Kelly, Alexandra; MacRae, Drew --- "Insurance investigations and the claims-handling process: How to protect policyholders" [2018] PrecedentAULA 68; (2018) 149 Precedent 14

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THE VICTORIAN OMBUDSMAN’S WORKSAFE INVESTIGATION

A GUIDE FOR PRACTITIONERS

By Linda Hanley and Grace Bowran-Burge

In September 2016, the Victorian Ombudsman, Ms Deborah Glass, published her findings in relation to her investigation into the management of complex workers’ compensation claims and WorkSafe oversight. The investigations were instigated in response to a growing number of complaints to her office and evidence provided by people working within the WorkCover system that a growing number of complex WorkCover claims were being mishandled.

As part of the investigation, the Ombudsman reviewed WorkCover cases from all five WorkSafe insurance agents, who at the time were: Allianz, CGU, Gallagher Bassett, QBE and Xchanging. Furthermore, the Ombudsman ensured that the cases that were reviewed were diverse in the types of injured workers involved and the types of injuries the workers sustained.

The Ombudsman’s investigation primarily looked into the following key areas:

• Whether the five insurance agents unreasonably denied liability for WorkCover claims or unreasonably terminated the entitlements of injured workers.

• Whether the five insurance agents engaged in unreasonable decision-making in order to obtain financial rewards provided to them by reason of their remuneration arrangement with WorkSafe.

• Whether WorkSafe provided effective oversight of the management of WorkCover claims by the five insurance agents.

In order to make her findings, the Ombudsman examined evidence obtained from various sources, including:

• 65 complex claims selected across all five insurance agents between 2014 and 2016;

• a random selection of emails exchanged by 15 technical mangers from all five insurance agents between April and June 2015;

• interviews conducted with injured workers and their family members, staff members from Accident Compensation Conciliation Service (ACCS), WorkCover Assist, WorkSafe and executives and former staff from each of the five insurance agents;

• material provided by WorkSafe, including WorkSafe’s contract and remuneration agreement with the five insurance agents; and

• material supplied by each of the five insurance agents, including their internal policy and procedure documents in relation to the handling of WorkCover claims.

At the conclusion of her investigation, the Ombudsman revealed the following key findings:

• There was unreasonable decision-making across all five insurance agents.

• There was evidence that financial rewards were encouraging the five insurance agents to focus on rejecting or terminating WorkCover entitlements.

• There were deficiencies in WorkSafe’s oversight into the five insurance agents’ management of WorkCover claims.

THE OMBUDSMAN’S KEY FINDINGS

Unreasonable decision-making across all five insurance agents

The investigation revealed that across all five insurance agents, unreasonable decision-making was occurring and commonly occurring within the following contexts:

• Insurance agents were found to be misusing evidence (for example, the opinions of Independent Medical Examiners (IMEs)) in their decision-making to reject or terminate WorkCover entitlements.

Identified examples of insurance agents misusing evidence included:

(a) Insurance agents failing to provide significant background information regarding the injured worker in their letters of instruction to IMEs when seeking an opinion.

(b) Insurance agents engaging in ‘fishing exercises’ and requesting multiple supplementary reports from IMEs in an attempt to influence or change the existing opinion expressed by the IME.

(c) Insurance agents engaging in ‘doctor shopping’ and seeking multiple reports from different IMEs until they found one that would support a rejection or termination of WorkCover entitlements.

(d) Insurance agents posing leading questions in their letters of instructions to IMEs in the hope of seeking an opinion that would justify a rejection or termination of the worker’s WorkCover entitlements.

• Insurance agents were found to be upholding decisions that were unreasonable even though the decision had been disputed by an injured worker and referred to conciliation through the ACCS.

Instances of this were identified when certain insurance agents acknowledged that they were maintaining a decision and proceeding with the conciliation process despite:

(a) Agreeing that their decision was ‘difficult to maintain’.

(b) Having the view that if their matter was heard in court, ‘it would get chucked out immediately’.

(c) Agreeing that their grounds for rejecting and terminating an injured worker’s entitlements were ‘not strong’.

It was noted by the Ombudsman that the failure of insurance agents to withdraw an unsustainable decision was not only costly to the WorkCover scheme, but had a significant and detrimental impact on the injured worker and their family.

