Nominal Insurer Audit Report - November 2023

1. Executive summary

1.1. Introduction and background

The State Insurance Regulatory Authority (SIRA) regulates NSW mandatory insurance schemes including the NSW workers compensation scheme. The majority (approximately 83%) of claims in the NSW workers compensation scheme are managed by Insurance and Care NSW (icare).

icare is responsible for two entities in the NSW workers compensation scheme, the Nominal Insurer (NI) and Treasury Managed Fund (TMF) (NSW Government employees). icare outsources the management of workers compensation claims to Claim Service Providers (CSP) for both the NI and TMF.

On the 6 October 2022, icare announced as part of its improvement program and commitment to delivering a higher standard of service in the NI scheme that it was expanding its panel of CSPs. This expansion saw the introduction of two new CSPs, Gallagher Bassett (GB) and DXC Technology, to handle all types of workers compensation claims and includes case managers with specialist skills to manage more complex psychological injuries.

As part of its risk minimisation strategy, icare staggered the onboarding of the two new providers. GB commenced providing claims management services from 1 July 2023 and DXC Technology from 1 October 2023.

This audit was conducted to assess the claims management performance of GB at a time appropriate to its onboarding as a CSP to the NI. SIRA allowed sufficient time for GB to commence management of claims before it initiated an audit in order to obtain a robust view of the CSPs performance in the early stages of both policy transition, and claims and injury management activities, which are critical to outcomes achieved by workers.

2. Purpose

In September 2022, SIRA made a commitment to conduct quarterly audits of the performance of the NI by reviewing up to 50 claims.

SIRA’s audit of the NI in November 2023 was designed to evaluate the efficiency of icare’s support and onboarding of a new claims service provider and transition process, alignment with the claims model. This would be evaluated through:

• assessment of the compliance and case management practices in:
  • liability determination
  • early intervention, injury management and recovery at work
  • data reporting accuracy
  • Customer Services Conduct Principles.

The insurers compliance and performance would be assessed relative to the following obligations under:

• Chapter 3, Part 2 and Chapter 7, Part 3, of the Workplace Injury Management and Workers Compensation Act 1998 (1998 Act), specifically:
  • S43,45 – early contact and injury management planning with key parties for workers with significant injuries as defined by the 1998 Act
  • S80 – required period of notice
  • S267, 274, 275, 279, -timely decision making in accordance with statutory timeframes
  • S268, 269, 280 notice requirements.
• And Part 3 of the Workers Compensation Act 1987 (1987 Act), specifically:
  • S36 & 37 – weekly payments during first and second entitlement period
  • S43 – decisions regarding the amount of an injured worker’s pre-injury average weekly earnings
  • S82 – that indexation was applied to workers weekly payments where required
  • S84 - times for payment of weekly compensation.
• The Workers compensation guidelines (2021)
• The Standards of Practice – expectations for insurer claims administration and conduct (2022)
• Workers compensation insurer data reporting requirements (2019)

2.1. Audit sample size and selection methodology

The audit sample was selected from all claims received and managed by GB from the inception of services on 1 July 2023 and remained open on 31 August 2023. This ensured a representation of claims that covered many different injury types and liability statuses to assess the overall approach of the insurer.

Claims from this period were divided into 2 cohorts, 15 psychological and 35 physical injuries. Each cohort was then further sorted into an assortment of reported liability and return to work status codes e.g. notification of injury, reasonable excuse, provisional acceptance, acceptance of full liability, liability denied, partial capacity, full capacity, returned to work and no capacity.

One physical claim was identified at the time of the audit to have been moved to another CSP and was removed from the audit scoring.

Criteria Scoring

This audit was scored in accordance with the SIRA Insurer claims management audit manual . The audit assessment instrument applied was a modified version of the SIRA self-audit tool available to all insurers.

As this audit was assessing early activities of claims, the assessment criteria relative to activities that occur later in a claim were removed, focussing on elements 1-10. Element 9 relating to estimates on a claim was not assessed.

Where a non-compliance with the SIRA audit manual was identified, the insurer was provided with the opportunity to provide additional information or evidence to the auditors to demonstrate conformance. The responsibility for the final decision sat with the lead auditor, with the aim for all non-conformances identified by the auditor team to be agreed on by all parties.

Note: Where it was evident that claims management activity or case manager behaviour caused harm, or increased risk of harm to the worker, and this fell outside the scope of the review the matter was escalated to GB and icare for immediate review and claim level actions.

