Paraplegia and Tetraplegia (Butterworths, London 1973); Survey Report of Paraplegics and Quadriplegics in New South Wales, (The Paraplegic and Quadriplegic Association of NSW); A. Bunbury, Survey of the Rehabilitation of Spinal Damage Patients Treated at the Austin Hospital, Melbourne, January 1968 - December 1972 (Melbourne, 1975).

11. See, for example, Annual Report of the Government Insurance Office of New South Wales for the Year Ending 30 June 1981, p.6.

12. Ibid.

13. Motor Vehicles (Third Party Insurance) Act 1942 (NSW), ss.33-33E.

14. The insurers surveyed and the methodology employed in the study are discussed in the Woodhouse Report, vol.3, Part 4.

15. Woodhouse Report, vol.1, para.153.

16. Report of the Board of Inquiry into Motor Vehicle Accident Compensation in Victoria (Vic. Govt. Printer, 1978) (the “Minogue Inquiry”), para.8.15. The report refers to the fact that when claims are settled payment is often made to the plaintiff on an “all-in basis”. This renders it impossible to ascertain the proportion of the lump sum attributable to legal costs and disbursements.

17. Pearson Report, para.83.

18. Ibid., para.74.

19. Workers’ Compensation Statistics, New South Wales, year ended 30 June 1980 (Catalogue No. 6301.1),Table 1.

20. Ibid., Table 14. The figures relate to compensation paid in a particular year and therefore include payments in respect of cases reported in earlier years, but exclude payments yet to be made on claims not finalised by the end of the year. Accordingly, the compensation payments during a year cannot be related to the new compensation cases reported in that year.

21. Ibid., Table 15.

22. Report of the Board of Inquiry into Workers’ Compensation (Vic Govt. Printer, 1977) (Judge C.W. Harris) p.12.

23. Woodhouse Report, paras.200-203, vol.3, pp.139-140.

24. Report of the Tripartite Committee on the Rehabilitation and Compensation of Persons Injured at Work (SA, 1980), p.41.

25. Pearson Report, Table 1.

26. Ibid., para.78, vol.2, Table 14.

27. Australian Bureau of Statistics, General Insurance Australia 1978-1979 and 1979-1980, Catalogue No. 5620.0, Tables 3, 4.