The Ombudsman estimated that the average cost of a conciliation was approximately $1,500 and the average cost of a court proceeding was approximately $27,000. Further, the average amount of time it took to obtain a conciliation outcome was approximately five months, while the average court proceeding took approximately two years.

• Insurance agents were found to be making decisions to terminate WorkCover entitlements despite the decisions being contrary to the final, binding and conclusive nature of Medical Panel decisions.

Examples identified included:

(a) Insurance agents reinstating an injured worker’s WorkCover entitlements subsequent to a Medical Panel decision and then, shortly thereafter, terminating the same entitlements on the basis of a conflicting IME’s opinion.

(b) Insurance agents terminating an injured worker’s WorkCover entitlements following a Medical Panel decision on the basis that there was a ‘material change’ to the worker’s circumstances but this ‘material change’ was not properly identified and/or supported.

(c) Insurance agents adopting a narrow interpretation of the Medical Panel opinion and therefore applying only a portion of the Panel’s opinion to the injured worker’s circumstances.

• Insurance agents were found to be allowing the injured worker’s employer to influence their management of the worker’s WorkCover claim. In some cases, it was found that insurance agents were yielding to the requests of the employer of the injured worker and seeking instruction from them in relation to the management of the worker’s WorkCover claim.

• Insurance agents were not properly conducting their internal review processes and merely engaging in a ‘box-ticking exercise’. The investigation revealed that some internal review processes maintained a rejection or termination of WorkCover entitlements without providing adequate details regarding how they came to the decision and what processes were adopted in reviewing the decision.

Financial rewards for rejecting or terminating WorkCover claims

The Ombudsman noted that WorkSafe pays its insurance agents according to a remuneration framework which entitles insurance agents to the following forms of remuneration:

• an annual service fee;

• a lump sum fee; and

• an annual performance adjustment, which are financial rewards and penalties offered by WorkSafe based on an insurance agent’s performance against a set of key measures tied to WorkSafe’s strategic objectives.

The Ombudsman noted that in 2014-15, WorkSafe paid more than $52 million in financial rewards to the five insurance agents.

During the Ombudsman’s investigations, it was revealed that insurance agents have manipulated their claims data in order to maximise financial rewards and minimise penalties. Insurance agents were found to have:

• recorded false and inaccurate information on claims;

• falsified documents or records;

• paid more or less compensation to injured workers on the basis of the financial reward scheme; and

• delayed payment of compensation.

Deficiencies in WorkSafe’s oversight of the management of WorkCover claims

The investigation revealed that, among other things, WorkSafe was:

• Deficient in its auditing process. Audits were identified to have contained small sample sizes and to have been conducted irregularly.

• Not properly using the provided feedback, complaints and dispute outcomes to identify and resolve issues with the insurance agents’ decision-making, processes and procedures.

• Not commonly issuing directions to its five insurance agents when problems were identified with their decision-making, and instead merely requesting that the insurance agent review their decision when a problem was identified.

• Not providing sufficient oversight of the IME system.

RECOMMENDATIONS FOR CHANGE

Following her findings, Ms Glass made 17 recommendations for change. These recommendations were directed both to the Victorian Government and WorkSafe.

Key government recommendations proposed by the Ombudsman included:

• reviewing the current dispute resolution model for workers’ compensation – in particular, the process following unsuccessful conciliation – to ensure that the model is fair and conducted in a timely fashion; and

• amending the Workplace Injury Rehabilitation and Compensation Act 2013 (Vic) to empower the ACCS to issue a direction to an insurance agent where a decision has no reasonable prospect of success were it to proceed to court.

Key WorkSafe recommendations proposed by the Ombudsman included:

• considering how the overall operation of the scheme can better target its resources and oversight to ensure quality decision-making in the cohort of complex cases where disputes frequently arise;

• implementing a system to record, collate and track complaints, feedback, discussions with insurance agents and outcomes, and utilise this data;

• providing conciliation officers access on request to the relevant claim files;

• reviewing all claims subject to a direction at conciliation to identify opportunities to improve insurance agent practices;

• implementing changes to the current IME system to prevent insurance agents from selectively using their preferred IMEs;

• amending the IME complaint-handling policy to provide scope to examine complaints where a worker does not provide consent for the complaint to be provided to the IME; and

• amending the IME quality assurance process to ensure that IMEs who are the subject of a high number of complaints are peer reviewed.