2.3. Performance Metrics

This audit is measured across 3 components:

1. Compliance: This measures activity performed by GB in relation to the obligations and timeframes placed upon the NI by the workers compensation legislation and the workers compensation guidelines.
2. Case management practice: This measures GB practice in line with the NI’s injury management program, and SIRA’s expectations of case management in accordance with the overarching case management principles in the Standards of Practice.
3. Data quality: This measures the accuracy of data submitted by the NI to SIRA against information held in the claim file.

Table 1 - Overall results summary

3. Results: Compliance

Total score for component: 89%

Table 2 – Compliance component summary

3.1. Injury management and recovery at work - assessment

Key findings

Initial stakeholder contact

SIRA measured the insurers compliance with Section 43(4) 1998 Act. - within 3 days of being notified of a significant injury, the insurer contacts the worker, employer, and where relevant the worker’s treating doctor.

Early contact with relevant stakeholders was evident on the audited claims, providing a supportive environment and relationship with workers. There was 1 instance of non-compliance where contacts were observed not to be made within 3 business days and was attributed to delayed reporting from the NI to GB.

Other instances were identified where there was no contact with the workers treating doctor when it was considered appropriate by the auditors that contact with the doctor may have improved case management planning and actions.

Consent

SIRA measured the insurers compliance with Section 243 1998 Act, that there is clearly documented evidence on file of a workers consent to discuss and release information to third parties.

The audit team raised concerns that the consent form used by the CSP may not meet the benchmark and expectations of ‘informed consent’ outlined in SIRAs Standard of Practice 1 for the following reasons:

• the form did not clearly indicate or confirm what types of information may be released, obtained or used
• the form referred to ‘an agent nominated on the form’ yet there was no named agent, e.g. ‘I authorise the agent nominated in this form to collect use and disclose personal and health information related to my injury’.

The audit team also highlighted the requirement contained within the insurers consent form for workers to have the form signed by a witness prior to acceptance by the insurer. This additional requirement is beyond legislative or SIRA expectation, adds administrative burden to the worker and potentially delays access to treatment and entitlements.

3.2. Injury management and recovery at work - planning

Key findings

SIRA measured the insurers compliance with Section 45 (1) 1998 Act in that an injury management plan is required to be established for workers that have sustained a significant injury.

Compliance with the development and issuing of an initial injury management plan for significant injuries was generally met and timely.

3.3. Injury management and recovery at work- implementation

There is no compliance practice component applicable to this element.

3.4. Injury management and recovery at work- finalisation

There is no compliance practice component applicable to this element.

3.5. Liability determination

Key findings

Initial determination within seven days

SIRA measured the insurers compliance with sections 267 and 275 1998 Act, determining the requirement to commence weekly payments within 7 days of notification of injury.

94% of the audited claims were noted to have had the first liability decision made within 7 days of notification to the insurer.

Two claims did not meet the legislated statutory timeframe due to a processing error and delay of triaging the injury notifications from the NI to GB. SIRA auditors were informed that in the initial onboarding of GB, due to policy system changes, notifications needed to be initially manually assigned to the CSP. This additional administrative process led to the delays in determination of liability and processing of benefits to workers. With system enhancements this was automated at a subsequent date, removing the administrative delays.

Initial liability decision notice

SIRA measured the insurers compliance with sections 268 & 269 1998 Act, that written notice of the initial determination is provided to the worker.

Consistent with feedback from previous audits of the Nominal Insurer, the icare liability templates used by CSPs could be simplified, contained incorrect information, and did not clearly advise workers of their rights and entitlements.

• Five claims were observed to have accepted provisional liability for medical payments only but did not inform the workers that the insurer had reasonable excused the requirement to commence weekly payments in accordance with section 268 1998 Act.
• Not all notices were observed to inform the workers of how to resolve a reasonable excuse that was applied. While the notices outlined the worker could make a claim by completing a claim form, there was little explanation as to why this may assist the process.

Ongoing liability decision

SIRA measured the insurers compliance with section 274 1998 Act where a reasonable excuse was applied, or provisional liability accepted, the subsequent liability decision is made within legislated timeframes.

Auditors noted 5 instances where case managers did not meet statutory timeframes to determine liability. Out of the 5 examples;

• one claim was delayed due to waiting on advice from a legal provider
• three claims did not have liability decisions made prior to the expiry of 12 weeks of provisional liability and
• one claim had no liability decision made despite the worker raising complaints.

Liability for medical and related treatment

SIRA measured the insurers compliance with section 279 1998 Act for the determination of liability for medical and related treatment within legislated timeframes.

Two instances of non- compliance were identified with delayed determination of liability for medical treatment which impacted on the workers recovery:

• One worker was self-employed waiting on approval for surgery
• One worker discharged from hospital and requested post operative rehabilitation.

