Yesterday Four Corners, in conjunction with ABC & SMH, reported “Australia’s biggest workers compensation system icare faces looming financial disaster“. icare has since released a Statement on Four Corners & other reports highlighting that “claims have been previously addressed” & “some reports are misleading & inaccurate”.
Is icare A Looming Disaster?
Workers compensation is a complex long-tail insurance , over the last 30 years many models have been implemented however the most recent since the creation of iCare is certainly different to anything we have experienced before. Carmel Donnelly, SIRA CEO stated she has reported iCare to ICAC and we await the outcome of these investigations. The current call centre approach has created challenges for many of our injured workers and clients alike where they need to repeat their situation to someone who is friendly however no case management expertise.
There are some key issues highlighted in the story as they relate to NSW (icare):
- Expertise – industry experts identify the NSW Workers compensation scheme is now being lead by people with short tail claims expertise. Short tail experience manage insurance products like home (building & contents), car & other policies yet not long tail claims (life workers compensation, CTP, life, etc). Peter McCarthy (ex-EY Partner and expert in long tail claims given 35 years in the industry) continues to highlight the actuarial risk indicators & the subsequent premium increases (required to cover suspected mis-management and issues with the tail). It was certainly concerning to hear from Peter McCarthy that premiums would need to double to cover the costs of the current liabilities. Something businesses could face in the future on top of what has already been a significantly difficult economic climate.
- Claims Model – the current claims model has had significant impacts on the RTW rates & it suggested icare is not reporting RTW rates accurately. Surgery costs have increased. Care costs (accommodation, treatment, etc) increase as have costs. Workers compensation claim cost increases relate to the changes to processes
- Claims Agent – The decision to allocate the management of the NSW scheme to one claims agent was also highlighted in the report. The lack of competition and choice for employers has seen a decline in service to the premium payers of the scheme. In addition the insourcing of premium management to iCare has also created additional service issues to employers trying to understand premiums, accuracy of calculations and impact of claims management practices that are resulting in premium increases. Recently employers paying over $1,000,000 in APP premium and later those paying over $500,000 in premium were provided with a choice of claims agent. As 98% of employers in NSW pay less than this it was difficult for those impacted by various service issues that they discovered they were not able to make the same choice as the 2% of larger employers.
- SIRA – SIRA’s involvement is key to assisting with the ongoing review and investigation of our scheme, we support the review to ensure the best outcomes for our injured workers, employers and providers. We will be interested in the ongoing involvement from SIRA and the review process with ICAC. We are keen for SIRA to increase their involvement in ensuring the scheme is viable for the future and premiums can be sustainable long term.
- Businesses – NSW businesses fund the NSW workers compensation scheme via the premiums they pay. Peter McCartney is vocal that the current model is penalising businesses. In addition he premiums will need to rise sharply to cover the looming financial NSW workers compensation disaster
A famous personality regularly says irrespective of how flat a pancake is there is always 2 sides. So it is also interesting the NSW Government who had budgeted $80,000 to fund an inquiry into icare recently been shelved. We monitor with bated breath & remain hopeful positive changes come of this investigation for our clients, partners & injured workers alike.
At ABILITY GROUP we continue to focus on achieving sustainable return to work outcomes for our clients and their injured workers. The current model has made our role very challenging and we strive to overcome barriers to make things happen for our clients we continue to lobby for refinements to processes through meetings with icare & SIRA.
The workers compensation journey continues…
Any questions or comments, please contact us to discuss.
Further information:
Source: ABC
Title: Australia’s biggest workers compensation system icare faces looming financial disaster
Read/Watch time: 50 minutes