Welcome to the Annual Report

Welcome to the Annual Report

Annual Report 2015

Insurance Commission

of Western Australia

This version of the Annual Report is provided in Word to comply with accessibility requirements. View the PDF version of the report to view images and tables removed from this version.

Welcome to the Annual Report

This report describes the functions and operations of the Insurance Commission of Western Australia (Insurance Commission), shows how the organisation performedand presents the audited financial statements and performance indicators for the financial year ended 30 June 2015[1].

This report and previous annual reports are available on the Insurance Commission’swebsite:icwa.wa.gov.au.

On request, this report canbe made available in alternative formats.

Statement of Compliance

Hon Dr Mike Nahan MLA


In accordance with section 63 of the Financial Management Act 2006, we hereby submit for your information and presentation to the Parliament of Western Australia the Annual Report of the Insurance Commission of Western Australia for the financial year ended 30 June 2015.

The Annual Report has been prepared in accordance with the provisions of the Financial Management Act2006, the Insurance Commission of Western Australia Act 1986, and a resolution of the Board of Commissioners of the Insurance Commission of Western Australia, passed on 14 September 2015.

Frank Cooper


14 September 2015

Rod Whithear


14 September 2015

Table of Contents


1.1Chairman’s Report

1.2Chief Executive’s Report

1.3Performance Highlights


2.1Who We Are

2.2What We Do

2.3Our Approach

2.4Operational Structure

2.5Governance Framework

2.6Performance Management Framework


3.1Insurance Commission

3.2Compulsory Third Party Insurance



3.5Fraud Investigations

4.Significant Issues

5.Financial Statements

5.1Statements of Compliance

5.2Financial Statements Index

6.Disclosures and Legal Compliance

6.1Ministerial Directions

6.2Other Financial Disclosures

6.3Governance Disclosures



1.1Chairman’s Report

On behalf of the Insurance Commission’s Board of Commissioners (the Board), I am delighted to present the Annual Report for the financial year ended 30 June 2015.

The Insurance Commission, excluding the RiskCover Fund that it manages on behalf of the Government of Western Australia (Government), reports a profit after tax of $193.5million for 2015. This compares favourably with a profit after tax of $76 million for 2014.

Catastrophic Motor Vehicle Injury Insurance

The Insurance Commission engaged extensively with motorists and the disability sector during the year to seek support for no-faultmotor vehicle catastrophic injury insurance. The majority of responses to the Green Paper issued by the Government supported the expansion of the insurance offered by the Insurance Commission. As a result of this feedback, the Government decided that expanded motor vehicle injury insurance will provide care and support to all people catastrophically injured in motor vehicle crashes in our State from 1 July 2016.

Government Dividend and Taxation

The Board’s Dividend Policy and the Insurance Commission of Western Australia Act 1986 balances the Insurance Commission’s objective of delivering efficient and equitable insurance services to Western Australian motorists while providing a basis to deliver an appropriate dividend to Government.

It is pleasing to report that in 2015, the Insurance Commission paid a final dividend of
$16.2 million to Government for the 2014 year and an interim dividend of
$18.9 million for the 2015 year.

The healthy return delivered by the Insurance Commission to the taxpayer on its investment fund means that tax payable to the Government for 2015 returns another $35.8 million. The Insurance Commission also paid $58 million in insurance duty to Government during 2015.

Bell Group Recoveries

I had hoped to report this year on the distribution of the Bell settlement sum of approximately $1.7 billion between creditors.However an agreement could not be reached between those creditors. The extreme positions put forward by some parties createsthe risk of further decades of litigation being required.

To provide a way forward without these major delays in distribution of funds to creditors, the Hon Dr Mike Nahan MLA introduced legislation in May 2015. The Bell Group Companies (Finalisation of Matters and Distribution of Proceeds) Bill 2015 passed the Lower House in June and was introduced into the Upper House in August 2015. The Insurance Commission has contractual and statutory rights to pursue claims up to $1.2 billion of the Bell Group recoveries. However, this would take years through the Courts to achieve. The Bill offers the opportunity for a faster path to resolution for creditors, including the Insurance Commission.