In September 2016, WorkSafe and the Andrews Labor Government adopted all 17 recommendations.

WHERE TO NEXT?

Despite the implementation of all 17 recommendations, the Ombudsman continues to receive a large number of complaints from the public about WorkSafe and its insurance agents. More than 660 complaints have been received so far in 2017-18 and a similar number was received in the previous financial year.^[1]

As a result, in June 2018 the Ombudsman announced that a follow-up investigation would be conducted.

SUGGESTED SCOPE OF THE SECOND REPORT

The Ombudsman has noted that a key recommendation to emerge from the original investigation was the necessity for WorkSafe to take greater responsibility for ensuring quality decision-making by its agents.^[2] As such, the follow-up investigation will examine whether WorkSafe’s implementation of the recommendations has changed insurance agent practices and decision-making and improved the effectiveness of its oversight.

Suggested further areas for investigation that were not examined in the Ombudsman’s original 2016 report include:

• Whether the five insurance agents were engaged in unreasonable return-to-work practices, resulting in injured workers being required to participate in unsuitable return-to-work plans or the termination of injured workers’ entitlements.

• Whether WorkSafe provided effective oversight of the management of return-to-work plans by the five insurance agents.

• An examination into the practice of employer and/or insurance representatives attending medical appointments with injured workers. According to a survey conducted by Unions Western Australia in December 2017, 11 per cent of members who had made a claim for workers’ compensation reported that their employer had sought to be or was represented at a medical assessment for their claim.^[3] This practice would benefit from investigation by the Ombudsman; in particular, it would be worthwhile investigating:

(a) whether similar percentages exist in the Victorian compensation scheme; and

(b) whether injured workers are aware of their rights in relation to requests by insurance representatives and/or employers to attend medical appointments.

FINAL REMARKS

The Ombudsman’s investigation into the management of complex workers’ compensation claims and WorkSafe’s oversight identified multiple areas of concern. It is pleasing that all recommendations proposed by the Ombudsman to address these concerns were adopted by the government and WorkSafe. However, it is apparent that problems with the Victorian workers’ compensation system still remain. For this reason, the Ombudsman’s follow-up investigation will be an important tool for both injured workers and practitioners. It is hoped that the new investigation will consider the points noted above. It is also hoped the Ombudsman will propose further recommendations in an attempt to make the Victorian workers’ compensation system easier for injured workers to navigate.

As the Ombudsman noted when announcing the subsequent investigation:

‘Given the distressing nature of what we found in 2016, it is incumbent upon me to examine whether the situation has improved for workers with complex injuries and conditions... As I said at the time, the cases we investigated are not merely files, numbers or claims; they involved people’s lives, and the human cost should never be forgotten.’^[4]

Linda Hanley is an Associate at Adviceline Injury Lawyers and Grace Bowran-Burge is a Lawyer at Adviceline Injury Lawyers. Linda and Grace have extensive practices in Workcover. They are passionate about helping injured workers navigate the Workcover system and receive compensation for their injuries. PHONE via Adviceline Injury Lawyers on [phone].

Key quotes to add to publication

‘The [agent] will get a report and it doesn’t quite say what they want it to say. So they will frame another question and go back to the [same IME] and they will keep asking questions framed just differently enough to finally get the one answer they want. They will ignore everything previous to that and hang their hat on that last statement.’ - Senior Conciliation Officer, ACCS

‘My mother was cut off from her medical expenses and we struggled to keep up with them. All of her treatment was denied and the sheer stress and anxiety this caused her made her get worse and I watched her lose all hope. My mother proceeded to commit suicide and passed away.’ - Daughter of the injured worker

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^[1] Victorian Ombudsman, Ombudsman to re-investigate insurers’ handling of workers compensation claims and WorkSafe oversight (7 June 2018) <https://www.ombudsman.vic.gov.au/News/Media-Alerts/workers-compensation>.

^[2] Ibid.

^[3] R Carmody, ‘Employers sitting in on workers’ compensation medical appointments a growing trend: Unions’, ABC News (online), 5 December 2017, <http://www.abc.net.au/news/2017-12-05/worker-forced-to-have-company-rep-at-doctor-appointment/9225290> .

^[4] See above note 1.