Speech at Second Reading of WICA Bill
Minister of State for Manpower Mr Zaqy Mohamad, Parliament House of Singapore
Rewarding Safer Companies and Better Protection for Employees and Employers
With your permission Mr Speaker, I have asked the Clerk to circulate a handout to illustrate the key changes to the Work Injury Compensation Act to all Members.
Mr Speaker, Sir, on behalf of the Minister for Manpower, I beg to move, “That the Bill be now read a second time”.
A. WICA Framework
A1. Sir, when an employee gets injured at work, he may claim damages under the common law, or claim compensation under the Work Injury Compensation Act (or WICA in short), but not both. Under the common law, the injured employee has to initiate legal actions and prove his employer’s negligence to succeed. The WICA provides a cheaper and quicker alternative for an injured employee to claim work injury compensation.
A2. Under the WICA, the employee does not need to prove the employer’s fault or negligence in order to be compensated. He will be compensated as long as the injury happened in the course of work. This is why we say WICA is a no fault regime. In exchange, the employer’s amount of compensation is capped under the WICA.
WICA has served employees well
A3. WICA has benefited many injured employees. Over the past three years, an average of about 15,000 work injury compensation claims were awarded, with a total pay-out close to $115 million per year for wage and lump sum compensation. All claimants, except 5 on average per year, were compensated by the deadline set by the Ministry. The common reason for non-payment was because the employer was uninsured and faced financial difficulties. In such situations, MOM will assist the injured employees using the Workers’ Fund.
B. Improvements in four key areas
Where WICA can be improved
B1. WICA has served its role of compensating injured workers well, but can be improved further, in four main ways.
B2. First, the aims of MOM’s work injury compensation regime should not be confined to compensation after injury has happened. It should also incentivise employers to prevent injuries from happening in the first place. Our WSH2028 aspiration for Singapore is to be amongst the best in the world in workplace safety and health standards.
B3. Second, some WIC claims still take too long before payout is made. We will speed up and improve claims processing.
B4. Third, we will enhance insurance coverage and benefits for injured employees.
B5. Fourth, we will give greater assurance to employers so that the WICA provides a balanced package of safeguards for both employers and injured employees.
B6. These are substantial changes. So the existing WICA will be repealed and replaced by a new Act, the Work Injury Compensation Act 2019.
C. Align commercial incentive of employers and insurers to injury prevention
C1. Let me explain how the new WICA will influence companies to prevent injuries. In the recommendations of the WSH2028 Tripartite Strategies Committee in April this year, they were convinced that the key in preventing injuries is aligning commercial interests of employers and insurers closer to preventing injuries. In short, we need to make good WSH good for business. More companies will then be self-motivated to prevent injuries. One of the features in the new WICA is designed to influence employers to be more proactive on prevention by making the business impact of injuries more significant, through its effect on premiums.
Greater information transparency to reward safer companies
C2. Information transparency on claims history is essential in influencing employers to be safer. Today, there is no information sharing between insurers of their clients’ past claims records. This has resulted in safer companies subsidising the less safe companies as there is little premium differentiation between these companies. The WSH2028 Tripartite Strategies Committee recommended that MOM facilitates the sharing of WIC claims data with insurers to sharpen the premium differentiation between safer and less safe companies.
C3. Clause 33 of the Bill will require insurers to share policy and claims information with the Commissioner. The relevant data will be made available to all designated insurers approved by the Commissioner. Furthermore, to facilitate more accurate premium pricing, all designated insurers will be able to verify their clients’ declared aggregated workforce size and annual payroll through MOM’s database. Clients’ actual workforce size and payroll data will remain confidential and will not be disclosed to insurers. What the insurers will know is whether their clients’ declarations are consistent or not consistent with MOM’s records, within a certain margin of error.
C4. With greater information transparency, employers with good safety records should be able to enjoy lower premiums. More importantly, less safe employers who are faced with higher premiums will have greater commercial incentive to put in place measures to prevent their employees from getting injured in the first place.
D. Improving processes to ensure expeditious WIC claims processing
D1. Next, we have proposed five amendments which aim to speed up and improve WIC claims processing.
Designated insurers to process WIC claims
D2. First, we will designate insurers to provide WIC insurance under clause 31. These designated insurers will be required to process insured WIC claims in accordance with clauses 36, 44 to 47.
