To privatise accident compensation schemes or not? Stakeholder views

Transcription

1 To privatise accident compensation schemes or not? Stakeholder views Andrew Doughman Bevan Damm Peter McCarthy Ernst & Young This presentation has been prepared for the Actuaries Institute 2012 General Insurance Seminar. The Institute Council wishes it to be understood that opinions put forward herein are not necessarily those of the Institute and the Council is not responsible for those opinions.

2 Agenda Context why do we care about accident compensation? More workers comp focused Our approach stakeholder interviews Key themes Please note that the purpose of this presentation is not to advocate nor discourage privatisation

3 Survey question - 1 Out of this group, which accident comp scheme do you think operates the best in terms of scheme management? a. NSW workers comp b. NSW CTP c. WA workers comp d. Vic workers comp e. QLD CTP f. VIC CTP

4 Survey question - 2 Which of the following do you think is the most important for ensuring an effective and efficient accident compensation scheme? a. Management b. Scheme design c. Premium structure d. Political and stakeholder support

5 Management of schemes NSW workers compensation

6 Our approach Stakeholders in workers comp schemes Claimants Employer associations (for workers comp) Unions (for workers comp) Insurers The legal profession Brokers Medical and allied health professionals WorkCover Others Not the view of Ernst & Young or the authors!

7 Privately Underwritten Scheme Government Philosophy Regulator Design Supervision Service Providers Delivery

8 Key themes Scheme management Outcomes vs process Cross-subsidies Specialisation Government and the regulator Premium regulation Transitional considerations for NSW workers compensation

9 Scheme management over structure Management is paramount both public and private can work Ownership and accountability to outcomes (incl. Financials) Active, timely decision making Dispute process Fraud RTW / rehab focus / medical providers Consistent, transparent & balanced legislation (incl. regulations and guidelines)

10 Outcomes focus vs process Scheme outcomes Safety and risk awareness Return To Work ( RTW ) Predictable & stable costs Process Onerous administration ahead of activities related to scheme objectives Incentives encourage the right behaviours E.g. Diagnosis and treatment to optimise rehabilitation & RTW

11 Cross subsidies - only where necessary Affordability for high risk groups Dilutes price signals Removal from schemes as they evolve Who should subsidise? Interest groups? Government? Limit their use Improve transparency

12 A case for specialisation? Industry-specific issues (e.g. Construction) Unique to industry Premium collection Claims expertise Encouraging apprentices Reduced scale Selection against the scheme Insurer of last resort Interest from employer groups in NSW

13 Survey question - 3 What do you believe should be the role of the Government (as distinct from the regulator) in a privatised scheme? a. To set the high-level objectives for the scheme b. To set the benefit structure c. To set the premium framework d. Two or more of the above

14 Survey question - 4 What do you believe should be the role of the regulator in a privatised scheme? a. To monitor the performance of the scheme b. Licensing / compliance c. Deciding benefit and premium levels d. Both (a) and (b) e. All of the above

15 Role of Government and the regulator Philosophy reflecting the values of society High-level scheme objectives Safety Productivity Affordability / availability / indemnity Contextualise high-level scheme objectives Premium / benefit / service levels Legislation, licensing & regulation

16 Transitional considerations for NSW workers comp Turning around the deficit Strategy to deal with the tail Improving the predictability and stability of costs Government commitment Proposal from the insurance industry

17 Survey question - 5 How many insurers do you believe should operate in an accident comp market the size of the NSW workers comp scheme (currently, $2.5B written premium)? a. 1, Government monopoly b. 1, Private monopoly c. 2-3 d. 4-7 e. 8+

18 Any questions? Thank you for your time