Insurance industry outlook

by Resolve Editor Deb Eccleston

The rise of Worker to Worker claims is an emerging challenge for the insurance industry.

Chubb Senior Casualty Underwriter Selous Nyakunu spoke about the issue of Worker to Worker (W2W) claims involving sub-contractors or labour hire employees sustaining injury at a work site.

These sites are controlled by a principal or “host” employer who holds Public Liability insurance, and the worker will obtain statutory workers' compensation benefits from their employer’s insurer.

Mr Nyakunu (pictured right) said looking at Chubb’s portfolio, out of the $1.7 billion in liability claims reported in 2021, 10 percent were from injury to contractors and labour hire personnel.  

“Most of these injuries are happening to contractors or labour hire personnel – mostly delivery drivers who are going to another site and getting injured,” he said.

“In most cases they are delivering things onsite, they trip and fall, and it comes back to us as a claim – it’s those ‘silent’ Worker to Worker claims that we’re struggling to deal with,” he said. 

“Most of these claims have been from construction, but we're seeing them coming from retail property and business services and a lot of them are coming from shopping centres.”

Preference for labour hire

Over the last 20 years, the labour hire industry has grown due to the increased flexibility and reduced employment costs it provides employers. In these arrangements, while the worker works at a site under the direction of the principal/host employer, the labour hire company has the direct contractual or employment relationship with the employee.

It’s estimated over 25 percent of Australian workplaces use labour hire firms, and more than 1,000 labour hire firms operate throughout the country, 40 percent of which are based in New South Wales.

Labour hire claims, which are less defensible than subcontractor W2W claims, continue to rise according to Mr Nyakunu.

He attributed this rise to five factors:

• Quality of training (less than three hours vs six hours for full-time employees).
• Inexperience and knowledge of tasks and hazards.
• Outsourcing of higher risk tasks (more labour intensive, repetitive, longer hours).
• Lack of active participation in OH&S/HSE consultative forums.
• Poor self-regulation (Queensland now regulates labour hire agencies).

Mr Nyakunu said the challenge with W2W claims was the longer timeframe involved and the resulting inflation. While a typical injury claim would take about two years from start to finish, W2W claims could take an average of five to eight years.

The average W2W paid claim is currently $260,000. Based on claims inflation, the average claim for a policy written today, if paid in five years, is expected to be about $500,000.

“What are we doing as insurers is looking at amending the language we are using in the deductibles and increasing the number of deductibles we apply on most of these claims,” Mr Nyakunu said.

“We’re also changing our appetite, looking at occupations we used to write and taking a step back or maybe increasing the premiums on those.

“The way forward for us is that we encourage early investigations in most of these claims and also encourage tighter insurance.”

Compensation imbalance

In a side-by-side comparison of W2W and Public Liability claims, Mr Nyakunu referred to the case of Robert Wayne Swell v Millennium Ltd (W2W) and Francesca Quinlivan v HT Cleaning Services Pty Ltd (Public Liability). 

In Robert Wayne Swell v Millennium Ltd the Plaintiff, employed by a subcontractor engaged by the Insured, slipped down a gravel bank working at a Western Australia gold mine suffering arm and shoulder injuries. After five years duration, the plaintiff was awarded $800,000 comprising $464,000 in damages to the Plaintiff and $336,000 in workers’ compensation recovery (legal costs totalled $67,500).

In Francesca Quinlivan v HT Cleaning Services Pty Ltd the Plaintiff tripped over a mat that had been folded over by the Insured’s cleaning staff at a Western Australian shopping centre, suffering injuries to her left hand and wrist. While the duration of the case was far shorter – under two years – the Plaintiff was awarded $30,000. Her legal fees totalled $23,000.

In almost all Australian jurisdictions, the injured worker will obtain greater damages by claiming against the principal/host employer, as opposed to their own employer.

“So the challenge is the process is taking forever so there’s a high cost of recovery and larger duration, whereas in a normal public liability claim it’s shorter, so you would settle for less,” he said.

Photo credit: AILA 2024 Conference photos supplied warringtonphotography.com.