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Scrutiny heightens as icare battles criticism

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It’s been a tough first five years for NSW insurer icare, and scrutiny is continuing to rise as it battles to convince regulators, employers and others involved in workers’ compensation that it is on the right path.

The Nominal Insurer scheme that started in 2015 was tasked with improving the performance of the state’s workers’ compensation arrangements and putting it on a stronger financial footing.

Legacy problems, mis-steps and issues that have continued to come to light since then have put heat on the group and triggered multiple reviews, while the insurer maintains it is acting on the identified short-comings and is making considerable progress.

“Since 2015 the icare Nominal Insurer has made the biggest transformation to workers’ compensation in over 30 years,” it says in a statement posted on its website.

“We knew a transformation of this magnitude was a five to 10-year plan and we’ve achieved more improvements in three years than in the three decades preceding.”

The changes introduced so far include moving from five agents in 2018 to one and transitioning more than 300,000 injured work claims, which it says has provided a clearer view of customers’ experience and more accurate information.

As a result, it also uncovered cases of over and under-payments, based on the pre-injury average weekly earnings (PIAWE), reporting the issue to the State Insurance Regulatory Authority (SIRA).

“It’s industry consensus that the legacy PIAWE formula was too complex and the issues we identified pre-date icare,” it says. “However, we’re working to remediate them.”

As previously reported by insuranceNEWS.com.au, dissatisfaction was rife following the switch to a single claims agent in EML.

SIRA commissioned a review of the nominal insurer scheme, partly in response to growing concern about its operation, with independent reviewer Janet Dore publishing a number of critical findings in December.

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

That report made 13 recommendations for improvement, with the majority backed by SIRA, which also issued a 21-point plan.

The regulator recommended icare commission an independent review into “the culture, governance and accountability” in its team and agents.

icare supported recommendations from the independent review and CEO John Nagle last year said the scheme was moving into a more stable period and well on the way to addressing concerns raised.

“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 said at that time.

The workers’ compensation scheme has since increased choice to larger customers, with Allianz, GIO and QBE now offering claims management services.

This year icare released a follow-up report from its customer advocate, Darrin Wright, who made 20 recommendations to address complaints around premiums, claims management issues and client engagement.

All the criticisms of icare have been raised again in a joint report by ABC’s Four Corners program and The Age/Sydney Morning Herald newspapers, forcing icare to again defend its performance.

It has rejected any suggestions it faces serious financial issues, but the difficult current environment is the last thing it needs.

The insurer says its expense ratio is targeted to fall to 15% next financial year from 21% in the 2018 financial year, but the funding ratio is “not where we’d like it to be”, based on its own 80% probability of adequacy measure.

In May, the funding ratio was at 98% compared to 123% in 2016.

Lower investment returns and the impact of COVID-19 has hit icare in much the same way as it has the privately owned insurers, and it continues to battle rising medical costs which it says account for around half its overall reserve strengthening losses.

icare has been publishing regular performance metric updates on its website, recently noting that the return-to-work rate, which has held at 82% since the second half of last year, will come under pressure from COVID-19. It has also warned of an increase in mental health claims, which are complex and lengthier.

“We know there is still more to do,” the statement says. “We have not always kept our customers and industry abreast of the details and so we must get better. This was seen in the independent Dore Review in 2019 and the work of the customer advocate.”

The transformation might have been a five to 10-year plan, but there’s no room for errors and missteps following recent issues highlighted and as pressures only increase.