icare to review and remediate historical indexation issue
icare to remedy historical issue affecting indexation of benefits for some injured workers across Nominal Insurer and Treasury Managed Funds. Board approves plan to pay impacted claims during the period.
In October 2019, icare established a continuous improvement program, including a quality assurance framework, to monitor the accuracy of injured workers’ weekly payments. In 2022, as a result of this program, we identified a historical issue in relation to the application of indexation of weekly benefits for some injured workers. The issue pre-dates icare and only impacts claims from October 2012 to October 2019.
Under NSW Workers Compensation laws, an injured worker getting weekly benefits is entitled to an indexed adjustment to their benefit each April and October. The indexation amount is calculated on the Australia's National Statistical agency (ABS) Wage Price Index published each quarter.
Legislative reforms were introduced in 2012, which included new and complicated provisions relating to indexation. At that time, icare did not exist, and the guidance and oversight of the application of indexation was with WorkCover.
From 2012 to 2019, there was an onus on the employer and worker to provide additional pay details to inform eligibility and enable the Claims Service Provider (CSP) to process indexation. The indexation anomalies relate to claims from this period, managed on legacy systems run by external CSPs before icare was set up.
Analysis of claims payment data was undertaken to ascertain the extent of the potential issue and the number of claims potentially impacted.
As this issue pre-dated icare’s existence, there was additional complexity to the analysis due to the need to review and understand previous practices implemented by WorkCover and different CSPs, including some no longer providing services on behalf of the Nominal Insurer (NI) and Treasury Managed Funds (TMF).
icare engaged a third party, Deloitte, to review the issue and assist in determining the extent, financial impact, and remediation approach.
Deloitte has now completed its review, which has included accessing information contained in decommissioned systems and has determined that after the exclusion of correctly indexed and low balance claims, there are a possible 20,643 claims that may require review and possible remediation (approximately 16,800 NI claims and 3,800 TMF claims are affected, about 6.6% of total claims). It is expected the further file review process will result in these numbers reducing.
icare estimates the maximum remediation value is approximately $40 million. This number will also reduce significantly as claims are reviewed and the correct application of indexation is confirmed.
icare will undertake a remediation program that leverages the previously-approved PIAWE Review and Remediation program, with the core principles of maintaining a customer-centric approach, ensuring the right outcomes for injured workers while also balancing scheme sustainability.
The simplification of the legislation and the introduction of icare’s IT platform in 2019 meant that indexation after 2019 is accurate. Following its recent review, icare has introduced multiple improvement initiatives, including systems upgrades, to ensure indexation continues to be applied correctly going forward.
icare Managing Director and CEO Richard Harding said: "icare apologises to any injured worker who has been impacted by these errors. icare did not create this issue but we are taking responsibility to fix it. This issue started more than 10 years ago, and we discovered it thanks to our improved processes and systems. Fixing this issue is part of icare’s commitment to continuous improvement. When we find a problem, we are open about it, and we work very hard to fix it".
We expect the remediation program will commence in July 2023 and take four to six months to complete.