I would like to thank my fellow Commissioners, the Chief Executive and his Executive Team and staff for their ongoing dedication throughout 2015. This group of people continually deliver important work on behalf of Government and our community, and it is appropriate that their commitment is properly recognised here.

The year ahead looks to deliver an investment return of a scale lower than the last three years. We have further work to do to ensure our assets are sufficiently diversified to offset insurance liabilities, and that the insurance divisions are not reliant on investment returns to break even.

I look forward to working with the Insurance Commission on the challenges of next year, which will be the 90th anniversary of its foundation toprovide insurance services to miners in the goldfields of Kalgoorlie, Western Australia.

Frank Cooper


1.2Chief Executive’s Report

The Insurance Commission and RiskCover received approximately 19,000 insurance claims and paid approximately $700 million to injured people and Government agencies during 2015 and incurred an additional $693 million in future claims expenses.

The combined Insurance Commission and the RiskCover Fund generated more than
$1.2 billion in revenue and earnings in 2015. The Insurance Commission’s profit before tax was $265.8 million for 2015, which was better than budget by $109.1 million. This result was higher than the Insurance Commission’s profit before tax of $99.5 million in 2014 but much lower than the result of $424.1 million in 2013.

Investment returns rather than insurance operations again drove the positive financial performance for the year, with a total investment return achieved for 2015 of 9.7% or $402.3 million. This is the third consecutive year we have been able to deliver a total investment return at about or above 10%, with returns achieved in 2014 of 10.5% or $434.1 million, and in 2013 of 14.9% or $480.7 million. The Insurance Commission’s investment return over the last three years totals 39.3%.These very positive results obviously help the Insurance Commission meet the financial demands its insurance claims present. The Insurance Commission now holds $4.7 billion in total assets (including receivables) of which $4.4 billion are investment assets.

Looking ahead, it is difficult to be confident the Insurance Commission can maintain investment returns of that order. Public commentary about interest rates and future investment returns increasinglyuses the phrase ‘lower for longer’ so frequently this term is now common parlance.

As we prepare this Annual Report, risks associated with investments made to offset insurance liabilities have been realised.August results took $$90.5 million out of our investments for the Insurance Commission. Had this decline occurred prior to 30 June 2015, the Insurance Commission’s profit before tax would have decreased by 34% down to $175.3 million and RiskCover’s profit would have decreased by 24% down to $76.5 million.

We therefore must continue positioning our main insurance lines to be supported more strongly from premium revenue and improved operational efficiencies to reduce the reliance on these investment returns to break even or make a profit.

Compulsory Third Party Insurance

Our Compulsory Third Party(CTP) Division made an underwriting loss of $15.1 million during 2015. This result was a significant improvement compared to the $228.8 million loss for 2014, butcame up just short of the 2015 budget by $5 million. This is the 15th time in
19 years that the Third Party Insurance Fund (TPIF) has recorded an underwriting loss, albeit a small one last year.

In 2015, we received almost $525 million in revenue from CTP premium payments by motorists for over 2.7 million insured vehicles. This was less than the forecast premium revenue of $534 million as Western Australia experienced some slowing demand for new cars. Despite that lower growth, the fact that Western Australia has far more vehicles than it has licensed drivers, helps keep our CTP premium lower than elsewhere.

The Insurance Commission paid $453.1 million to people injured in motor vehicle crashes during 2015, bringing the total paid in the last three years to $1.3 billion. Claims costs for catastrophic injury claims continue to rise due to increases in wage growth of medical and allied health services. In addition to claims payments, future claims expenses of $470.3 million were incurred during 2015.

