ICA calls for overhaul of Australia’s workers comp schemes

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According to the Insurance Council of Australia, there is a need to overhaul Australia’s workers’ compensation insurance industry by harmonizing the nine federal, state and territory workers’ compensation schemes and opening the state-run schemes to private insurers.

Insurance Council of Australia Calls for Overhaul of Workers’ Compensation Scheme

Ernesto Calucag
Jun 10, 2015

The industry group, citing a commissioned report done by Finity Consulting, is calling for uniform best practices among the different schemes around the country and for the market as whole to be overseen by a new independent regulatory body.

“Australia’s workers’ compensation schemes need an overhaul for reasons of efficiency and equity. At present, employers may need to comply with up to eight state and territory schemes, and each scheme is different. A person injured at work may receive different levels of benefits, depending on the state or territory in which the injury occurred,” ICA chief executive Rob Whelan said in a statement.

“The differences between the schemes and the compliance burden on businesses are detrimental to efficiency and costs, and are a drag on employment and the economy,” he added.

The best practices suggested in the report include a fair benefit system such that workers with higher earnings have lower benefits than those with low income. It also argued that higher compensation should go to more seriously injured people, while payouts to those less seriously injured should be smaller.

On a bigger scale, the report suggested it is time the workers’ compensation scheme, being mandatory, should be open to private insurers in a competitive market and managed by a specialist scheme regulator.

Premium rates, it added, should be lightly regulated, which is free from interference by government and other stakeholders.

Whelan echoed the report’s recommendations, saying a workers’ compensation scheme based on competitive underwriting by insurers would help avoid financial risk to governments, taxpayers and future policyholders.

“Competitive underwriting of monopoly schemes would reduce scheme volatility and remove political interference with the pricing of risk. It would also remove government reliance on premiums as a source of general revenue,” he said.

On claims assessment and processing, the report suggested a “more inquisitorial tribunal process” would reduce costs that would benefit both the employers, insurers and the claimants. It noted the “adversarial judicial nature of dispute resolution” under the current framework means a large amount of money is being wasted paying lawyers and medical specialists.

Whelan said he hoped the report would help renew the conversation about improving the current scheme and come up with a more uniform workers’ compensation system.

At present, several Australian states are examining the sustainability of their schemes while the Senate is considering changes to the Federal Comcare scheme that would benefit some national employers.

“The ICA believes the time is right to take stock of the best scheme model to serve Australians and the national economy,” Whelan said.

(By Ernesto Calucag, Hong Kong news editor: Ernesto.Calucag@ambest.com)

[Source: http://www.individual.com/storyrss.php?story=206016041&hash=f86a3a6fbd10f07ee61cd9b9dd384192]

The report can be viewed here>>



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4 Responses to “ICA calls for overhaul of Australia’s workers comp schemes”

  1. On a bigger scale, the report suggested it is time the workers’ compensation scheme, being mandatory, should be open to private insurers in a competitive market and managed by a specialist scheme regulator.

    Hell NO!

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  2. ‘Open to private insurance companies’? Oh my God. You think it is bad now, this would be Armageddon to claimants. If anyone has followed the plight of claimants stuck with Metlife Insurance in NSW – being delayed for exorbitant periods of time, then be prepared for even worse.
    ‘Managed by a Specialist Scheme Regulator’ – do you think that will make any difference to insurance companies? Hell no. With their myriad of excuses for delays and rejections of claims the regulator will quickly become swamped by the overload of hold-ups and throw their hands up – especially if then being made to handle multiple private companies, each with their own policies and procedures etc. A complex convoluted minefield of paperwork, confusion and smokescreens.
    The only thing I agree on is there should be an ‘inquisitorial tribunal process’ to replace the ‘adversarial nature of dispute resolution’.
    But if ICA is requesting for changes you can bet your bottom dollar that it is all for them. They may try to paint a pretty picture where the benefits of an inquisitorial system go to the employers, insurers and the claimants. But don’t be fooled, their definition of ‘benefit’ would likely be the same as the definition of a ‘successful outcome’ which can range from pittance to a reasonable amount. It is not a subjective benefit for the claimant. It would be the ‘objective’ (again would be biased) one from the stakeholders.
    And who are ‘Finity Consulting’? How was the tender process done to choose them? Do they have any affiliations/biased/conflict of interests with the stakeholders? Again, my suspicions are that ICA have chosen a firm for the benefits of its members who of course pay ICA to be a member and hence pay the salaries etc.
    “If it sounds too good to be true it probably is”.

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  3. A legal advocacy group has criticized a plan endorsed by the Insurance Council of Australia to overhaul and privatize the country’s various workers’ compensation schemes, labeling it as “self-interested.”

    In a statement, the Australian Lawyers Alliance said the state and territory governments should reject a commissioned report by ICA which presented best practices on workers’ compensation, saying it was only “an attempt to promote profitable opportunities for insurers at the expense of injured workers.”

    ICA chief executive Rob Whelan, citing a report done by Finity Consulting, earlier said that the state-run workers’ compensation schemes should be opened to private insurers for reasons of efficiency and equity (Best’s News Service, June 10, 2015).

    “The differences between the schemes and the compliance burden on businesses are detrimental to efficiency and costs, and are a drag on employment and the economy,” he added.