D3. Today, insurers only process WIC claims for temporary incapacity (TI). Fatal and permanent incapacity (PI) claims are processed by the Commissioner. In contrast, insurers are already processing the claims for all other types of insurance, such as life, medical and travel insurance, in Singapore. Other jurisdictions that also adopt the private WIC insurance model, such as certain states in the US and Australia, have also required WIC insurers to process all insured claims. Allowing insurers to process WIC claims can help to speed up claims processing as insurers, who are the payers, need not do duplicative work to verify the documents and evidence obtained by MOM on the claim. Under the current system, having insurers check back with employers, workers and MOM on the claim details can delay processing for up to six weeks.
D4. To ensure the interests of all parties will continue to be protected under this new process, the Ministry will put in place a system of checks and balances. Clauses 31 to 34 allow the Commissioner to impose licensing conditions on designated WIC insurers. The Commissioner may conduct third party audits on insurers to make sure they comply with the Commissioner’s conditions. Any insurer that fails to comply with the Commissioner’s conditions may be subject to administrative financial penalties, or in more serious cases, have their WIC designation suspended or revoked.
D5. Under an insurer-processing regime, employees’ and employers’ interests will continue to be protected in four key ways:
a) First, insurers have to comply with the Commissioner’s protocol on claims admissibility. The grounds of liability for compensation under the new Bill remain the same as that in the existing Act. We will set out guidelines to ensure that insurers do not reject claims which are currently admissible.
b) Second, insurers do not have discretion in determining the compensation amount as it is a fixed formula based on three factors: i) the doctor’s assessment of the extent of incapacity; ii) the worker’s remaining years of working life; and iii) the worker’s average monthly earnings (or AME).
c) Third, in terms of processing, insurers have to meet the processing timelines set by the Commissioner to ensure that injured employees continue to receive their compensation promptly.
d) Finally, any parties that are aggrieved by the insurer’s decision may raise an objection. Objections will continue to be adjudicated by the Commissioner.
Allowing compensation to be based on assessment of current incapacity
D6. Another recommendation to speed up claim processing is to allow compensation to be based on the prevailing state of incapacity that is unlikely to change significantly after the date of assessment of the incapacity (termed “current incapacity” or CI). Today, about 80% of PI claims every year are resolved within 6 months. The remaining 20% take longer to resolve due to the time required for a PI assessment to be made. The PI percentage is one of the factors determining the amount of lump sum compensation. However, delay in settling the compensation means injured employees will receive their compensation later, employers of injured foreign employees will incur higher upkeep and maintenance expenses, as well as increased uncertainty for all parties involved.
D7. We have consulted the WIC medical board members who advised that the extent of incapacity at six months after accident is a close approximation to the eventual state of PI in most cases.
D8. Clause 15 of the Bill and the First Schedule to the Bill allow lump sum compensation to be computed based on the CI assessment that is made at least six months after the date of accident.
D9. This will help to expedite claims payout to the employee or their families for many long-drawn claims. The default expectation is for CI to be assessed as soon as possible after six months from the accident. Nonetheless, doctors will still have the professional discretion to assess for PI at a later date if they believe that the extent of incapacity will change further for more complex injuries.
Compensate based on a multiple of the basic rate of pay
D10. Another cause of delay is disputes over AME. The Ministry receives about 360 AME disputes a year. Such disputes may delay claims processing by up to about 1.5 months.
D11. Currently, the Commissioner uses documentary evidence such as pay slips to compute the employee’s AME for purposes of WICA compensation. If the employee’s pay slip is not available, the Commissioner can compute compensation based on a co-worker’s pay slip. However, there are cases where there is no documentary evidence of the employee’s or the co-workers’ pay slip. Therefore, the First Schedule to the Bill will also empower the Commissioner to compute the employee’s earnings based on a multiple of the employee’s basic rate of pay (called the “derived AME”) if there is no other reliable evidence. The derived AME will be set at the higher end of industry norm. This is to ensure that employees are not disadvantaged due to the absence of reliable evidence to compute the actual AME.
Streamline process to “auto-claim”
D12. We also propose to streamline the claim process to provide for more hassle-free “auto-claim” for fatal and serious injuries. Currently, an employee or his representative needs to submit a WICA claim application for fatal or PI compensation.