Cost pressures for the Insurance Commission will grow next year when motor vehicle injury insurance is expanded to cover all people catastrophically injured in crashes in Western Australia. Expanded insurance cover will commence from 1 July 2016. This follows an extensive community consultation program in which the majority of respondents supported increased cover to provide long-term care to an estimated additional 44 people each year. We are currently working with Government and engaging with the disability service sector on the design, development and implementation phases of the scheme.

The cost of long-term care and supportfor people catastrophically injured can be as high as $10 million over their lifetime, and has averaged $4 million. To fund the additional costs of care and support for these people, annual CTP premium rates will rise by $99 per family car from 1 July 2016.

Even after that price increase, wewill continue to deliver one of the most affordable CTP insurance schemes in Australia for motorists. Despite thelift in the annual cost of CTP insurance (including GST and duty) of$303up to $415 after 1 July 2016, CTP in Western Australiawill still beconsiderably cheaper than the CTP premium rates in South Australia ($488), Victoria ($494), the Northern Territory ($544), the Australian Capital Territory ($600) and New South Wales ($614).


The RiskCover Division of the Insurance Commission achieved its first positive underwriting result in six years, $21.6 million ahead of costs in 2015. This result was $33.9 million better than budget and was due to a reduction in net claims incurred. Fortunately for the RiskCover Fund and the people working in insured agencies, there were 2,000 fewer new insurance claims received in 2015 compared to the previous year. We hope this is the start of a trend, but do not know if that will prove to be the case.

While a reduction in new claims received by RiskCover in 2015 was a positive result, it was not matched by a corresponding reduction in workers’ compensation claims costs. Costs of claims in some workers’ compensation categories continue to rise well above 2013 and 2014 levels. The cost of claims in 2015 is largely a consequence of 19% of claims contributing to 82% of the compensation costs.

The RiskCover profit for 2015 was $100.5 million, which was a $60 million improvement from 2014. This positive result, and the strong investment return on RiskCover Funds of $78.9 million in 2015 allowed RiskCover to return approximately $54.5million to agencies associated with claims incurrent and prior years.Theunderwriting result (excluding investment performance) is due to fewer property and some reduction in workers’ compensation insurance claims received. In past years, variability in claims experience and investment returns resulted in significant variations in agency insurance costs from year to year. We will work to develop a financial model that reduces these variations.

RiskCover purchases reinsurance to protect Government agencies and the community against large or catastrophic losses that might affect their financial security. During 2015, RiskCover used its purchasing power and favourable conditions in the reinsurance market to acquire broader cover for 2015-16 at more competitive prices than 2014-15. Cover has been doubled for some insurance lines such as liability and terrorism.Cyber risk reinsurance has been purchased for Government agencies for the first time due to the increasing number and impact of these events globally.

Administration Costs

The Insurance Commission’s internally controlled administration costs (excluding Bell Recovery costs) decreased $1.1 million in 2015 to $53 million, compared to $54.1 million in 2014. Insurance Commission administration costs have decreased by $7.9 million or 13% since the end of the 2011 Financial Year.

Our People

I would like to thank our staff, the Board and our Management Team for their hard work throughout 2015. Delivering these positive financial results in a tight fiscal environment is a great outcome.

We continue to focus our attention closely on deliveringefficient and equitable insurance services to Western Australian (WA) motorists and public authorities. During the year, we delivered Projects to improve our service delivery through automated processing of claims documents and invoices, and enhanced data capture and communication processes. We are also making some structural changes to ensure the Insurance Commission is best positioned to meet our customers’ needs.

During 2015, we established a working group to help us achieve our objective of being an organisation that strategically identifies, supports, promotes and manages talent. I look forward to the group assisting us making progress towards our diversity targets and promoting the organisation as a ‘great place to work’.

As we look to the year ahead, the Insurance Commission will continue its pursuit of its rights and recovery of costs under the Bell Recovery through allavailable legal and statutory means. We welcome the action taken by the Treasurer introducing the Bell Bill, and the passage of that Bill into law, to potentially bring an end to what we think might be Australia’s longest running litigation, and the prospect it holds to finally return money to the major creditors after more than 25 years.

