Two of the biggest workers’ compensation schemes in Australia are losing millions of dollars a year, according to an investigation into the A$60bn ($43bn) system.
A joint Four Corners investigation with The Age and Sydney Morning Herald has found the schemes in Victoria and New South Wales are facing significant financial troubles, reported abc.net.au.
The investigation has heard claims of insurance agents gaming the system for financial incentives and it reveals that an underpayment scandal at the country’s biggest provider, icare, could cost up to A$80m—double what had been originally reported.
The joint investigation examined hundreds of sensitive internal NSW government documents that show despite deepening concerns about the financial viability of icare, its executives were paid some of the biggest salaries of any NSW government agency.
The icare scheme started out in 2015 with a A$4bn surplus and every year 295,000 businesses pay more than A$3bn in premiums to cover more than 3m workers if they get injured or sick at work.
As early as June 2018, Treasury officials noted they were aware the regulator—the State Insurance Regulatory Authority (SIRA)—had become “increasingly concerned about the financial viability of the workers’ insurance scheme”.
By 2020, the regulator had warned that the fund’s “liabilities are now greater than their assets by A$459m”.
Possible A$80m debt bomb
Earlier this year, icare admitted it had underpaid thousands of sick and injured workers by up to A$40m as a result of calculation errors.
But Treasury documents from March reveal “approximately 52,000 people have been underpaid an estimate of A$80m in claims benefits”.
Regulator refers icare to anti-corruption watchdog
Questions are also being raised about how icare awards contracts.
On 25 February this year, icare published dozens of contracts worth more than A$150m on the NSW contract database, with some more than two years old and none disclosed within the required 45 working day period.
SIRA has confirmed to Four Corners that it has referred some matters to the anti-corruption watchdog the Independent Commission Against Corruption.
Mr John Nagle, CEO of icare, said he was not aware the regulator had referred any matters to ICAC but he was confident in icare’s processes. He denied there were any solvency issues at icare and said he welcomed SIRA’s scrutiny of its accounts and valuations.
Some insurance agents went doctor shopping
In Victoria, the workers compensation scheme WorkSafe recorded a loss of A$823m last financial year.
But there is still money to be made for insurance agents who can meet key performance targets.
Victorian Ombudsman Deborah Glass told the joint investigation she had seen evidence that some agents were gaming the system for financial incentives, such as by doctor shopping and cherry-picking evidence to terminate claims.