Rehabilitating the Victorian WorkCover Authority s claims management system (Epilogue)

Transcription

1 CASE PROGRAM Rehabilitating the Victorian WorkCover Authority s claims management system (Epilogue) In early 2001, the Victorian WorkCover Authority (VWA) began to implement the changes suggested by the McKinsey consultants. However, the Authority also recognised that it lacked the internal capacity to oversee such sweeping changes. To this end, it created a dedicated Project Management Office to co-ordinate the process, recruiting a consultant specialised in implementing large change programs. 1 This Office coordinated an implementation team drawn from VWA employees, removed from their day-to-day responsibilities, and divided into 13 streams for each of the major aspects of the plan. 2 The streams included: - Notification and triage - Claims processes - Injury management protocols and provider management - Labour market assistance - Legal investigations and recoveries - CAT transfer (to look at catastrophic claims) - Tender Management - Agent remuneration This case was written by Marinella Padula, Australia and New Zealand School of Government for John Daley. It has been prepared for teaching use in association with the cases and The use of teaching materials is restricted to authorised persons. Cases are not necessarily intended as a complete account of the events described. While every reasonable effort has been made to ensure accuracy at the time of publication, subsequent developments may mean that certain details have since changed. This work is licensed under Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International Licence, except for logos, trademarks, photographs and other content marked as supplied by third parties. No licence is given in relation to third party material. Version Distributed by the Case Program, The Australia and New Zealand School of Government, 1 Management of claims by the Victorian WorkCover Authority, Victoria Auditor-General s Office, November 2001, p.52 2 Management of claims by the Victorian WorkCover Authority, Victoria Auditor-General s Office, November 2001, p.52

2 As time went on, the implementation team expanded to subsume half the claims management organisation. The Project Management Office devised a detailed implementation plan with milestones for each stream. The Project Management Office regularly reported to the VWA CEO and Board on progress with each of the streams. 3 In September 2001, the VWA called for expressions of interest from claims agents, and these were followed by a request for tender. In April 2002, the successful applicants were selected (Exhibit A). Five of the previous 11 agents were reappointed, and two agents new to Victoria were selected. None of the unsuccessful tenderers challenged the process. Throughout June, VWA successfully managed the transfer of 58,000 employer files from former agents to the members of the new agent panel which commenced operation in July Throughout the implementation period, VWA communicated extensively with employer groups, employee groups, staff and agents, to explain the case for change, and the changes proposed. The details of the incentive model were developed in conjunction with the agents as the tender progressed. Extensive consultation and planning sessions were conducted. VWA held inductions for agent trainers, and the development of new information technology support tools. The full implementation of the new model began in December The VWA s financial position started to improve. By , for example, the scheme was fully funded again several years earlier than anticipated. Meanwhile, average premium rates fell steadily from 2.22 percent of payroll to 1.39 percent (Exhibit C), to be amongst the lowest in Australia (Exhibit B). While the overall number of claims remained fairly constant, from , the number of claims exceeding 26 weeks duration fell by 15 percent, and the number of claims exceeding two years duration was halved, which indicated improved claims management performance (Exhibit D). 4 The non-completion rates improved between each time period, suggesting that claims management improved throughout the system (Exhibit E). Another indication was employer and employee satisfaction levels. Employer satisfaction rose from 76.3 percent in 2002 to 84.4 percent in In the same period, injured worker satisfaction rose from 56.3 percent to 69.8 percent. 5 However, a 2009 Victorian Auditor-General s report noted that return-to-work (RTW) rates since 2002 had only improved marginally over the medium term (Exhibit F). 6 Continuance rates may have improved substantially while RTW rates only improved marginally because a class of workers not returning to work previously claimed WorkCover payments, but now instead claimed unemployment or disabilities benefits, or retired. The Audit report concluded that overall, the new claims management model had substantially reduced the VWA s long-term claims costs and improved the scheme s financial position. Indeed, projected liabilities had been reduced by $2.9 billion. 7 It also recognised that the VWA had devised better ways to monitor and raise agent performance but determined that more needed to be done to improve agents case management skills. For instance, agents did 3 Ibid, p.53 4 Claims Management by the Victorian WorkCover Authority, Victorian Auditor-General s Office, June 2009, p ibid, p ibid, p.3. 7 Ibid. 2

