CGU withdraw from NSW workers’ comp scheme – what are the implications for your organisation?

On Wednesday, 1 March 2017 CGU announced it would not be re-tendering for its licence and would exit the scheme effective 31 December 2017. CGU cited:

“…risks and returns fall short of IAG’s [CGU] requirements, meaning it is no longer viable for us to participate in the NSW Workers’ Compensation Scheme”.

Whilst the outcome of the tender process is not yet known, it is clear that Allianz will be the only true national provider, subject to a successful re-application.

Separately, Insurance & Care New South Wales, also known as iCare, launched its new multi-channel platform for new employers, requiring all new policies to be arranged directly with iCare from 1 March 2017.

iCare will also be managing all policy renewals from 30 April 2017 and will advise employers of this change as part of the renewal process.

What are the implications for your organisation?

What this means for national employers

With the June renewal season approaching, employers need to re-evaluate whether having a national program is in fact delivering value or if they would be better served appointing a different insurer / agent in each jurisdiction based on the service and price available. If this approach is taken, employers may need to engage more deeply with their insurance broker to manage the various providers.

Currently, iCare has not given any indication as to whether there will be a market freeze and says it will determine the outcome of the tender before considering next steps.

Background

Within the NSW workers’ compensation insurance scheme, claims are managed by claims agents appointed by iCare.

Periodically, these agents are required to re-tender for their licences. The renewal process for licences beyond 31 December 2017 is underway.

The current agents are:

• Allianz Australia Workers’ Compensation
• CGU Workers’ Compensation
• Employers Mutual
• GIO General
• QBE Workers’ Compensation

Of the above, only Allianz and CGU hold a licence in their own right across all Australian workers’ compensation jurisdictions (except South Australia & Queensland).

GIO and QBE service their national clients through a partnership with Gallagher Bassett and Employers Mutual respectively.

The outcome of the tender process is expected to be announced at the end of April 2017.

What is Aon doing?

Aon has been actively consulting with both iCare and the five claims agents in recent months to keep updated on changes.

We will continue to provide updates to our clients as they are available, including iCare’s intentions in relation to re-allocating the CGU portfolio.

For national employers, our client managers are walking clients through the implications of these changes, and factoring this into the development of renewal strategies.

Recommendations

Employers should consider the implications of the potential changes and prepare contingency strategies, particularly those with upcoming 30 June 2017 renewals across one or multiple states in Australia.

Aon can assist in developing a roadmap and preparing a strategy to put your business first.

Get in touch with us to help mitigate any financial or operational burdens arising from the NSW jurisdiction.