Originally published in Precedent Magazine
In September 2016, the Victorian Ombudsman, Ms Deborah Glass, published her findings in relation to her investigation into the management of complex worker’s compensation claims and WorkSafe oversight. The investigations were instigated in response to the growing number of complaints to her office and evidence provided by people working within the WorkCover system that indicated a growing number of complex WorkCover claims being mishandled.
As part of the investigation, the Ombudsman reviewed WorkCover cases from all five insurance agents, who at the time were: Allianz, CGU, Gallagher Bassett, QBE and Xchanging. Furthermore, the Ombudsman ensured that the cases that were reviewed were diverse in the types of injured workers involved and the types of injuries the workers involved sustained.
The Ombudsman’s investigation primarily looked into the following key areas:
- whether the five insurance agents unreasonably denied liability for WorkCover claims or unreasonably terminated the entitlements of injured workers
- whether the five insurance agents engaged in unreasonable decision making in order to obtain financial rewards provided to them by reason of their remuneration arrangement with WorkSafe
- whether WorkSafe provided effective oversight of the management of WorkCover claims by the five insurance agents.
In order to obtain her findings, the Ombudsman obtained evidence from various sources, including the following:
- 65 complex claims selected across all five insurance agents between 2014 and 2016
- a random selection of emails exchanged by 15 technical managers from all five insurance agents between April and June 2015
- interviews conducted with injured workers and their family members, staff members from ACCS, WorkCover Assist, WorkSafe and executives and former staff from each of the five insurance agents
- examining material provided from WorkSafe, including WorkSafe’s contract and remuneration agreement with the five insurance agents
- examining material from within each of the five insurance agents, including their internal policy and procedure documents in relation to the handling of WorkCover claims.
At the conclusion of the Ombudsman’s investigation, the Ombudsman revealed the following key findings:
- there was unreasonable decision making across all five insurance agents
- there was evidence that the financial rewards were encouraging the five insurance agents to focus on rejecting or terminating WorkCover entitlements
- there were deficiencies in WorkSafe’s oversight into the five insurance agent’s management of WorkCover claims.
Unreasonable decision making across all five insurance agents
The investigation revealed that across all five insurance agents, unreasonable decision making was occurring and commonly occurring within the following contexts:
- insurance agents were found misusing evidence (i.e. the opinions of Independent Medical Examiners’ (IMEs)) in their decision making to reject or terminate WorkCover entitlements. Identified examples of insurance agents misusing evidence included:
- insurance agents failing to provide significant background information regarding the injured worker in their letters of instruction to IMEs when seeking an opinion
- insurance agents engaging in “fishing exercises” and requesting multiple supplementary reports from IMEs in an attempt to influence or change the existing opinion expressed by the IME
- insurance agents engaging in “doctor shopping” and sought multiple reports from different IMEs until they found one that would support a rejection or termination of WorkCover entitlements
- insurance agents posing leading questions in their letters of instructions to IMEs in hope of seeking an opinion that would justify a rejection or termination of WorkCover entitlements.
- insurance agents were found to be maintaining decisions that were unreasonable when an insurance agent’s decision was disputed by an injured worker and referred to conciliation through the ACCS. Instances of this were identified when certain insurance agents acknowledged that they were maintaining a decision and proceeding with the conciliation process despite:
- agreeing that their decision was “difficult to maintain”
- having the view that if their matter was heard in court, “it would get chucked out immediately”
- agreeing that their grounds for rejecting and terminating an injured worker’s entitlements were “not strong”.
It was noted by the Ombudsman that the failure of insurance agents to withdraw an unsustainable decision was not only costly to the WorkCover scheme, but had a significant and detrimental impact on the injured worker and their families.
The Ombudsman estimated that the average cost of a conciliation was approximately $1,500 and the average cost of a court proceeding was approximately $27,000. Further to this, the average amount of time it took to obtain a conciliation outcome was approximately 5 months and the average court proceeding took approximately 2 years.
- insurance agents were found to be making decisions to terminate WorkCover entitlements despite it being contrary to the final, binding and conclusive nature of Medical Panel decisions. Examples identified where insurance agents were making decisions contrary to Medical Panel decisions include:
- insurance agents reinstating an injured worker’s WorkCover entitlements subsequent to a Medical Panel decision and then shortly thereafter, terminating the same entitlements on the basis of a conflicting IME’s opinion
- insurance agents terminating an injured worker’s WorkCover entitlements following a Medical Panel decision on the basis that there was a “material change” to their circumstances but this “material change” was not properly identified and/or supported
- insurance agents adopting a narrow interpretation of the Medical Panel opinion and therefore only applying a portion of the Medical Panel’s opinion to the injured worker’s circumstances.
- insurance agents were found to be allowing the injured worker’s employer to influence their management of the injured worker’s WorkCover claim. It some cases, it was found that insurance agents were yielding to the request of the employers of the injured workers and seeking instruction from them in relation to the management of the injured worker’s WorkCover claim
- insurance agents were not properly conducting their internal review processes and merely engaging in a “box ticking exercise”. The investigation revealed that some internal review processes maintained a rejection or termination of WorkCover entitlements without providing adequate details regarding how they came to the decision and what processes were adopted in reviewing the decision.
