4.3 Access to Self-Insurance
4.4.1 Monitoring model
4.4.1.1 Auditing framework Recommendation 12:
That the VWA manage self-insurers under a performance driven monitoring regime incorporating:
• variable OHS and claims management self-audit requirements for self-insurers, driven by performance levels;
• strategic action plans designed to drive improvements at worksites, developed by self-insurers and reported against annually; and
• variable levels of VWA audit and review of self-insurers, based upon performance.
There are a number of issues with the current oversight arrangements:
• all self-insurers are subject to the same level of oversight irrespective of their performance;
• self-audits required by the VWA can duplicate internal audits performed by self-insurers; and
• there is concern that monitoring performance via audits alone focuses on systems and processes (rather than on outcomes) and may not maximise the opportunities for continuous improvement.
The Review has proposed revisions to the current auditing framework to address these issues. The details of the proposed auditing frameworks under the two models are discussed below.
Option 1 – Value-added intervention model
It is proposed that a targeted oversight model based on three tiers be
implemented within the existing legislation (refer to section 4.2). Self-insurers would be subject to a variable audit and action plan framework, with
differentiation in oversight for lesser, medium and high performers.
Page 58 of 111 Figure 14 sets out the oversight requirements for self-insurers which could be implemented within the existing legislation. Note that under this model all self-insurers, regardless of their tier, receive four year renewals (subject to
meeting the approval requirements).
Tier 1 Tier 2 Tier 3
VWA conducts JAS-ANZ compliant audit at entry or re-approval
Action plan and milestones developed by self-insurer and signed off by VWA
Annual reports to VWA on progress against Action plan milestones and annual review and update of Action plans
Financial
Self audits Financial self audits completed annually and reported to the VWA Annual OHS performance report provided to VWA signed off by
Board/senior management
OHS Report
4 years 3 years for new self-insurers
(a) The VWA reserves the right to require reporting of self-audits if the VWA audit identifies significant issues.
(b) Reporting of self-audits will be required the following year if the self-insurer fails an audit.
(c) Subject to satisfactory results in the previous claims management self-audit.
Claims Mgmt.
Figure 14 – Audit and action plan framework under the existing legislation
Page 59 of 111 The benefits of this model are:
• a targeted approach allowing the VWA to focus its resources on the self-insurers with the highest risks and greatest opportunity for improvement, whilst reducing the requirements for high performing self-insurers and providing them with greater flexibility to facilitate innovation;
• action plans would provide for a focus on continuous improvement and strategic OHS planning (consistent with SafetyMAP criteria 2.3.1); and
• the reliance on audit activities as the primary means of managing OHS in worksites is replaced by a mix of audit activity and an outcome focused approach, allowing for a more balanced and practical oversight regime.
Self-audit requirements Financial self-audits
All self-insurers would continue to be required to undertake and report on their annual self-audit of financial status. This is the case irrespective of the
performance tier of the self-insurer as these audits are required for annual financial monitoring.
OHS self-audits
High performers (tier 1) would not be required to report OHS self-audits to the VWA although they would be required to conduct the appropriate internal audits of their systems as part of their ongoing health and safety management system processes. This would be subject to VWA verification. These self-insurers would be considered to have mature health and safety systems in place and thus require less focus by the VWA on their systems and process compliance. However, if a VWA audit or inspection identifies significant issues the VWA could require tier 1 self-insurers to conduct an OHS self-audit and provide the results.
Tier 2 self-insurers would be required to report their OHS self-audit results to the VWA every second year. However, if a tier 2 self-insurer failed an OHS self-audit, it would be required to conduct a self-audit the following year to demonstrate to the VWA that the substantive issues had been addressed.
Tier 3 self-insurers, including new self-insurers, would be required to undertake and report on an OHS self-audit annually, as all self-insurers do currently.
Claims-management self-audits
Following consultation with stakeholders on the draft report, the framework will also incorporate flexible claims-management self-audit requirements based upon a self-insurer’s performance (i.e. tier allocation).