Rod Whithear


1.3Performance Highlights

2015 highlights

Insurance Claims (including RiskCover)

Total Claims - 19,068

Total Paid - $695.8 million

Contribution to the State

Net Debt Reduction - $395.4 million

Dividends - $35.1 million

Tax Payable - $35.8 million

Insurance Duty $58 million


Total Profit Before Tax - $265.8 million

Investment Performance - $402.3 million

Underwriting Loss- $50.3 million

Total Value of Assets -$4.7 billion

Premium Revenue - $857 million (including RiskCover)


Total InsuredVehicles - 2,767,428

Total Government Agencies Covered - 168

Total Government Employees Covered -122,373

No-fault Insurance - working towards the introduction of no-fault motor vehicle catastrophic injury insurance in WA

Start date 1 July 2016 - covers all people catastrophically injured in crashes

Public Submissions - 2,395

Website Traffic -5,300+ Hits and downloads of consultation documents



This version of the Annual Report does not show financial tables to comply with accessibility requirements. The financial tables can be viewed in the PDF version of this report.



This version of the Annual Report does not show financial tables to comply with accessibility requirements. The financial tables can be viewed in the PDF version of this report.


2.1Who We Are

The Insurance Commission is a Government Trading Enterprise, which is a statutory corporation owned by the Government of Western Australia.

Our enabling legislation is the Insurance Commission of Western Australia Act 1986 (the Act).

The Insurance Commission administers the Motor Vehicle (Third Party Insurance) Act 1943.

There is a range of other legislation that is applicable to the Insurance Commission in the conduct of its business, with which the Insurance Commissioncomplies.

The responsible Minister is the Hon Dr Mike Nahan MLA, Treasurer, Minister for Energy, Citizenship and Multicultural Interests.

2.2What We Do

The Insurance Commission is primarily responsible for:

  • administering, underwriting and managing Western Australia’s (WA) Compulsory Third Party(CTP) insurance scheme for motor vehicle personal injuries;
  • managing RiskCover, theself-insurance arrangements on behalf of Government;
  • investing and managing funds to provide assets to meet insurance liabilities; and
  • advising Government about insurance and risk management.

The Insurance Commission manages and arranges underwriting for the following four funds:

  1. Third Party Insurance Fund;
  2. Compensation (Industrial Diseases) Fund;
  3. Insurance Commission General Fund; and
  4. Government Insurance Fund.

The Insurance Commission also manages but does not underwrite the:

  • RiskCover Fund;
  • Employers’ Indemnity Supplementation Fund;
  • Former Police Officers’ Medical Benefit Scheme; and
  • Indian Ocean Territories CTP Scheme(on behalf of the Commonwealth).

2.3Our Approach

Our approach to what we do is reflectedin our vision, mission and core values.


A Government Business Enterprise delivering efficient and equitable insurance services to WA motorists and Government Departments and Authorities.


To provide high quality and efficient:

  • motor vehicle personal injury insurance for WA motorists;
  • self-insurance fund management (RiskCover) for Government’s Departments and Authorities;
  • industrial diseases insurance to the mining sector and management of the Insurance Commission General Fund, Employers’ Indemnity Supplementation Fund and Government Insurance Fund; and
  • advice to the Government on insurance and risk management matters.

Core values

In everything we do, our Core Values are:

  • simplicity;
  • teamwork;
  • accountability;
  • integrity and openness; and
  • respect and compassion.

2.4Operational Structure

The Insurance Commission delivers services through four divisions:

  1. Compulsory Third Party;
  2. RiskCover;
  3. Investments; and
  4. Corporate Services.

2.4.1Compulsory Third Party Insurance

Third Party Insurance Fund

The Insurance Commission is the sole underwriter of Compulsory Third Party (CTP) motor vehicle personal injury insurance in WA. The CTP Division manages the Third Party Insurance Fund (TPIF).