The State Insurance Regulatory Authority (SIRA) was established in 2015 to regulate NSW statutory insurance schemes including workers compensation and motor accident injury (CTP). The Compliance and Performance Review of the Workers Compensation Nominal Insurer managed by icare (the Review) forms part of SI RA's regulatory role.
The NSW workers compensation system is a critical social safety net. It protects over 4.5 million workers and provides income replacement and medical support for more than 100,000 people injured at work each year. Workers compensation is intended to provide affordable and effective insurance cover for employers.
SIRA is responsible for regulating all workers compensation insurers in NSW, the largest of which is the Nominal Insurer (NI) managed by icare. The NI accounts for around 65% of total active claims, provides compensation cover for more than 320,000 employers, collects $2.3 billion in premiums, and pays out approximately $1.97 billion in claim-related costs per year.
SIRA was established under the State Insurance and Care Governance Act 2075 ith the intent that:
"SIRA will focus on ensuring that key public outcomes are achieved in relation to service delivery to injured people, affordability, and the effective management and sustainability of the insurance schemes. Consolidating regulatory responsibility for State insurance into one regulator will enable a consistent and robust approach to monitoring and enforcement of insurance and compensation legislation in this state". (Second Reading Speech)
This Review is part of SIRA's role as a strong, independent regulator monitoring scheme performance and compliance, and holding all insurers to account for the services and outcomes they deliver for scheme customers - people who are injured at work and employers required to purchase workers compensation insurance.
Background to the Independent Compliance and Performance Review of the workers compensation Nominal Insurer (NI) managed by icare
The success of the NI is critical to the performance of the NSW workers compensation system. Through 2018 SIRA closely monitored aspects of performance and compliance and observed some negative trends in liability valuations and costs, premium setting, operational reforms, risk management, return to work rates and data quality. These trends warranted deeper review. SIRA was also aware of customer complaints and concerns raised by business representatives, unions and other stakeholders.
In February 2019 the SIRA Chief Executive commissioned the Independent Compliance and Performance Review of the workers compensation Nominal Insurer (NI) managed by icare and appointed Independent Reviewer, Ms Janet Dore. The Review was supported by independent actuaries from EY and authorised officers of SIRA. The scope of the Review included the work undertaken on behalf of icare by its agents Allianz, EML and GIO.
The Review was established as part of SIRA's role in regulating the workers compensation system to deliver on the objectives set out in Section 3 of the Workplace Injury Management and Workers Compensation Act 1998:
- to assist in securing the health, safety and welfare of workers and in particular preventing work-related injury,
- to provide,
- prompt treatment of injuries, and
- effective and proactive management of injuries, and
- necessary medical and vocational rehabilitation following injuries,
in order to assist injured workers and to promote their return to work as soon as possible.
- to provide injured workers and their dependants with income support during incapacity, payment for permanent impairment or death, and payment for reasonable treatment and other related expenses,
- to be fair, affordable, and financially viable,
- to ensure contributions by employers are commensurate with the risks faced, taking into account strategies and performance in injury prevention, injury management, and return to work,
- to deliver the above objectives efficiently and effectively
The Independent Reviewer engaged with stakeholders, audited compliance with legislation and guidelines including the Market Practice and Premium Guidelines (MPPGs) and reviewed claims management performance and return to work outcomes. Specifically, Ms Dore was tasked to provide findings in relation to:
- Unintended consequences, risks and priorities for improvement in SIRA's regulation of NI premiums.
- Benefits and risks to the workers compensation system performance arising from changes to the NI operating model and digital platforms.
- NI performance in relation to return to work outcomes, claims management (encompassing injured workers, employers and health service providers), customer experience and data quality and reporting.
The Review has now been finalised. On 13 December 2019 the following documents were published at sira.nsw.gov.au.
- The final report of the Independent Reviewer, Ms Janet Dore
- Three supporting reports prepared by scheme actuaries EY
- SIRA's response to the Review, including a 21-point action plan
- The icare response to the Review
SIRA thanks Ms Janet Dore and EY for their work and insights, and the Board, Executive team and staff at icare and its agents for their constructive engagement. SIRA acknowledges and thanks the SIRA Tripartite reference group members (including the NSW Business Chamber, Australian Industry Group, the Australian Federation of Employers and industries, Unions NSW, the Construction, Forestry, Maritime, Mining and Energy Union NSW, Australian Manufacturing Workers Union NSW and NSW Teachers' Federation) for their input and contribution throughout the Review.
SIRA particularly thanks the many customers and stakeholders who provided input and openly shared their personal experiences through detailed submissions and many hours of meetings.
The Review contains findings on the operation and sustainability of the NI and recommends significant steps for improvement. It is an important contribution to maintaining a fair and sustainable workers compensation system for New South Wales. In tabling the Review and the actions that flow from it, SIRA has highlighted a range of issues that need to be addressed in the interests of current and future customers and stakeholders of the workers compensation scheme. Priorities for improvement are:
- improving early and safe return to work outcomes, including for people with psychological injury
- claims management, early intervention and treatment
- premium transparency and volatility in alignment with SIRA guidelines
- engagement with employers
- data quality
- escalating medical costs due to leakage and increases in utilisation
The Review assessed progress and performance through audits and stakeholder consultation immediately following a period of significant transformation of the NI. icare introduced changes to its operations over 2019 while the Review was underway. A further program of audits in 2020 will assess the impact of changes made since the Review audits and stakeholder consultation.
