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Safeguard OSH Solutions - Thomson Reuters

Safeguard OSH Solutions - Thomson Reuters

Alert24 - Safeguard Update

Finding effective incentives

Finding effective incentives
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New Zealand

ACC incentive programmes have only a limited impact on health and safety outcomes, with the widely used WSMP system producing no discernible benefits, Dr John Wren, AUT adjunct research fellow told a seminar at Victoria University's Industrial Relations Centre.

Discussing the role of incentives in New Zealand's post-Taskforce safety climate, Wren said that while ACC's Accredited Employer Programme has been associated with fewer and less severe work-related injuries, the audit-based Workplace Safety Management Practices (WSMP) programme appears to have had no effect.

While the ratio between paid claims and levies has fallen significantly for WSMP employers since 2009, this trend has been closely mirrored by companies of comparable size who do not belong to the scheme. Companies which are ineligible for WSMP membership - those paying annual levies of less than $10,000 - have a much higher claims-to-levies ratio, but non-member companies in the scheme's target group of medium to large employers have consistently recorded ratios that are within a few percentage points of those for WSMP employers.

The statistics also show that higher levels of WSMP accreditation are not necessarily associated with reduced claims costs, with the claims/levies ratios for primary, secondary and tertiary level companies showing little difference from one another, or from those of similar sized companies that were not part of the discount scheme.

The discounts have also proved less popular with employers than may have been expected, with significant numbers deciding to leave the programme when their two-yearly audits fell due.

"Of the 2550 participants in 2007/08, more than 1000 (40%) were no longer in the programme in 2011/12," Wren says. "Slightly less than half of this reduction appears to be due to employers ceasing business or merging, and the remainder apparently failed to reapply. Why would an employer who has previously met the requirements to join WSMP opt out of the programme and forego their levy discount?"

The Accredited Employers Programme, which allows large companies (generally those paying annual levies of $250,000-plus) to take responsibility for their own injury management, has been more successful. A 2010 study found that both the rate and average size of claims for accredited employers were lower than for other employers.

"Their overall costs per average entitlement claim were around 15% lower than non-accredited employers, while the rate of claims for non-accredited employers was 14% higher during the 2000 to 2009 study period," Wren said.

The only concern was that the study showed claims rates for non-accredited employers were improving, while those for AEP companies had remained relatively static.

Economic incentives to encourage health and safety best practice are widely used around the world, Wren said, but if the incentives ACC offers either don't work, or provide discounts that are higher than the benefits achieved, the scheme may be vulnerable to an "actuarial risk", with mispriced premiums causing losses.

It is, however, difficult to determine the health and safety impact of New Zealand's economic incentive schemes, he said, because the small numbers involved in the various initiatives make it "virtually impossible" for researchers to establish efficacy in any robust way.

"New Zealand research on effectiveness is essentially non-existent. The available evidence suggests that participants in AEP are safer than non-AEP companies, but this could be because of a large number of reasons unrelated to the economic incentive."

Wren outlined the findings of a major review by the European Agency for Safety and Health at Work, which decided that, while the effectiveness of economic incentives in Europe had been mixed, there was a strong policy argument in favour of their continued use.

"The two main types of incentive used in Europe are insurance strategies, similar to those provided by ACC, and tax or funding schemes, which offer one-off rebates or grants for employers who invest in OHS in particular ways - such as buying certain types of safety equipment - or who meet specific performance targets."

The review identified seven success factors for economic incentive programmes:

  • Incentives should both reward past OHS successes and recognise efforts to reduce future injuries and ill health;
  • Enterprises of all sizes should be eligible for the incentives, with SMEs having particular needs;
  • Incentives should be high enough to motivate employers to participate;
  • There should be a clear and prompt association between implementation of the prevention activities and the financial reward;
  • Criteria should be clearly defined, easy to use, and not create an administrative burden for either party;
  • Insurance or tax-based incentives with clearly defined criteria are the best ways to target large numbers of employers;
  • Subsidy schemes are useful to promote innovative solutions in specific areas.

"Insurance-related economic incentives are an effective way to motivate organisations to invest in OHS," Wren said, "however they should be regarded as a single strategy within a group of initiatives, including tax incentives and funding schemes."

People Mentioned:
John Wren
Organisations Mentioned:
ACC; European Agency for Safety and Health at Work
Reference No:

From Alert24 - Safeguard Update

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