Self insurer licensing framework review discussion paper

Self-insurer licence applicants must first meet certain requirements to ensure they are able to conduct themselves in accordance with the legislation, are financially viable and can maintain high standards of injury management and case management throughout the term of the licence. In recent years there has been a growing interest in self-insurance and an increasing trend in outsourcing of insurance related functions which makes this review timely to ensure the framework remains appropriate in this changing market dynamic.

A self-insurer licence establishes additional operational conditions that supplement legislative requirements. In order for SIRA to achieve the workers compensation system objectives outlined in the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act), SIRA expects self-insurers to:

• comply with legislation; and
• comply with licence conditions by performing to SIRA standards in the areas of:
  • conduct (incorporating legislative compliance and regulatory reporting);
  • claims management; and
  • financial ability.

(c) the efficiency of the workers compensation system generally, and

(d) other matters as SIRA thinks fit.

Currently, a prospective self-insurer must provide the following information as part of their application:

• applicant information;
• workers compensation information;
• claims management information;
• financial information;
• completed and signed declaration; and
• additional information to support the application.

Preferred outcomes

• The application process aligns with legislative intent.
• The business making the application is financially viable and motivated by more than cost savings alone.
• The business making the application is engaged, accountable and is available and able to respond to queries and requests for information as part of the application process, whether or not a broker is engaged to support the application.
• The business making the application can demonstrate sound governance of itself and any outsourced providers.
• The applicant is able to demonstrate competent case management capability.
• Granting a licence is likely to result in improved scheme efficiency through competition, best practice and innovation

Questions

• Are the current application requirements fit for purpose?
• If an external advisor is engaged to assist the potential applicant, how can SIRA ensure that an applicant will retain or develop sufficient internal expertise to manage its responsibilities as a self-insurer?
• Should SIRA define expectations and requirements about the suitability of the applicant in other dimensions in addition to conduct, structure, system, finances, people, experience?
• How can SIRA ensure that applicants can demonstrate capability in resourcing and expertise to carry out the workers compensation business?
• Should SIRA require comprehensive premium and claims information from the current insurer to determine whether self-insurance is a better option?
• Should a cost benefit analysis be required to assist in determining whether an employer should become self-insured?
• What due diligence and governance systems should an applicant demonstrate if they are choosing to outsource claims handling or other functions?
• How should SIRA assess whether outsourced arrangements will meet requirements and result in preferred outcomes?
• If claims handling is to be managed internally by an applicant, what is the best method to measure internal capability and governance?
• Should the new applicant provide evidence of:
  • a learning and development program for workers compensation staff;
  • a quality assurance program;
  • a case management model;

and provide ongoing reporting as part of their business plan?

• How should a new applicant best demonstrate the change in culture and sound governance required in the move from being a policy holder to a self-insurer?
• Should the requirement for a minimum number of employees for a new applicant be reviewed?
• Is there a different approach to financial modelling that would work better in assessing an applicant’s position?
• Are there any other matters SIRA should consider?

Questions

• What is the best way for SIRA to assure that all claims liabilities are funded by the insurer in the event of insolvency?
• Does the way SIRA hold security for self-insurers need to be reviewed? What are the suggested alternatives?
• Should there be a review of the calculation methodology by which the security is determined?
• Are there any other matters SIRA should consider?

Questions

• What is the best way for a self-insurer to influence WHS outcomes for their overall business?
• How should the self-insurer demonstrate that injury management and WHS claims management staff share knowledge about WHS requirements and processes?
• Are there any other matters SIRA should consider?

While the expectation for an insurer to meet these conduct requirements has been made clear, greater detail in the self-insurer licence conditions is important to ensure an insurer’s understanding and adherence to the expectations outlined.

Preferred outcomes:

• Insurers achieve compliance with the legislation and conduct themselves in a manner which provides system participants with positive experiences and outcomes.
• Insurer conduct is in line with community and regulator expectations.
• Once a self-insurer is licensed, ongoing exemplary conduct is demonstrated throughout the duration of the licence.

Questions:

• How best can SIRA ensure self-insurers adhere to conduct expectations?
• Should further detail regarding conduct expectations be outlined in the licence conditions?
• How and when should self-insurers articulate to SIRA the values and behaviours of their organisation which underpin their conduct?
• How should self-insurers demonstrate adherence to the customer service principles?
• Are there any other matters SIRA should consider?

Questions

• How should SIRA ensure that a self-insurer’s board or senior executive is able to demonstrate a required level of expertise and skill in workers compensation and that their workers compensation insurance business is conducted in line with the objectives of the legislation?
• Should employee satisfaction surveys, cultural reviews/reporting information be included in the self-insurer business plans submitted to SIRA or reported in another way?
• How should an insurer demonstrate that the culture and governance of outsourced service providers aligns with the self-insurer’s culture and governance and the expectations of the regulator?
• Are there other ways to achieve, demonstrate and assess better outcomes / governance?
• Are there any other matters SIRA should consider?

Currently SIRA requires that an insurer must perform its obligations and functions as a licensed self-insurer in accordance with the legislation and demonstrate performance in injury and claims management of a standard acceptable to the Authority.

When a function is outsourced to a third-party the self-insurer, as the licensed entity, remains accountable for the performance of outsourced parties and any instances of non-compliance. Before outsourcing the whole or any part of any key operational functions the licensee must notify SIRA in advance.

Preferred outcomes

• Ensure appropriate accountability and understanding of their obligations by the licensed entity.
• Ensure appropriate capability and capacity of the functions of the insurer to achieve good outcomes for system stakeholders.

Questions

• Should this licence condition be strengthened to define expectations?
• How can SIRA best ensure that self-insurers have appropriate resourcing with sufficient knowledge and experience to perform their obligations in claims management?
• How should SIRA require that insurers demonstrate that they have the necessary infrastructure, systems, processes and resources to perform their obligations and functions (including injury, claims and complaints management) as a licensed insurer in accordance with legislative requirements and to the commercial standards acceptable to SIRA?
• How can SIRA best ensure that self-insurers maintain appropriate oversight of outsourced arrangements, given their continued accountability?
• When should SIRA be provided with copies of service level agreements, reporting or monitoring, models that reflect performance of the outsourced provider? Should evidence of any penalties imposed by the self-insurer on their outsourced provider for poor performance also be provided to SIRA?
• Should self-insurers have to demonstrate exemplary conduct and claims handling practices for a minimum period after their self-insurance licence is granted before they can apply to purchase their tail liabilities?
• Should SIRA’s approval be required for outsourcing arrangements?
• Are there any other matters SIRA should consider?