Key points from the McDougall Review of icare

On 30 April 2021, the Hon. Robert McDougall QC delivered his extensive (374 page) report. The independent review was a bring-forward of the scheduled five-year review, in response to public allegations. Divided into four parts, Part 1A addresses allegations raised on a case-by-case basis, including declining Return to Work Rates, the treatment and underpayment of injured workers, icare’s probity, procurement and conflict of interest management, and the financial viability of the Nominal Insurer (‘NI’). Part 1B outlines an organisational review of icare largely covering the above issues. Part 2 provides a review of government-managed workers compensations schemes and their legislative framework. Part 3 provides a review of State Insurance and Care Governance Act. Finally, Part 4 summarises the recommendations for improvement. McDougall sets out 49 recommendations in the final part.

The Financial viability of the Nominal Insurer

McDougall states, “In summary, given the level of assurance produced by the multiple layers of review that I have described, and the assistance I have received from CS (Cumpston Sarjeant) in relation to this subject, any suggestion that the scheme’s financial sustainability is currently in doubt is, in my opinion, unsupportable.”

McDougall calls out the various processes involved in preparing icare’s financial statements, including the valuation of liabilities, peer reviews and unqualified Audit Office reviews and confirms there is nothing in the Cumpston Sarjeant review to suggest process has gone awry or that the stated liabilities in the terms which they are stated are inaccurate or unreasonably assessed.

The Cumpston Sarjeant review notes that premium rates in the two of the last three previous financial years from 2017-2020 were loss-making. The report states that if the steps that have been taken, continue to be taken regarding expense management and setting of premium rates to reflect appropriately the risks insured, there is no reason to think the NI will cease to be financially viable in the future.  

Return To Work (RTW) rates

The report makes clear the decline of RTW rates from late 2017, stating the dispute between SIRA and icare over how rates were measured as “to an extent a side issue”. While the report acknowledges icare’s recognition of operational instability within Employers Mutual NSW Ltd (EML), and high caseloads as contributing to the decline, that recognition “glosses over the likely impact” of the new operating claims model on RTW rates. The significant steps taken by icare to address the issue have not shown a marked improvement so far. The report recommends icare continue to build on commitments to improving EML’s claims management capabilities, including extending the current service provider agreement to 24 months to allow EML to implement changes in claims management processes.

The claims management model

According to the report, the significant changes by icare to the claim’s management model were overly ambitious in their scope and introduction, made within a short space of time, increasing the risk factor by multiples, implemented without due testing, and with insufficient regard to the inherent risks. None of these problems were unforeseeable or unpredictable and should have been identified.

Pace of change

The report identifies this prioritisation of speed as the common factor behind multiple serious failings at icare. In the executive summary, McDougall criticises icare for implementing a program of changes too quickly and without adequate testing.

Probity and procurement failures

McDougall states that icare consequently disregarded establishing proper and prudent procurement practices and did not pay attention to embedding sound probity principles. Both instances were procedural and cultural – a reflection of icare’s determination to effect speedy change and dismissing practices that might hinder this. McDougall continues, “It is unfortunate that the zeal to implement the transformation was not moderated by the prior establishment of best practice ground rules for icare’s operation.”

The report recommends that icare should prepare a plan for cultural change which addresses the key risk factors of inattention to process, a focus on transformation at the expense of process and resistance to oversight.

Legislation

The report ends by examining government-managed workers compensation schemes and the legislation underpinning them. It recommends that this legislative structure should be improved by making limited and specific changes to sections relating to medical assessments and treatment. It would also allow for the compromise of claims where that is presently not available, so long as there is appropriate oversight of the compromise. It notes the Personal Injury Commission is well placed to provide this.

While the Nominal Insurer has made substantial progress to achieving the policy objectives that were set out for it, the report recommends a clear statement of policy objectives should be inserted into the State Insurance and Care Governance Act to resolve any doubt over the roles, functions and powers of icare, SIRA and SafeWork NSW.

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