Seeing red flags

Monday night’s Four Corners program on ABC TV was of great interest. The program was titled: “The financial scandal and human cost of Australia's failing workers compensation schemes”. It went to air with the title: “Unethical & Immoral”. The program considered alleged failings of Victoria and NSW’s workers compensation schemes. The schemes are run by government owned entities; Workcover in Victoria and iCare in NSW. Together the schemes provide workers compensation to a large proportion of Australia’s workforce.

The television program was of interest in that a risk professional likes to consider whether red flags were evident in governance or business practice prior to the emergence of the impact of misconduct. Now, I’m not suggesting there is misconduct – only that the investigative journalism of the ABC allows an insight into the current affairs. That is, I’m taking the ABC journalism as the whole of the account. Indeed, I’ve kept analysis here strictly to the transcript of the program. Red flags are indicators that something is wrong, or that something terrible will emerge. So, for Enron, the complex financial instruments and the plethora of off-balance sheet special purpose vehicles were both red flags.

To a risk professional the consideration of red flags sharpens skill. Study of red flags in poor weather best prepares you to recognise emergent red flags on entering poor weather. In turn, such skill allows for mitigation activity to be implemented.

As the program content was roughly 80/20 split iCare/Workcover I’ll keep analysis to iCare only.

 

“The scheme is heading for a financial disaster, and it was heading for a financial disaster before the COVID pandemic hit.”

Daniel Mookhey, NSW Shadow Minister for Finance and Small Business

 

So, what were the iCare red flags as presented by Four Corners? I’ve listed the red flags here. All of them drawn from the program transcript:

•           Claimant dissatisfaction; slow processing, lack of response,
•           Claimants pushed to despair and depression on observing poor or untimely decision-making,
•           Denial of claimant treating doctor medical advice with emphasis on iCare scheme agent medical expert advice,
•           Financial incentive driven decision-making at claim level and business process level,
•           Street talk within the insurance industry is circumspect of inadequate or thin executive recruitment practices,
•           Thin accountability of iCare with lack of transparency compared to other government agencies,
•           Rapid growth of wage account without any measurable productive returns,
•           Poor improvement in a key ratio; worker return to work rates,
•           Significant financial losses with no immediate horizon to return to surplus,
•           Conflict of interest,
•           Early warnings from NSW Treasury.