Dallas Booth on NSW Workers Compensation

NIBA CEO Dallas Booth discusses NSW workers compensation and the serious challenges still to be resolved.

Written on 11 June, 2021
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Following a major expose by the ABC Four Corners program, significant media coverage, Parliamentary inquiries and a major Government-sponsored inquiry into the NSW Workers Compensation scheme, two major reports were released recently. They were:

• The report from the NSW Parliament’s Legislative Council Standing Committee on Law and Justice following the Committee’s 2020 review of the Workers Compensation Scheme; and

• The report on the Independent Review of icare and the State Insurance and Care Governance Act 2015 by the Hon Robert McDougall QC.

Both reports were released on 30 April 2021.The Report from the Standing Committee on Law and Justice was unanimously approved by all members of the Committee. This does not happen very often. A key paragraph from the chair’s foreword to the Report was as follows:

This review undoubtedly highlighted the need for significant leadership and cultural change at icare. It is clear that the icare board must govern icare appropriately and have experience in personal injury management or workers compensation. Senior executives at icare must also demonstrate the high standard and level of responsibility expected of public sector officials.

The Report went on to make a series of findings about the management of workers compensation in New South Wales and made nine recommendations for the future management and oversight of the scheme.

The McDougall Report was commissioned by the NSW Government. The key conclusion in the Report was set out in the Executive Summary, as follows:

When icare was established, it set about an enthusiastic program of change. Although that program was well-intentioned, its execution was, in a word, sloppy. In hindsight, it is clear that icare sought to change more than was necessary to achieve its statutory purposes and implemented its changes far too quickly and without adequate testing.

After considering a range of matters in considerable detail, the Report made 33 detailed recommendations.

It is important to note that significant change has already started to occur, with the appointment of a new chair and members of the icare board, and a new Chief Executive Officer of icare, Richard Harding. Under Harding ’s leadership, a major program of reform is being developed and implemented.

NIBA will work with Harding and his executive team at icare to implement much-needed changes to the operation of the workers compensation scheme, especially in the areas of underwriting and premiums, injury and claims management. Insurance brokers share the concerns of many of their employer clients regarding the need for a well-managed, efficient and effective workers compensation scheme which delivers the necessary care and support for injured workers, and charges appropriate premiums to NSW employers.

Why does this happen? Why was it allowed to occur?

icare is not the insurer of the NSW workers compensation scheme. The scheme has a formal legal title, and is a legal entity called the Nominal Insurer. Workers compensation risks are insured by the Nominal Insurer, not by icare. icare manages the Nominal Insurer arrangements, but Nominal Insurer assets and liabilities are not carried on the icare balance sheet. In fact, the assets and liabilities of the NSW Nominal Insurer are not carried on the state’s balance sheet either. This is clearly stated in the annual financial accounts of the Nominal Insurer.

So, we have the situation where the workers compensation liabilities for most private sector employers in NSW are carried by a legal entity that is not owned by the state, or by the organisation that manages its affairs. Who, exactly, is responsible and accountable for the operation of workers compensation in New South Wales?

The McDougall report considered these issues in some detail. The report notes that the Nominal Insurer operates within the NSW public sector but does not go on to assess the full lines of accountability and responsibility in relation to the business and its operations.

While the operational issues and challenges are now being addressed by icare and the State Insurance Regulatory Authority, I believe much more detailed consideration needs to be given to the overall accountability mechanisms that need to be in place to ensure the mistakes of the past five years are not repeated. This should include detailed consideration of the roles, responsibilities and accountabilities of:

• The minister ultimately responsible for the operation of the scheme;

• NSW Treasury, as the government agency advising the minister on these matters;

• The icare Board, including its role and powers and relationship with the minister to whom it is responsible;

• The icare Chief Executive Officer and the executive team; and

• The State Insurance Regulatory Authority.

I hope I am wrong, but I do fear if clear accountability and responsibility is not implemented in relation to the NSW Nominal Insurer, the mistakes of the past may well be repeated.

Dallas Booth, NIBA CEO