Critical reports on NSW and VIC workers compensation systems

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Critical reports on NSW and VIC workers compensation systems

Reports into the workers comp systems have found significant deficiencies that are causing detriment to both employees and employers. The main failings relate to claims management and general oversight of the systems.

Separate reports into the New South Wales and Victorian workers compensation systems have concluded that both have significant deficiencies that are causing detriment to both employees and employers. The main failings relate to claims management and general oversight of the systems.

NSW report


The NSW report on the Nominal Insurer (NI) scheme was commissioned by the State Insurance Regulatory Authority (SIRA). NI is managed by ICare, which in 2018 changed the claim management system and reduced the number of claims agents from five to on one (EML). The report concluded that these changes reduced the performance of the system in the following ways:
  • Lower employee return-to-work rates, falling from 96% in 2016 to 73% in 2019
  • Increased underwriting losses
  • Lack of competition provided a disincentive to improve performance
  • Increased delays in employees returning to work, which increased the overall cost of the system (due to more employees off work)
  • ICare recorded a net loss of $874 million in 2019, which the report described as “a real risk to the NI’s sustainability”
  • Premium calculations lacked transparency and were too volatile

ICare’s response to the report disputed the criticisms of the NI’s performance, claiming that regulatory changes and external economic factors were not taken into account. However, it did not comment on the reduced return-to-work rates.

The report recommended that SIRA be given increased legislative powers to oversee the performance of the NI more stringently. This will require the NSW Government to enact legislation. It also sets out a 21-point action plan to improve operation of the system.

Further information and a copy of the report can be accessed here.

Victorian report


The Victorian report, released by the Victorian Ombudsman, was highly critical of the administrator WorkSafe. WorkSafe does not manage claims itself, but has outsourced claim management to five claims agents (large insurance companies). The main criticisms were:
  • Claims agents were prone to “cherry picking” medical advice and doctors in order to have claims rejected
  • Evidence of claims being terminated and unreasonable or unjust return-to-work practices being set – the report described some cases as “downright immoral and unethical”
  • WorkSafe had insufficient oversight of medical advisers hired by the claims agents, and referred cases to conciliation or court “despite clearly inadequate or unreasonable agent decision-making”
  • The system had a complicated set of financial rewards and penalties that encouraged agents to terminate claims and remove people from WorkCover, and tended to treat outcomes as “wins or losses”
  • Some practices, such as unnecessary surveillance of claimants, resulted in workers receiving psychological injuries in addition to their physical ones

The report made 15 recommendations, the main ones being that the Victorian Government commission an independent review of the claims management model and implement a new dispute resolution process. The latter included establishing a dedicated business unit to review disputes. The Victorian Government has indicated that it will accept all 15 recommendations.

This report follows a previous one conducted in 2016 that was also highly critical of the system. The second report suggested that the main outcome of the 2016 report had been to “drive the bad practices underground”.

The report can be accessed here.
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