In both instances, there appeared to be sufficient information on file to make a determination, and there was evidence on file that both workers raised complaints with the insurer regarding delays to treatment. The insurer representative noted the approval or determination was not made as the received information was overlooked.

3.6.  Weekly payments

Key findings

Weekly payments

SIRA measured the insurers compliance with Part 3, Schedule 3, and section sections 84 of 1987 Act, along with part 10 of the Workers Compensation Guidelines. Evidence on file was assessed to determine that the correct weekly payments were paid to the worker in a timely manner.

The insurer scored their lowest rates of compliance across the audit against Criterion 6.3 (63%) – the requirement to ensure that that workers receive their correct weekly payments in accordance with their PIAWE, correct entitlement period and legislative requirements.
With a large portion of the insurers claims originating from small employers there appeared to be a lack of clear information supplied to employers about how, what, and when to pay workers which resulted in workers not receiving access to timely and accurate weekly benefits.

Generally, initial liability and PIAWE letters were difficult to comprehend and contained incorrect or deficient information leading to employers not clearly understanding what to pay workers and subsequently, workers not knowing if they were being paid correctly.

Further, the following specific payment errors were identified:

• two underpayments on claims where liability had been disputed and the workers were not paid up to the effective decision date
• three claims where payments were incorrectly paid to the employer instead of the worker causing financial distress to the worker through delayed, or, non-payment of weekly payments
• file notes indicated one worker was informed that they could not be paid their weekly payments until the monies paid in error to the employer were reimbursed to the insurer,
• one underpayment where it was identified that indexation was not applied to weekly payments at the 1 October 2023 indexation point.

Certificate of Capacity

SIRA measured the insurers compliance with section 44B of 1987 Act and section 270 of 1998 act, that there is evidence of a valid certificate of capacity to claim weekly benefits.

Overall, there was clear medical evidence covering weekly payments for incapacity.

Auditors observed 2 claims where weekly payments were made to workers without supporting certificates of capacity on file. It was noted that attempts were made to follow up the workers for certification.

3.7.  Work capacity

Key findings

SIRA measured the insurers compliance with sections 43 and 44 of 1987 Act to conduct regular assessments, where required, of a workers current capacity for work by reviewing evidence on file and documenting rationale for work capacity decisions.

The general assessment of a workers capacity for work was performed well and was found to be conformant across claims.
Due to the formative nature of the claims reviewed and the focus of the audit targeted towards early intervention the audit team only assessed and reviewed compliance with criterion 7.1 and 7.4

3.8. Service provider management and related expenses

Key findings

Service provider approvals

Generally, the compliance aspect of service provider management was managed well, and treatment requests were promptly addressed. Any non-compliance identified with statutory timeframes pursuant to Section 279 98 Act were addressed in criterion 5.2.

Independent Medical Examinations

SIRA measured that independent medical examinations were arranged in accordance with Part 7 of the workers compensation guideline (2021).

• The claims management procedures that insurers are required to follow when arranging Independent Medical Examinations for workers as prescribed by Part 7 of the Workers Compensation Guidelines were observed to be adhered to in 8 out of 10 claims where independent medical examiners (IME) were utilised.
• Non-compliance with Part 7.5 of the guidelines was observed on 2 claims with inadequate notification provided to workers about upcoming IME appointments.

3.9. Claims estimates

There is no compliance practice component applicable to this element and the component was not reviewed as part of this audit

3.10. Data management

There are no legislative compliance requirements relevant to this component applicable.

4. Results: Case management practice

Total score for component: 88 %

Table 3 – Case Management practice component summary

4.1. Injury management and recovery at work - assessment

Key findings

SIRA assessed the evidence on file to determine whether the insurer was making early supportive contact with all relevant stakeholders in accordance with standards of practice 33 and 34.

Evidence confirmed attempts for prompt and early contact with all relevant stakeholders demonstrating the insurers commitment to injury management.

4.2. Injury management and recovery at work - planning

Key findings

Through the evidence on file, SIRA assessed the insurers injury management planning through the development and updating of the IMP in accordance with their own Injury Management Program and Standards of Practice 12, 33 and 34.

Whilst there was evidence of IMPs and risk assessments on file, it was observed that intended plans, actions and outcomes from these risk assessments were not always followed through.

Several IMPs were observed to be not consistent with information on file, not tailored to workers circumstances, had incorrect content or information and there was minimal evidence of consultation to develop subsequent plans. These practices are below the benchmarks and expectations set out in Standard of Practice 12.