Page 60 of 111 Under the existing arrangements, all self-insurers are required to select a random sample of claims to audit. The sample size is determined according to the number of active claims. For instance, if a self-insurer has less than 20 active claims, all the claims must be sampled. If between 20 and 90 claims, 20 claims are sampled. As the number of active claims increases, the number of claims to be sampled also increases, with 10 per cent of active claims
sampled if a self-insurer has more than 1000 active claims.
Under the proposed framework, tier 1 and 2 self-insurers that have achieved a satisfactory result in the previous year’s claims management self-audit will be able to sample a smaller number of claims than a tier 3 self-insurer with the same number of active claims in the current audit period.
This approach is consistent with the targeted approach to oversight and will contribute to reducing the administrative requirements for better performing self-insurers.
Action plans
Under the existing SafetyMAP audit criteria, an organisation is required to have in place a health and safety management plan. The plan sets objectives, targets, timeframes and allocates responsibilities.
Under the new model, self-insurers would use their health and safety management plan as a basis for a strategic action plan that would outline a program for improving identified performance gaps, primarily in the area of health and safety, but could also potentially extend to claims management and other activities.
The insurer would provide the action plan to the VWA at the time of self-insurance application or re-application. The action plan would include areas for performance improvement that were identified through audit or monitoring activities conducted by the self-insurer and/or the VWA.
The action plan would be ‘a living document’ and would be reviewed and updated regularly as part of normal business planning cycles. It should also be updated when VWA audits, inspections or the self-insurer’s self-audits identify non-conformances.
As part of the new model’s outcome-focussed approach, self-insurers would be required to provide the VWA with annual updates against the milestones in the plan.
As a guide, the plans would be expected to detail the key improvement area, actions required, actions undertaken and results to date, priority, roles and responsibilities, goals aimed at improving performance, evaluation procedures (for measuring performance against goals and ensuring continuous
improvement), timelines and key milestones. Where a self-insurer has in place a well-developed, detailed health and safety management plan (SafetyMAP criteria 2.3.1), the strategic action plan may well be a sub-set of that plan.
Page 61 of 111 The use and monitoring of action plans would provide several advantages:
• complex problems could be programmed to be addressed over time;
• they would be driven by input from both the self-insurer and the VWA, resulting in a comprehensive plan for the self-insurer;
• they would support continuous improvement at a practical level and would drive workplace change in target areas; and
• they would provide a vehicle for the VWA and the self-insurer to assess progress over time against the specified milestones.
VWA audit and review
Under the proposed oversight model, the level of VWA audit and review would be dependent on the performance tier of the self-insurer.
High performing self-insurers would not be subject to regular review. Instead, random assessments by the VWA would be conducted. These assessments could take the form of an audit against a subset of SafetyMAP or equivalent criteria, as the standard, or a review of progress at worksites against the action plan.
For tier 2 and 3 self-insurers, the VWA would undertake an annual check of progress and/or an audit against a subset of criteria (SafetyMAP or
equivalent). In addition, tier 3 self-insurers would be subject to random checks of progress against milestones.
Externally certified self-insurers
For those self-insurers in tier 1 that are externally certified to SafetyMAP, AS4801 or other approved standard/system, reporting requirements for self-audits will remain unchanged from the current requirements.
For externally certified self-insurers classified in tiers 2 and 3, the VWA may, where appropriate, require the reporting of self-audits in line with the
arrangements applying to non-externally certified self-insurers in that particular tier.
All self-insurers will be required to develop and report against strategic action plans.
Option 2 – Legislative change model
The key difference in the audit and action plan framework under the legislative change model is the alignment of the proposed flexible re-approval periods with the three-tiered oversight model. This would provide a greater incentive for improved performance as the five year renewal period for tier 1 insurers provides a reduction in administrative requirements for these self-insurers.
Page 62 of 111 Other elements of the model are the same as for the value-added intervention model, namely:
• a variable self-audit reporting requirement based on the level of performance (tier 1, 2 or 3) for OHS self-audits;
• a reduced self-audit sampling requirement based on the level of performance (tier 1, 2 or 3) for claims management self-audits;
• all self-insurers required to develop an action plan which would provide a tool for assessment of OHS progress and outcomes; and
• variable levels of VWA monitoring against the action plan and other criteria based upon the level of performance.