Financial rewards encouraging the five insurance agents to focus on rejecting or terminating WorkCover claims
The Ombudsman noted that WorkSafe pays its insurance agents according to a remuneration framework which entitles insurance agents to the following forms of remuneration:
- an annual service fee
- a lump sum fee
- an annual performance adjustment, which are financial rewards and penalities offered by WorkSafe in light of their performance.
The Ombudsman noted that in 2014-2015, WorkSafe paid more than $52 million in financial rewards to the five insurance agents.
During the investigations, it was revealed that insurance agents have manipulated their claims data in order to maximise financial rewards and minimise penalities. Insurance agents were found:
- recording false and inaccurate information on claims
- falsifying documents or records
- paying more or less compensation to injured workers on the basis of the financial reward scheme
- delaying payment of compensation.
Deficiencies in WorkSafe’s oversight into the five insurance agent’s management of WorkCover claims
The investigation revealed that amongst other things, WorkSafe was:
- deficient in its auditing process. Audits were identified to have contained small sample sizes and conducted irregularly
- not properly using the provided feedback, complaints and dispute outcomes to identify and resolve issues with the insurance agents’ decision making, processes and procedures
- not commonly issuing directions to its five insurance agents when problems were identified with their decision making and instead, merely requesting that the insurance agent reviewed their decision when a problem was identified
- not providing sufficient oversight over the IME system.
Recommendations for change
Following her findings, Ms Glass made 17 recommendations for change. These recommendations were directed to both the Government and WorkSafe.
Key Government recommendations proposed by the Ombudsman included:
- reviewing the current dispute resolution model for worker’s compensation, in particular, the process following unsuccessful conciliation to ensure the model is fair and conducted in a timely fashion
- amending the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) to empower the ACCS to issue a direction to an insurance agent where a decision has no reasonable prospect of success were it to proceed to court.
Key WorkSafe recommendations proposed by the Ombudsman included:
- considering how the overall operation of the scheme can better target its resources and oversight to ensure quality decision-making in the cohort of complex cases where disputes frequently arise;
- implementing a system to record, collate and track complaints, feedback, discussions with insurance agents and outcomes and utilise this data;
- providing conciliation officers access on request to the relevant claim files
- reviewing all claims subject to a direction at conciliation to identify opportunities to improve insurance agent practices
- implementing changes to the current IME system to prevent insurance agents from selectively using preferred IMEs or provide injured workers a choice of the IME with the appropriate speciality
- amending the IME complaint handling policy to provide scope for examination of complaints where a worker does not provide consent for the complaint to be provided to the IME
- amending the IME quality assurance process to ensure IMEs subject to a high number of complaints are peer reviewed.
In September 2016, WorkSafe and the Andrews Labor Government adopted all of the 17 recommendations.
Where to next?
Despite the implementation of all 17 recommendations, the Ombudsman continues to receive a large number of complaints from the public about WorkSafe and its insurance agents. More than 660 complaints have been received so far in 2017-18 and a similar number were received in the previous financial year.1
As a result, in June 2018, the Ombudsman announced a follow up investigation would be conducted.
Suggested scope of the second report
The Ombudsman has noted that a key recommendation to emerge from the original investigation was the necessity for WorkSafe to take greater responsibility in ensuring quality decision-making by its agents.2 As such, the follow up investigation will examine whether WorkSafe’s implementation of the recommendations has changed insurance agent practices and decision making and improved the effectiveness of its oversight.
Suggested further areas of investigation that were not examined in the Ombudsman’s original 2016 report include:
- whether the five insurance agents engaged in unreasonable return to work practices resulting in injured workers being required to participate in unsuitable return to work plans or the termination of injured workers entitlements
- whether WorkSafe provided effective oversight of the management of return to work plans by the five insurance agents
- an examination into the practice of employer and insurance representatives attending medical appointments with injured workers. According to a survey conducted by Unions Western Australia in December 2017, 11 per cent of members who had made a claim for worker’s compensation reported that their employer had sought to be or was represented at a medical assessment for their claim.3 This practice would benefit from investigation by the Ombudsman, in particular, it would be worthwhile investigating:
- whether similar percentages exist in the Victorian compensation scheme
- whether injured workers are aware of their rights in relation to requests by insurance representatives to attend medical appointments.
The Ombudsman’s investigation into the management of complex worker’s compensation claims and WorkSafe’s oversight identified multiple areas of concern. It is pleasing that all recommendations proposed by the Ombudsman to address these concerns were adopted by the Government and WorkSafe. However, it is apparent that problems with the Victorian worker’s compensation system still remain. For this reason, the Ombudsman’s follow up investigation will be an important tool for both injured workers and practitioners. It is hoped that the follow up investigation will consider the points noted above. It is also hoped the Ombudsman will propose further recommendations in an attempt to make the Victorian workers compensation system easier for injured workers to navigate.
As the Ombudsman noted when announcing the subsequent investigation:
“Given the distressing nature of what we found in 2016, it is incumbent upon me to examine whether the situation has improved for workers with complex injuries and conditions…..As I said at the time, the cases we investigated are not merely files, numbers or claims; they involved people’s lives, and the human cost should never be forgotten.”4
4 Above n 1.