Findings and action
This document sets out SIRA's response to the thirteen findings of the Independent Reviewer and a 21-point action plan. SIRA and icare will now move to implement the action plan with a view to improving the performance of the NI and the health of the workers compensation scheme more broadly.
The Independent Reviewer made thirteen findings, twelve of which are operational or regulatory in nature. SIRA supports eleven of the findings, as does icare. Both SIRA and icare support an additional finding in principle (Finding 4) and have agreed that SIRA, rather than icare, will take action on this finding. One finding (Finding 12) would require consideration of legislative amendment and is matter for the Government and Parliament.
SIRA has published the full icare response to the Review and welcomes their support for the majority of Ms Dare's findings. The icare response includes commentary on those aspects of the Review with which they do not agree. SIRA notes that icare looks forward to working with SIRA in addressing the Review recommendations and the 21-point action plan.
icare has advised SIRA that it is committed, in conjunction with its delivery partners, to continue to work towards substantially improving services for our customers.
SIRA welcomes Ms Dore's findings that relate specifically to our role as workers compensation regulator and steward. SIRA will continue to respond to the new landscape for regulators and changing community expectations following the Hayne Royal Commission. In addition to implementing Ms Dore's findings SIRA has committed to number of initiatives in the 21-point action plan to increase transparency and improve performance scheme-wide. These include publishing the results of regular customer experience surveys, reviewing and strengthening performance benchmarks and leading consultation on return to work measures to contribute to the national RTW measurement framework.
It is important that the way SIRA and icare respond to the Review stabilises and improves services and results without causing uncertainty and volatility. After a period of large-scale change in workers compensation and the NI operating model, SIRA's 21-point action plan provides a foundation for fact-based and steady improvement rather than further rapid or large-scale change.
SIRA will continue to supervise the NI closely and report publicly on progress against the action plan, the performance of the NI and the workers compensation system more broadly.
Findings of the Independent Reviewer, Ms Janet Dore
Finding 1: SIRA should review definitions where it requires reporting of data in consultation with all stakeholders.
Finding 2: Regular meetings between Board chairs, CE and CEO of SIRA and icare should be continued on an open and constructive basis to promote understanding between, and positive relations with, the two organisations in meeting their respective responsibilities.
Finding 3: SIRA continue its review of governance and capabilities within the emerging contemporary approach to regulation.
Finding 4: Priority should be given to a training program for GPs by icare.
Supported in principle noting SIRA will take action on Finding 4.
SIRA will partner with professional medical colleges to increase awareness of the Health Benefits of Good Work initiative amongst GPs and other health providers.
Finding 5: SIRA should continue its monitoring focus on capital adequacy in liaison with Treasury officials.
Finding 6: icare should provide SIRA sufficient regular information to assure the regulator that premiums are calculated in compliance with the legislative requirements.
Finding 7: Internal Audit planning and risk mitigation actions should be provided by icare to SIRA on a regular basis.
Finding 8: Regular meetings between senior executives should be utilised to agree on and monitor mitigation plans so that formal penalties can be understood as last resort measures in accordance with the spirit of the Premier’s memorandum on inter-agency disputes.
Finding 9: icare should ensure its agreements with agents and service providers give adequate weighting to the primary goal of RTW.
Finding 10: icare should review its internal governance of the claims management model to ensure adequacy of intended outcomes. In particular it should consider allocating files to other agents with expertise to reduce the load on EML and provide time for skills and experience to improve.
Finding 11: icare should address the staff turnover at EML as a matter of priority to ensure case management services are improved.
Finding 12: The legislative powers available to SIRA should be reviewed and strengthened to enable proper oversight of the NI.
This is a matter for Government and the Parliament.
SIRA notes there will be an opportunity for Government to consider this Finding as part of the statutory review of the State Insurance and Care Governance Act 2015 in 2020.
Finding 13: SIRA should build on its governance work since the Hayne Royal Commission and take up the challenge to operate as a best in class modern regulator.
21- point action plan
icare actions required by SIRA
|Actions||Relevant Independent Reviewer finding(s)|
SIRA will require icare under Division 4 of the Workers Compensation Act 1987 to revise and re-submit to SIRA its FY19/20 business plan by 28 February 2020 to address key issues and findings from the review. The revised Business Plan is to include appropriate targets for return to work at 4, 13 and 26 weeks and action to deliver performance at the targeted levels as well as comprehensive plans to improve claims management by the NI including:
icare is required to urgently address data quality and timeliness issues and provide monthly data in accordance with regulatory requirements.