SIRA also observed workers initial risk ratings remaining constant or were downgraded when there was available evidence of these being workers at a greater risk of delayed recovery. Examples included:

• workers undergoing surgery,
• suitable duties withdrawn by pre-injury employer,
• worker becoming job detached, or
• workers not attending suitable employment.

4.3. Injury management and recovery at work - implementation

Key findings

Promoting recovery at work

SIRA assessed the available evidence on file to support the implementation of the injury management plan, promoting recovery through work in accordance  with Standard of practice 34.

There was consistent evidence that recovery at work was promoted through the provision of suitable duties.

The only non-conformance identified was for a worker who was job detached and had capacity for work at the time of notification, but not referred to a workplace rehabilitation provider for over 12 weeks.

Claim handovers

SIRA assessed the available evidence on file that in the event of a change in case manager, the claim strategy is documented as part of the handover and the incoming case manager makes proactive early contact with stakeholders to establish working relationships.

Claim handovers were managed well by case managers and were conformant with expected practices outlined in relevant Standards of practice

4.4. Injury management and recovery at work – finalisation

Key findings

In accordance with Standards of practice 19 and 30, SIRA assessed the available evidence on file to support that all stakeholders had been notified of intending claim closure and all outstanding invoices had been paid.

Due to the formative nature of the claims reviewed there was limited activity to review against this component.

One non-conformance was recorded in no evidence on file notifying the workers treating practitioners and service providers of the insurers intention to close the claim in accordance with Standard of practice 30.1

4.5. Liability determination

There is no case management practice component applicable to this element.

4.6. Weekly payments

Key findings

Initial and interim pre-injury average weekly earnings calculation

SIRA measured the insurers conformance with claims management benchmarks and expectations prescribed in Standards of Practice 3, 7 and 23 through observations of case management practices and decision making documented on file to determine workers’ initial and/or interim pre-injury average weekly earnings (PIAWE).

• Auditors noted that initial communication sourcing the required PIAWE information was swift and robust.
• Interim PIAWEs were noted to be applied to a high proportion of claims (51%) and the insurer scored a relatively low compliance rate for the criterion 6.2, regarding subsequent communication to both employers and injured workers. The initial liability letter poorly communicated that the PIAWE amount determined was in fact an interim amount and the letter failed to clearly identify what further information was required by the insurer to properly assess and determine the workers correct PIAWE.
• Two claims were observed to not adequately inform workers of their correct PIAWE and weekly payment entitlements.
• Auditors also noted the amount of information requested from working directors (small employers) to determine full PIAWE appeared excessive. Evidence was noted that employers expressed their difficulty to obtain all the requested information leaving these claims on interim PIAWE for long periods.

Statutory reduction in payments

Where workers compensation legislation provides for a reduction in weekly payments of compensation, Standard of Practice 9 sets the expectation that insurers are to provide both employers and workers with no less than 15 working days' notice of the reduction in payments.

Of the 22 claims reviewed that had a step down in entitlements after the first 13 weeks of weekly payments, only 14 claims (60%) met the required benchmark to inform workers and employers of the amendment to payment amounts.

Further, several step-down letters observed did not inform workers that they were entitled to either 95% or 80% of their PIAWE in the second entitlement period, dependant on hours worked each week.

The audit team observed;

• five instances where workers and/or employers were either notified of the 13-week step down after the 15-day time frame recommended in the Standard of Practice, or, after the date of effect
• two instances where it was recorded that notification of the step down was not required when it was
• one instance where no letter was evident on file of the 13-week step down in entitlements.

Due to the confusion in the letters and communication, it was noted that an employer queried what the correct amount was to pay a worker, delaying payment and leading to an underpayment of weekly payments to the worker.

4.7. Work capacity

There is no case management practice component applicable to this element.

4.8. Service provider management and related expenses

Key findings

Factual investigations and surveillance.

Where a claim was referred for a factual investigation or surveillance, SIRA assessed the available evidence on file to deem whether case management expectations outlined in Standard of Practice 24 had been met.

There was a high component of non-conformances (8 from 17) scored against the insurer for their practices and conduct relating to arranging for workers to participate in factual investigations (criterion 8.9). While case notes were recorded that workers had been ‘advised of the purpose, process and obligations’ of the factual investigation, no written documentation to the worker confirming the process was evident on file.

No audited claims were referred for surveillance activities.

Payment of service provider invoices.

In accordance with Standards of Practice 10 and 15, SIRA assessed that provider invoices were paid within the 10 working day timeframe.

Evidence on file indicated payment of service provider invoices were made within timeframes on 36 of 41 files (88%). It was acknowledged by the insurer that the payments systems had some challenges in the audit period leading to some delays in payments.

Workplace rehabilitation.