D13. To speed up claims processing and reduce the risk of employees being misled or being ignorant of application procedures, clause 35 of the Bill provides that a claim is deemed to be made when the employer first receives notice of the accident. Insurers or the Commissioner will start to process the claims once there is notice of accident, without the employee needing to submit a separate claims application.
D14. Under this regime, employees who do not wish to make a claim under WICA can still opt out at a later stage.
Penalties for non-cooperation in claim process
D15. Delays can also be caused by parties not cooperating with the Commissioner or the designated insurers in the claims process. To avoid such delays, we will make it an offence under clause 50 for parties who fail to comply with the Commissioner’s direction to provide information or documents to the designated insurer or the Commissioner necessary for claims processing.
E. Enhancing protection for employees
E1. If accidents do happen, we are also enhancing the protection and benefits for injured employees.
Expanding compulsory insurance coverage
E2. Under current WICA, employers are required to compensate all their injured employees, regardless of their salaries, where they work, and nature of work, manual or non-manual. To help employers to fulfil this obligation, employers are required to purchase insurance for all manual employees and non-manual employees (or NME) working in factories earning up to $1,600 per month.
E3. The Minister will amend the WICA subsidiary legislation to align with the salary threshold for non-workmen under Part IV of the Employment Act, to give added protection to these employees. This will be done in phases to allow employers time to adjust.
a) Phase 1: We will extend compulsory insurance to non-manual employees earning up to $2,100 per month, regardless of where they work. We plan to do this in 2020.
b) Phase 2: We will further increase the monthly salary threshold to $2,600. We plan to do this in 2021.
E4. This expansion will require around 300,000 more employees to be covered by the compulsory insurance requirement. Nonetheless, we do not expect significant cost impact to businesses as MOM’s Conditions of Employment survey indicates that close to 90% of employees are already covered by WIC insurance. The vast majority of companies already insure all their employees even when they do not need to. By doing so, these companies ensure that they could meet their WICA obligations in case of accident.
Expanding compensation to employees on light duties due to work injuries
E5. The First Schedule to the Bill extends compensation to employees on light duties due to work injuries. This will put them on par with employees on medical leave due to work injuries. An employee injured at work could be given medical leave or light duties, depending on his fitness to work and availability of light duties. Employers would benefit from an employee who is fit enough to carry out light duties, as there would be shorter downtime from work, and some restoration of productive capacity.
E6. However, an employee on light duties may be earning less than his usual salary. This is because he is likely to work at a lower intensity and duration, and will miss out on overtime pay or allowances that he would have normally received if he was not injured. The First Schedule requires employers to compensate the difference between what the employee earns on light duties, and his AME, which is what he normally earns, including overtime, bonuses and allowances. Compensation is payable only if the employee’s actual wages while he was on light duties is less than what he would have received as his AME compensation under the WICA. This is to ensure that an employee who is on light duties due to a work injury is not worse off than an injured employee on medical leave, who would be given compensation of AME.
Require reporting of instances of medical leave or light duties due to work injuries
E7. In addition, the WICA subsidiary legislation will require employers to report any instance of employees on medical leave or light duties due to a work injury. This is to address the concern that some irresponsible employers may try to avoid reporting work accidents by attempting to influence doctors to give fewer days of medical leave or light duties. We will simplify the reporting requirements for accidents with less than 4 days of medical leave or light duties to minimise the administrative burden on companies.
Ensuring proper assessment of work injuries
E8. Today, an injured employee’s PI assessment is typically done by a doctor directed by the employer. However, MOM has received feedback that some errant employers may attempt to influence doctors to give inadequate medical leave or some doctors may be overly conservative and under-estimate the percentage of PI.
E9. To ensure that there is proper and fair assessment of the extent of work injury sustained by the employee, clause 37 of the Bill which requires an employee to attend medical examination required by the employer has an exception which enables the Commissioner to allow employees to undergo medical examination by another doctor doing the PI assessment. This would be exercised, for example, if there are concerns and prima facie evidence that the quality of care and incapacity assessment by the employer’s doctor may not be adequate or fair.
Updating WICA compensation limits
E10. MOM will also update the WICA compensation limits in the First Schedule to the Bill to keep pace with wage growth and healthcare costs.
E11. This is a regular update which we do once every four years. It prevents the real value of compensation from being eroded by inflation.