SIRA recommends icare work with an ICT assurance specialist agreed with SIRA to ensure adherence to data provision requirements.
icare will undertake a comprehensive review of the icare Workers Insurance Premium Calculation Model, including:
icare will provide SIRA with a report on its review of the Workers Insurance Premium Calculation Model as part of the 2020 NI premium filing.
icare will review and formally advise SIRA of its premium review arrangements under s8.5 of the Market Practice and Premiums Guidelines issued by SIRA under Division 2 of the Workers Compensation Act 1987. icare will report to SIRA quarterly on premium complaints received and premium reviews and other actions taken as required.
icare actions recommended by SIRA
|icare actions recommended by SIRA||Relevant Independent Reviewer finding(s)|
Noting icare has advised SIRA that icare and its agents now allocate a dedicated case manager where an injured worker is away from work for 2 weeks. SIRA recommends icare consider a further enhancement to allocate a dedicated case manager whenever an injured worker is likely to be (or has been) incapacitated for work for a continuous period of more than 7 calendar days. This would include any injured person meeting the definition of a worker with a significant injury as defined by s42 of the Workplace Injury Management and Workers Compensation 1998 Act (1998 Act) and would strengthen delivery of appropriate injury management as required by s45 of the 1998 Act.
icare should review RTW remuneration incentives for scheme agents and relevant icare employees to ensure focus on return to work outcomes at four, 13 and 26 weeks
Noting the announcement of the extended Authorised Provider Model will increase choice of claims management service for large employers, it is recommended icare also enhance the NI operating model to provide small business employers with greater choice of claim management service provider. Options would be developed by icare in consultation with SIRA.
SIRA will invite icare to attend SIRA Tripartite Reference Group meetings at least once per quarter to outline progress on actions arising from the Review and on the performance of the NI. It is recommended the icare CEO attend whenever possible to engage with peak business organisations and unions.
SIRA recommends icare commission an independent review into the culture, governance and accountability in the icare team and agents managing the NI.
SIRA regulatory actions related to the Nominal Insurer managed by icare
|SIRA regulatory actions related to the Nominal Insurer managed by icare||Relevant Independent Reviewer finding(s)|
During 2020, SIRA will conduct and publish a quarterly compliance and performance audit of claims management by the NI, under Division 4 of the Workers Compensation Act 1987, including file reviews utilising an enhanced methodology. Audit reports will be provided to the SIRA and icare boards.
The first audit will commence in February 2020 and will be undertaken by EY in accordance with Terms of Reference to be finalised by January 2020.
Noting that the NI has experienced a higher rate of increase in utilisation of medical services than other providers, without improvement in return to work outcomes, under Division 4 of the Workers Compensation Act 1987, SIRA will commission an independent audit of the NI’s approval and payments process for medical and related treatment expenses to monitor compliance with regulatory requirements.
This audit will commence in the April quarter of 2020.
Finding 5 given increase in medical costs
SIRA will provide advice to Government on prudential supervision options for the NI. SIRA will continue its monitoring focus on capital adequacy. SIRA will continue to work with NSW Treasury in line with the NSW Treasury/SIRA Memorandum of Understanding.
SIRA will engage constructively with the icare board and senior executives on the NI management and improvement plans; SIRA will retain its independent approach on compliance and enforcement matters
SIRA will provide advice to Government on legislative policy matters as required
SIRA regulator commitments
|SIRA regulator commitments||Relevant Independent Reviewer finding(s)|
SIRA will review definitions and strengthen key performance indicators and compliance benchmarks for workers compensation insurer performance over 2020 and will publish the results at least quarterly. SIRA will consult widely on the development of the indicators and benchmarks.
As a priority, SIRA will lead consultation on measurement of return to work outcomes for injured people and is working with Safe Work Australia on its national RTW measurement framework.
Finding 1, 3, 9 and 13
SIRA will partner with professional medical colleges to increase awareness of the Health Benefits of Good Work initiative amongst GPs and other health providers
SIRA is currently undertaking a review of health care arrangements for the workers compensation and CTP schemes in response to rising health care costs. Over 2020, this review will result in improved regulatory and fee setting approaches to ensure injured people have access to the right healthcare at the right time for optimal recovery and return to work, and so the schemes provide value-based healthcare.
Finding 3 and 4
Finding 5 given increase in medical costs
SIRA will conduct a rolling survey to measure the customer experience of injured people and policy holders across workers compensation and CTP. The first survey will commence by March 2020 and will be published by June 2020.
Agreed joint SIRA/icare NI actions
|Agreed joint SIRA/icare NI actions||Relevant Independent Reviewer finding(s)|
SIRA and icare boards will meet half-yearly. The SIRA Chief Executive and icare CEO will meet monthly with a more detailed quarterly review meeting in line with quarterly audit processes.
SIRA and icare will continue, until at least December 2020, the current level of escalated monitoring and communication provided by the SIRA/icare NI Joint Premium and Prudential Oversight Committee (JPPOC) and Joint Claims Assurance Committee (JCAC).
A pdf copy of SIRA response to the review of the NSW Workers Compensation Nominal Insurer Scheme - PDF is also available to download