    ALA Queensland director Rod Hodgson in a statement said that contrary to ICA’s claims, the various state schemes are sustainable and well-run. He noted for example the schemes in Queensland and Victoria which have a long history of delivering low premiums for employers, high solvency and providing fair benefits for injured workers.

    “Those schemes work because state governments rightly channel revenue and profits into a carefully balanced mix of benefits for injured workers. There is no evidence that workers’ compensation schemes function best when run by private insurers, as asserted by the ICA,” he said.

    Hodgson is particularly critical of the ICA-backed report’s recommendation to put a cap on benefits to high-earning workers, saying the proposed cut-off in weekly compensation payments at 2.5 times average weekly earnings is “too low.”

    “The ICA are proposing cut-offs in weekly compensation payments, on a work capacity test controlled by insurers that is not subject to any sort of court or legal review. That will see thousands of people stripped of their legal safety net, with few options for review,” he said.

    The insurers’ group proposal to combine the work health and safety regulator with the workers compensation regulator has also attracted criticism.

    “The ICA says that a new scheme culture should prevail and that staff at the regulator should be committed to sustainability ahead of compliance. This is plain wrong — all workers’ compensation schemes must work towards both sustainability and compliance and you cannot have one without the other,” Hodgson said.

    “The message for state governments is clear — do not to hand over the keys to workers’ compensation schemes to the private insurers,” he concluded.

    At present, several Australian states are examining the sustainability of their schemes while the Senate is considering changes to the Federal Comcare scheme that would benefit some national employers.

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  4. Legal advocacy and workers rights groups have slammed a plan backed by the Insurance Council of Australia to overhaul and harmonise the nation’s nine disjointed workers’ compensation schemes, labelling it a self-interested cash grab that would endanger lives.

    The Insurance Council of Australia last week released a report, produced by Finity Consulting, that outlined its vision for a best practice national approach to workers’ compensation schemes. It calls for the nine workers’ compensation schemes around the country to be harmonised and overseen by a new independent regulatory body.

    “That would be a disaster that would lead to more deaths. A central theme of the report is that insurance companies know best and can be trusted to always act fairly and reasonably. Anyone who believes that is naive in the extreme,” Australian Lawyers Alliance (ALA) director Rod Hodgson said.

    The Injured Workers Support Network has also written an open letter criticising the plan.

    Recommendations put forward in the ICA-backed report that the ALA strongly oppose include: opening up state-run monopoly workers compensation schemes to market competition from general insurance companies, combining the work health and safety regulator with the workers compensation regulator, capping payments to higher income workers, and abolishing “journey claims”.

    Insurance Council of Australia (ICA) chief executive Rob Whelan said an overhaul of the current system is needed to make it more financially sustainable, efficient and equitable. He pointed to large annual deficits posted by some state schemes, particularly South Australia, as evidence that the state-backed schemes are too volatile.

    Mr Hodgson, who is a principal at Maurice Blackburn Lawyers, said the plan outlined by Finity in its report for the ICA relies on “nonsense claims” that demonstrate a “limited understanding” of how state schemes operate.

    “The claim that the government schemes are volatile and at risk of falling over are rubbish. The evidence shows that state schemes, with the exception of the no-fault South Australian Scheme, are sustainable and well-run,” Mr Hodgson said.

    Unsafe practices

    Mr Hodgson said the ICA plan would replicate the key fault of the SA scheme, its lack of recourse to common law that allows injured workers to sue workplaces for negligence, also helps to act as a deterrent for unsafe workplace practices.

    The ALA points to the Queensland and Victorian schemes as having a long history of delivering low premiums for employers, high solvency and providing fair benefits for injured workers.

    “Under the ICA plan, catastrophically injured workers who need assistance for life would be palmed off to a yet to be created National Injury Insurance scheme, leaving the taxpayer to pick up the tab for compensation that ought properly to flow from workers’ compensation insurance,” Mr Hodgson said.

    The ICA-backed report also proposed cut-offs in weekly compensation payments at 2½ times average weekly earnings.

    Mr Hodgson agreed that introducing a cap for very high income workers may be appropriate, but said the proposed cut-off was too low.

    “This is a brutal cash grab against people working in the most dangerous sectors – mining, construction, agriculture, transport, and manufacturing. Workers in these industries earning more than 2½ times the average wage that are seriously injured or killed will normally have mortgages and financial affairs that need servicing”.

    The ICA-backed report has also called for the right to medical treatment to cease for claimants after 12 months.

    “Again, that is an uninformed and illogical step that runs counter to best medical practice,” Mr Hodgson said.

    Injured Workers Support Network co-ordinator Rowan Kernebone said the ICA backed plan would lead to the “Americanisation” of the medical treatment provided to injured workers.

    A proposal to exclude “journey claims”, that provide coverage for people injured while travelling to and from work, from all workers compensation schemes has also attracted criticism.

    “Including journey claim coverage only adds a few cents per month on average to the monthly premium paid by an employer and delivers good value in keeping the cost of caring for people injured while commuting off the taxpayer,” Mr Hodgson said.

    One recommendation of the ICA commissioned plan that the ALA does support is that all workers’ compensation recipients should also continue receiving superannuation payments at the guarantee rate, which is currently 9.5 per cent.

    Source: http://www.theage.com.au/business/workplace-relations/lawyers-and-injured-slam-insurance-councils-workers-compensation-plan-20150615-ghniws

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