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Workers’ comp: searching for Australia’s next top model

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Victoria is set to become the latest state to begin a workers’ compensation review as the nation continues to grapple with a mish-mash of models, different levels of private and public participation and questions over their performance.

“It is time for the change that makes a difference,” Ombudsman Deborah Glass says in a report highly critical of Victoria’s handling of complex claims.

“I am pleased the Government has accepted my two key recommendations: an independent review of the agent model to determine how and by whom complex claims should be managed, and to introduce a new dispute resolution process which allows for binding determinations.”

Whether engaging in wholesale reforms or more minor adjustments, governments have been kept busy over the years trying to find the best way to deliver the benefits of workers’ compensation as efficiently as possible.

Australia has 11 major state, territory and commonwealth workers’ compensation schemes, with much variation between their policies and practices, the Compare project based at Monash University notes.

“We haven’t really settled on a best practice model in Australia,” Insurance Work and Health Research Group Director Alex Collie told insuranceNEWS.com.au. “You see different outcomes around the country based on all sorts of different factors.”

A Compare project report two years ago looked at 60 legislative changes across nine schemes over 2004 to 2015 to assess claims outcomes. The area remains a moveable feast.

“It is not as if we are comparing static entities,” Professor Collie says. “They change quite regularly, and these changes include some expected differences and unexpected differences to outcomes.

“There are so many different factors and things that influence the return to work and health outcomes and financial outcomes in these schemes that it requires a pretty close and nuanced look to really understand what is going on.”

The Victorian Ombudsman’s report on the handling of complex claims, which are outsourced to private agents with oversight by WorkSafe, suggests a focus on financial outcomes has come at the expense of fair decision-making.

“The financial viability of the scheme is imperative,” it says. “However, a balance must be struck so that the scheme can achieve both objectives of financial sustainability and appropriate compensation for injured workers.

“At present the system is failing to achieve the latter in too many complex claims.”

Ombudsman Deborah Glass has pointed to the state’s Transport Accident Commission and international jurisdictions as examples where claims are mostly managed by the relevant government authorities.

Flagging the in-house option reflects a long-running tug of war over the desired extent of private and public involvement from underwriting through to claims management.

The Insurance Council of Australia says it supports the involvement of insurers in workers’ compensation claims handling.

“It is the ICA’s long-held position that competition, in relation to both underwriting and claims management can aid and improve the performance of statutory insurance schemes,” spokesman Campbell Fuller said.

Philip Maguire, a principal at PFS Consulting and a former Insurance Council of Australia Deputy CEO, says there has long been tension between beliefs that workers’ compensation is a social service requiring government control, and beliefs that the private sector is best placed to deliver the service.

“Each can work, but it really just depends on the execution,” he told insuranceNEWS.com.au. “That is the challenge with all of these things.”

In the meantime, harsh findings in the Victorian Ombudsman’s report have not gone unchallenged by agents involved in the scheme.

Gallagher Bassett says in a response to a draft version of the report that “the imperfect path of reasoning and lack of supporting evidence makes the stated link between poor decision-making and financial considerations difficult to justify”.

The methodology of the report, and a focus on a small number of cases where a complaint has been made or a dispute is in progress, has been criticised for not reflecting overall performance or genuine efforts by agents to meet service objectives.

The Victorian Ombudsman’s report follows vocal criticism this year of the NSW system, which underwent major reforms in 2015 and where a review is underway.

The State Insurance Regulatory Authority (SIRA) has wrapped up consultations on the Nominal Insurer scheme, managed by icare, and is set to deliver its final report by the end of the year.

Many submissions have criticised poor claims management and communication through EML, appointed in 2017 as the sole agent for new claims. Last month icare said larger clients will now also have the option of engaging with Allianz, GIO or QBE under the “authorised provider” model.

The main NSW workers’ compensation scheme swung to a $876 million net loss last year amid falling bond yields and rising medical expenses. SIRA is also looking at healthcare costs affecting the workers’ compensation and compulsory third party schemes.

Whatever the outcomes, the various workers’ compensation schemes around Australia will keep separately changing as governments seek improvements, while hopes for a more unified approach remain elusive. The one thing certain about the latest Victorian review is that it won’t be the last.