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icare's claims model blamed for workers' comp scheme decline

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NSW state insurer icare’s new workers’ compensation claims model is the “primary driver” behind the scheme’s deteriorating performance, according to a highly critical report.

The State Insurance Regulatory Authority (SIRA) commissioned the review of the nominal insurer scheme, partly in response to growing concern about its operation, with independent reviewer Janet Dore publishing her findings today.

She says icare pursued “an ambitious model based on principles of triage, injured worker empowerment and straight-through processing”, with one insurance agent – EML – for all new claims. A single IT platform was also introduced for operating the new claims model.

“The ambition of the model was matched by the ambition of the timeframe for implementation,” Ms Dore says.

“The new claims model led to a significant deterioration in the performance of the [nominal insurer] through poorer return to work rates, underwriting losses, no competition and therefore, concentration of risk.

“While investment returns for icare have bridged the gap in underwriting losses, the current economic environment of low returns does not bode well.”

Ms Dore notes that icare suggests deteriorating performance is the result of factors “beyond its control”.

But she says “while there have been some external factors…the primary driver for the decline is the implementation and operation of the new claims model implemented by icare”.

icare has already implemented improvements but Ms Dore says “they have not yet abated the ongoing deterioration”.

The report makes 13 recommendations for improvement including a review of the claims management model.

icare should consider “allocating files to other agents with expertise to reduce the load on EML and provide time for skills and experience to improve”.

icare should also “address the staff turnover at EML as a matter of priority” to ensure case management services are improved, and the legislative powers available to SIRA should be “reviewed and strengthened to enable proper oversight”.

SIRA has backed the majority of the recommendations and also issued its own 21-point plan.

Through its new “authorised provider” model, icare has already offered a choice of agents to larger businesses, but SIRA wants greater choice to be offered to smaller employers as well.

SIRA also recommends icare commission an independent review into “the culture, governance and accountability in the icare team and agents”.

In response icare has said it welcomes the report and supports 11 of the 13 recommendations – with the other two being matters for SIRA and the NSW Government.

It reinforces its commitment to delivering “a fairer, sustainable and customer-centric workers’ compensation scheme” and says the review “coincided with a significant period of transition”.

But icare CEO and MD John Nagle says the scheme is “moving into a more stable period” and is “well on the way to addressing the concerns raised in the report”.

“It’s the biggest change to the workers’ compensation scheme in 30 years,” he said. “We accept that we underestimated some of the challenges of implementation, which have resulted in a poor experience for some customers, which is regrettable.”

He also takes issue with some aspects of the report, saying it didn’t present “a true reflection” of the scheme’s overall performance and “omitted some key facts”.

He says while the report provides “extensive coverage” of employer feedback, “the voice of injured workers was largely absent”.

“Our focus has always been to balance the needs of employers and injured workers to create a fairer system,” he says.

To read the report, supporting documents, SIRA’s response, and icare’s full response, click here.