3 not give due consideration to psychosocial issues in devising RTW strategies. The report found that while adequate management was performed in 63 percent of cases, good practice was only observed in 21 percent of cases. 8 However, it also noted that the VWA had already taken positive steps to address these issues. 8 Ibid, p.4 3

4 Exhibit A: Claims Agents 2002 Allianz Australia Workers Compensation (Victoria) Ltd Cambridge Australia CGU Workers Compensation Vic Ltd JLT Workers Compensation Services Pty Ltd NRMA Workers Compensation Vic Ltd QBE Mercantile Mutual Workers Compensation Wyatt Gallagher-Bassett A provider of insurance and risk management products and services. Formed in 1998 when MMI and Allianz became a wholly owned subsidiary of Allianz AG A subsidiary of the US-based AON Group, providing risk management, insurance brokerage, reinsurance and human capital consulting services throughout the world. It s the company s first entry into workers compensation management in Australia Providing personal, commercial and rural insurance products, CGU has more than 3 million policies in Australia. Formed through a merger between Commercial Union Insurance and NZI Insurance in 1998 Wholly-owned subsidiary of the largest quoted British and European insurance broking group. JLT provides risk solutions and corporate services in Australia Joined the WorkCover agent panel in 2001 when it took over HIH. Part of the Insurance Australia Group, Australia s largest general insurance group. Formed in 1999 as a joint venture between QBE Insurance (Australia) and Mercantile Mutual Insurance (Australia) A 50% partnership with US-based Gallagher Bassett Services Inc. Delivers integrated claims management and loss adjusting services including total claims management in catastrophic situations Source: Annual Report , Victorian WorkCover Authority Exhibit B: Premium rates, by State, % 3.0% 2.5% 2.0% 1.5% 1.0% 0.5% 0.0% Queensland Victoria WA NSW Tasmania SA Source: 2005 Annual Report, Victorian WorkCover Authority 4

5 Exhibit C: VWA financial performance to Underwriting performance Revenue Premium 1,587 1,693 1,923 1,787 1,668 1,641 1,656 1,608 Other Expenses Claims paid and change in outstanding claims liabilities (1,232) (1,682) (1,259) (1,376) (1,302) (1,163) (1,259) (1,772) Agent fees (98) (124) (172) (201) (202) (191) (193) (194) Other (172) (171) (166) (172) (218) (230) (244) (268) Underwriting result 109 (265) (504) Investment returns (208) (50) (944) (1305) Net profit (loss) before tax (99) (315) 1,164 1,071 1,401 1,631 (876) (1,809) Assets 5,252 5,651 7,439 8,908 10,012 11,221 10,271 9,300 Liabilities 6,033 6,748 7,313 8,007 8,526 8,565 8,201 8,486 Net equity (781) (1,097) ,486 2,656 2, Key Indicators Premium rate ($ premium / payroll) Combined ratio (expenses + losses / premiums) 2.22% 2.22% 2.22% 2.00% 1.80% 1.62% 1.46% 1.39% 83% 117% 83% 98% 103% 97% 102% 139% Investment returns (4%) (1%) 11% 11% 14% 13% (9%) 14% Funding ratio (assets / liabilities) 87% 84% 102% 111% 117% 131% 125% 110% Source: Annual Reports, Victorian WorkCover Authority, various years 5

6 Exhibit D: Continuance Rates (% paid benefit of those with lost time injury reported in period, as at October each year) wks 47% 49% 50% 47% 46% 45% 44% 43% 26 wks 30% 32% 31% 29% 27% 26% 27% 26% 52 wks 20% 21% 19% 18% 17% 16% 16% 15% 13 weeks 26 weeks 52 weeks Exhibit E: Non-closure Rates (% paid benefit of those paid benefit at previous milestone reported in period, as at October each year) wks to 26 wks 64% 65% 62% 62% 59% 58% 61% 60% 26 wks to 52 wks 67% 66% 61% 62% 63% 62% 59% 58% 13 weeks to 26 weeks 26 weeks to 52 weeks Source: Claims Management by the Victorian WorkCover Authority, Victorian Auditor-General s Office, June 2009, p.48 Exhibit F: Durable Return to Work Rates Victoria 74% 70% 71% 75% 77% 76% 75% Australia 73% 73% 76% 76% 80% 77% 75% Source: Claims Management by the Victorian WorkCover Authority, Victorian Auditor-General s Office, June 2009, p.38 6