The audit and action plan framework under the legislative change model is set out in Figure 15.
R eport s elf audit annually R eport s elf audit
ev ery 2 y ears ( b) progres s agains t
A c tion plan progres s agains t
A c tion plan and annual rev iew and update of A c tion plans
Financial
Self audits F inanc ial s elf audits c om pleted annually and reported to the V W A A nnual O H S perform anc e report prov ided to V W A s igned off by
B oard/s enior m anagem ent
O HS Report
(a) T he V W A res erv es the right to require reporting of s elf-audits if the V W A audit identifies s ignific ant is s ues .
(b) R eporting of s elf-audits w ill be required the follow ing y ear if the s elf-ins urer fails an audit.
(c) S u b je c t to s a tis fa c to ry re s u lts in th e p re v io u s c la im s m a n a g e m e n t s e lf-a u d it.
Figure 15 – Audit and action plan framework (Option 2 - legislative change model)
Page 63 of 111 4.4.1.2 Performance management framework
Recommendation 13:
That the VWA develop a performance management framework for the three-tiered model that includes:
• developing a suite of performance indicators to assess self-insurers’
performance;
• regular assessment of self-insurers’ comparative performance, using a range of claims management, occupational health and safety, and other performance data;
• enhancing systems to capture claims and OHS data for self-insurers, including ensuring that self-insurers provide sufficient data to enable effective OHS enforcement and prevention activity; and
• regular reporting of performance information to self-insurers, possibly via the internet.
The VWA and stakeholders have recognised the need for a robust
performance monitoring and reporting system. The VWA currently collects a considerable amount of claims management data but does not monitor or report the performance of self-insurers on a regular and systematic basis.
Similarly, there is no regular reporting of the occupational health and safety performance of self-insurers.
Development of a performance management framework is a key requirement for the implementation of the proposed new model. The key aim of the
framework would be the classification of self-insurers, based on performance, as part of the proposed three tiered model of oversight. In addition a new reporting framework would:
• assist the VWA, self-insurers, unions and other stakeholders to better understand the self-insurance environment;
• create incentives for self-insurers by being able to compare their performance against their peers;
• facilitate a culture of continuous improvement; and
• assist the VWA to mitigate risks, by enabling the early identification of lesser performers and any emerging performance issues.
Page 64 of 111 Developing a suite of performance indicators to assess self-insurers’
performance
It is proposed that under the performance management framework the performance of self-insurers would be regularly assessed against a suite of performance indicators and the results of this assessment used to allocate each self-insurer to one of three tiers. Allocating self-insurers to three tiers, as described in Recommendation 3, allows the VWA to target its oversight
towards lesser performing self-insurers.
Under this framework:
• Tier 1 self-insurers would represent exemplary employers, who have demonstrated strong claims management performance and high levels of OHS standards. Tier 1 performers would be expected to have
achieved Tier 1 benchmarks on a significant number of the performance indicators.
• Tier 2 self-insurers would represent employers who have achieved above standard results. They would outperform Tier 3 self-insurers and would be assessed as achieving some level of improvement, in their claims management performance and OHS standards, above the minimum criteria for eligibility to self-insure. A Tier 2 self-insurer would have achieved Tier 2 benchmarks on a significant number of indicators;
• Tier 3 self-insurers would represent employers who have met the
minimum criteria for becoming a self-insurer, thus achieving the status of
‘fit and proper’. However, on aggregate, they would not have demonstrated that they sufficiently exceeded these standards.
• Where a self-insurer was assessed as falling below Tier 3 standards it would be assigned to an improvement program. Self-insurers who have been successfully prosecuted or have significant breaches of the Act may be moved to Tier 3 and/or the improvement program. The VWA would assess these matters on a case by case basis and appropriate actions initiated to meet scheme objectives. Other possible criteria for access to the improvement program are detailed in Recommendation 3.
