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icare reform execution 'sloppy', review finds

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NSW state insurer icare introduced reforms too quickly and without adequate testing while showing disregard for “proper and prudent” procurement practices, independent reviewer Robert McDougall says in a report released today.

“When icare was established, it set about an enthusiastic program of change,” he says. “Although that program was well-intentioned its execution was, in a word, sloppy.”

Mr McDougall delivered his report to NSW Treasurer Dominic Perrottet and Minister for Customer Service Victor Dominello, who says work will start immediately on the recommendations.

The 49 proposals include that icare’s procurement and probity framework should equal that of other government agencies, it should publish a plan for culture change that addresses risk factors, and report progress annually to the Treasurer, and the board should include one or more members with extensive public sector experience and workers’ compensation experience.

The report found that while procurement and processes for reporting gifts and benefits at icare were deficient, there was no evidence of criminality or corruption and problems faced did not reflect “some malign or corrupt intent”.

The report says the shift to a single claims agent was hindered by flawed assumptions, including on claims volumes, and inadequate resourcing, while a delay in launching the a new technology platform, which was “integral to the success of the new model”, also created problems.

“The process leading to the decision to move to a single provider model was not inherently flawed. It was however essential that the implementation of the model be carefully planned and managed,” he says.

“And it was equally essential that EML be given the resources and support to allow it to plan for, and scale up to, the huge workload that it would take on.”

Mr McDougall recommends icare should reconsider whether the 12-month duration of its current service provider contract with EML is appropriate or whether it should be extended to 24 months to allow EML time to put in place agreed claims management changes and other innovations.

The review says there is no present threat to the solvency of the Nominal Insurer and there is no reason to think it will cease to be financially viable as long as premiums are set appropriately.

Mr McDougall says changes in icare’s leadership at executive and board levels and a more positive relationship with the State Insurance Regulatory Authority (SIRA) points to a more positive future.

“It is clear that the new management team is determined to remedy the problems of the past and to turn icare into the organisation that the legislature expected it to be,” he says.

Mr Perrottet and Mr Dominello today also said action would be taken to speed remediation of underpayments to injured workers, self-reported by icare, with progress to date hampered by the complexity of recalculations.

Deloitte will lead a review providing expert advice on rectifying the historical Pre-Injury Average Weekly Earnings (PIAWE) underpayments and overpayments, following their work on the 7-Eleven wage claims program.

icare Chairman John Robertson says the McDougall report is thorough and fair, and provides key areas of improvement.

“We accept the findings, respect the conclusions and will implement the recommendations relevant to icare fully,” he said.

The insurer also welcomed the Deloitte review on payments, which will be overseen by a steering committee chaired by SIRA and comprising Treasury and icare.

“It’s clear that the remediation has not happened fast enough, driven by complexity and the technicalities of the current legislative framework,” CEO Richard Harding said. “Obtaining expert advice from a team who have assisted organisations with similar issues in the past will be invaluable.”

The NSW Standing Committee on Law and Justice also today tabled its Review of the Workers’ Compensation scheme, making 22 findings and nine recommendations.

The committee plans to undertake a brief hearing toward the end of the year to review the status of icare reforms and the implementation of various reviews.

SIRA says it is reviewing the McDougall report and is committed on acting on recommendations relevant to its role, and is also carefully considering the parliamentary committee’s findings.