E12. The compensation limits for death and PI will increase by about 10% to $225,000 and $289,000 respectively. This is to account for the growth in median gross monthly income since the last review. The compensation limit for medical expenses will be raised from current $36,000 to $45,000, an increase of about 25%. This will ensure that the limit for medical expenses continues to cover more than 95% of all WICA claims medical expenses.
F. More certainty for employers
F1. While we work to make the WIC framework better for employees, it is equally important to ensure the interests of the employers are protected.
More certainty for employers when buying WIC insurance policies
F2. Employers who buy insurance policies that do not adequately cover their WICA liabilities may not be able to obtain reimbursement for compensation paid. We have come across cases where construction companies bought WICA policies that do not cover accidents arising from working above a certain height, and certain activities such as digging and piling. These are precisely the type of work where accidents are more likely to happen. To better safeguard employers’ interests when buying WIC insurance policies, clause 26 of the Bill allows the Commissioner to prescribe a core set of standard terms for WICA-compliant policies to ensure that insurance policies cover employers’ WICA liabilities adequately.
F3. We will also make insurers accountable for the policies they offer to employers. Clause 26 of the Bill requires any insurer who has sold to the employer a policy purporting to be WICA-compliant, to compensate the injured employee according to the standard terms of a WICA-compliant policy. This is on top of it being an offence under clause 30 for insurers to sell policies purporting to be WICA-compliant, when they are not.
F4. Additionally, clause 30 makes it an offence for any insurers not approved by the Commissioner as a designated insurer to sell a WICA- compliant policy.
Recourse for employers for compensation paid due to error or false or misleading information
F5. Under current WICA, the Commissioner can order the employee to refund to the employer any medical leave wages paid if the employee withdraws his claim, the accident was subsequently determined not to be work-related, or it was a false claim. We will extend the refund to lump sum compensation and medical expenses. Clauses 16 and 54 of the Bill enable the Commissioner to order the claimant to refund to the employer (or insurer), if the employer (or insurer) had paid for the lump sum compensation or medical expenses due to error or false or misleading information. This is on top of it being an offence under clause 62 for any person to obtain compensation by providing false or misleading information.
G. Other amendments
Safeguarding against fraud or error
G1. Sir, other than the four key areas highlighted above, we will be making other amendments to the Act.
G2. Under the current Act, parties have up to 14 days from the receipt of the notice of assessment to raise objections to the Commissioner. If no objection is raised within the 14-day timeline, the notice of assessment takes the effect of an order for compensation, and such orders cannot be appealed to the High Court.
G3. We will amend the Act to allow late objections with valid reasons. MOM had come across a case where the employee had given the completed objection form to the employer to submit to the Commissioner. However, the employer failed to submit the employee’s objection form within the prescribed 14-day timeline due to administrative lapses. While the employer had appealed for the Commissioner to accept the late objection, current WICA does not allow late objections irrespective of the reasons. Therefore, we have provided in clauses 46 and 49 of the Bill to allow the Commissioner to accept late objections if the late objection is due to error or fraud by another person.
G4. On penalties, clause 61 increases the maximum fine for non- or late payment of compensation from current $10,000 to $15,000. In addition, we will create a new offence under the same clause for failure to deposit compensation with the Commissioner when directed. Both offences are benchmarked to non-or delayed payment of salary under the Employment Act.
G5. To deter repeat offenders, clauses 25, 35, 61, 62, and 68 provide for the maximum fines for a second or subsequent offence to be doubled.
H1. In conclusion, our goals for the new WIC Bill are:
a) First, to influence employers and insurers to be more proactive in preventing injuries from happening in the first place;
b) Second, to speed up and improve claims processing;
c) Third, to enhance protection for employees; and
d) Last, to give greater assurance to employers when buying WIC insurance.
This will make the WICA better for both employers and employees.
H2. We have worked with tripartite partners and other key stakeholders to design the new WIC Bill to support our WSH 2028 vision. With these changes, and all other on-going and upcoming efforts under the WSH 2028 strategy, and continued strong support from tripartite partners, we endeavour to reduce workplace accidents and raise Singapore’s WSH standards to be amongst the best in the world.
H3. The new WIC Bill, if passed, will be effected on 1 September 2020. This will give sufficient lead time for the industry to adjust to the changes.
H4. Sir, I beg to move.