During consultations with stakeholders, concerns were raised about the use of performance indicators to assess self-insurer performance. In particular, there was concern that reliance on key performance indicators could influence behaviour perversely or that analyses would not necessarily compare like with like. It is acknowledged that some performance indicators may have inherent weaknesses. However, to address these concerns and mitigate some of the risks of over-reliance on a single indicator, the VWA will adopt a suite of
performance indicators to monitor performance over a range of relevant areas.
Indicators will be based on Section 142(2) of the Act, which sets out the matters which the VWA must have regard to in determining whether a body corporate is fit and proper to be a self-insurer (Table 5).
Page 65 of 111 Subsection
of s142(2) of the Act
Matters to be considered by the VWA to determine the
‘fit and proper’ status of a self-insurer.
S142(2)(b) The resources, including employees, that the body corporate has for the purpose of administering claims for compensation.
S142(2)(c) The incidence of injuries to workers arising out of and in the course of employment by the body corporate and, if applicable, its subsidiaries and the cost of claims in respect of such injuries.
S142(2)(d) The safety of the working conditions for workers employed by the body corporate and, if applicable, by its subsidiaries.
S142(2)(h) If the application is for renewal of approval as a self-insurer by a body corporate that is or has at any time been a self-insurer for the purposes of this Part – whether the body corporate has at any time failed to comply with this Act or the regulations or any conditions of its approval as a self-insurer.
Table 5 – Subsections of the Act assessed in the performance management framework A variety of lead and lag indicators will be measured. Lead indicators will help assess the claims management systems implemented and the quality of OHS processes. Lag indicators will help assess the level of success that the self-insurer has achieved from implementation of these systems and processes.
Both qualitative and quantitative indicators will be used to ensure relevance to the area of activity being measured.
A list of the indicators that may be used in the framework is provided in Table 6. Some measures will be used to determine whether a self-insurer is meeting the standards required of self-insurers, i.e. they continue to be ‘fit and proper’
employers. Other measures will be used to assess the level of performance and allocate self-insurers to one of the three tiers. These indicators will also be combined with other benchmarks to assess an employer’s suitability to self-insure (see Recommendation 9). The individual indicators will be regularly reviewed, particularly during the initial phases of implementation, to ensure their success in measuring specific areas of performance.
Page 66 of 111 S142(2)(b) of the Act
• Number of claims per claims officer
• Claims Management Self-Audit non-compliances as a percentage of files reviewed
• Change in the number of Claims Management Self-Audit non-conformances over time
• Implementation of VWA InjuryMAP or similar injury management system
• Number of non-compliances with the provisions relating to occupational rehabilitation and return to work obligations under the Act, per claim
• Number of substantiated complaints
• Report from the Accident Compensation Conciliation Service (ACCS) S142(2)(c) of the Act
• Claims frequency rate
• Average total payments per standard claim
• Outstanding claims liabilities as a percentage of remuneration
• Results of the return to work satisfaction survey
• Average number of days lost on standard claims with 10 or more days lost S142(2)(d) of the Act
• Existence of employee OHS survey in workplace
• Externally certified management system implemented
• SafetyMap level (initial or advanced)
• OHS Self-Audit Program results
• OHS action plan present
• Number of prosecutions or pending proceedings under the Occupational Health and Safety Act, 1985
• Number of notifiable incidents/accidents
• Number of fatalities
• Number of Notices issued by WorkSafe per site visit S142(2)(h) of the Act
• Number of non-compliances with the Accident Compensation Act 1985
• Number of non-compliances with the Accident Compensation Regulations 2001
• Number of non-compliances with prescribed terms and conditions in Schedule 4 of the Regulations
• Number of non-compliances with any specific terms and conditions imposed on the self-insurer’s approval
• Number of breaches of the Act or Regulations
Table 6 – Potential performance indicators
Page 67 of 111 Regular assessment of self-insurer performance
Self insurer performance will be assessed on a regular basis using a set of performance indicators, as per the potential measures in Table 7, potentially against some or all of the following analyses.
1. Relative comparison of self insurers with:
a. Large scheme employers, at WIC or industry group.
b. Other self-insurers in the same WIC or industry group.
c. Overall scheme performance.
2. Self-insurer performance over time to monitor improvement or
2. Self-insurer performance over time to monitor improvement or