Due to the formative nature of the claims, there was minimal engagement with workplace rehabilitation providers. Instances were observed on claims whereby it would have been appropriate to engage a provider early, particularly to assist small employers to support their employees in their return to work.

Payment of worker claim reimbursements.

In accordance with Standard of Practice 10, SIRA assessed whether any reimbursements claimed by the worker were paid promptly, and within 10 working days.

One worker had their claim for reimbursement verbally denied with no dispute notice issued to the worker. Claim notes recorded affirmed the insurers decision and stated that no dispute notice was required.

4.9. Claims estimates

SIRA auditors did not measure conformance against this case management component.

4.10. Data management

There is no case management practice component applicable to this element.

5. Results: Data quality

Total score for component: 95%

Table 4 – Data quality component summary

5.1. Injury management and recovery at work - assessment

There is no data quality component applicable to this element.

5.2. Injury management and recovery at work - planning

There is no data quality component applicable to this element.

5.3. Injury management and recovery at work - implementation

There is no data quality component applicable to this element.

5.4. Injury management and recovery at work - finalisation

There is no data quality component applicable to this element.

5.5. Liability determination

Key findings

SIRA assessed the liability status code and date of this decision in the data submitted to SIRA accurately reflected information on the claim file.

Non-conformances were identified when liability letters and information on file had a different date of decision than the data reflected in the claims management system and subsequently reported to SIRA.

One claim was identified to be a duplicate report of an injury and the insurer determined that no liability decision was required. However, the insurer closed the initial report of injury and did not amend the liability status code to identify that this claim raised was an administration error.

5.6. Weekly payments

Key findings

The data reported to SIRA matched the information visible on file.

5.7. Work capacity

Key findings

The data reported to SIRA matched the decisions and information regarding adverse work capacity decisions on file. Minimal adverse work capacity decisions were observed due to the maturity of the claims reviewed.

5.8. Service provider management and related expenses

There is no data quality component applicable to this element.

5.10 Data management

Key findings

The work status and injury codes reported in the data to SIRA was consistent with the work status and injury codes recorded on the file.

The non-conformances identified related to work status codes not being updated on the file when new relevant information was presented.

6. Results: Overall Audit Score

Overall Audit Score

7. Observations

7.1. Strengths

The following practices/processes were identified as areas of strength in GB management of claims:

• There was a high level of demonstrated engagement with workers, employers and treating practitioners which supports a strong focus towards early intervention and injury management.
• Early contact with relevant stakeholders was evident, which provided for a supportive environment and positive relationship with all parties.
• Early risk assessments were completed on claims in accordance with Standard of practice 34.
• There was appropriate use and referral to third-party consultants such as independent medical examiners and injury management consultants.
• Claim handovers and transition of claims between case managers were observed to be well managed and workers and employers were duly informed of any changes with no adverse effects.
• Where there was a delayed notification of injury by employers, SIRA observed the insurer to apply an excess payment in accordance with Section 160 1987 and the SIRA Market Practice and Premium Guidelines.
• There was generally prompt approval for medical expenses claims and payment of invoices. Initial injury management plans were issued in  timely manner.

7.2. Areas for improvement

The following practices/processes were identified as opportunities for improvement in the management of claims:

• Ensure a consistent audit trail of initial injury notification on claim files. The date and time stamp for when an injury was first notified to the NI was observed to be incorrect on many files, and the initial assessment and referral date of the injury notification to GB was unclear, risking non-compliance with liability decision timeframes and payments of benefits to workers.
• Ensure accurate risk rating assessment of the claim consistent with new information on file. In some instances, workers became disengaged from their pre-injury employer or underwent surgery, and the claim risk rating was at odds with the new information, remaining the same or reducing rather than amplifying.
• Assess the minimal information required to determine the PIAWE for working directors of companies, facilitating the prompt payment of these workers.
• Improve the accessibility and accuracy of standard icare templates and letters used to communicate important information and decisions to workers and employers.
• Ensure timely action, response, intervention, and resolution to complaints from workers about their weekly payment, especially where there are barriers to the employer paying the worker.
• Improved and early identification of small employers is required for those who may need increased guidance and support with the recovery through work process by engaging workplace rehabilitation providers at the earliest point.
• Improve case management practices and communication when arranging for workers to participate in factual investigations.
• Promote accurate file noting rather than inserting of large standard templates designed to cover multiple scenarios.
• Consider the definition of date claim made as a data reporting field in line with the requirements for making a claim in the workers compensation guidelines and the reporting requirements in the workers compensation insurer data reporting requirements.

8. Future audits

SIRA’s next audit of the NI was conducted in February 2024.