CGU exits Victorian WorkCover scheme

Just before Christmas 2020 we received the shock news that CGU has decided to turn its back on workers compensation in Victoria, leaving four agents to administer claims- and premium-related matters on behalf of WorkSafe Victoria.

How can an agent (insurer) just leave like that?

In Victoria, there are five WorkSafe-appointed agents. These are Allianz, CGU, EML, Gallagher Bassett and Xchanging. The agents typically work on a 5-year contract. The current contracts were due to expire on 30 June 2021.

Sources have advised us that, due to the disruption of COVID, working from home and all things 2020, WorkSafe extended the existing contracts by two years, meaning they would now expire on 30 June 2023. This makes some sense because there has been significant disruption for all the agents and many of their usual performance metrics would have been negatively affected. It would be difficult to accurately gauge each agent’s performance based on their outcomes in 2020.

Four of the agents welcomed the 2-year contract extension. However, CGU has decided to cease their arrangement with WorkSafe as planned on 30 June 2021.

In a statement to The Age, a CGU representative stated “After careful consideration, in line with the strategic direction of our business, CGU decided not to accept the two-year extension offer of our existing contract with WorkSafe Victoria… For CGU, the agency model doesn’t leverage our core capabilities and align with the direction of our business, which is why we’ve chosen not to continue as a claims agent.”

What are the implications of CGU’s exit from WorkCover insurance in Victoria?

The decision leaves a question mark around the future employment of hundreds of CGU staff working in the workers compensation department.

According to WorkSafe’s 2020 annual report, 25.79% of employers’ WorkCover policies are managed by CGU. This means a quarter of all employers with a policy – and all of their injured workers with a claim – will be assigned an entirely new team from 1 July 2021. The disruption will be far reaching.

What happens now?

While there has been no formal announcement about the transition process there are a few things we expect will occur in the year ahead.

  • CGU and/or WorkSafe will likely offer affected employees incentives to remain in their current roles until the current contract expires to avoid a mass exodus of staff.
  • WorkSafe will likely consult with the remaining four agents regarding their desire and ability to take on additional business.
  • Employers currently positioned with CGU will likely be designated a new agent (ie. You may not get to choose your new agent)
  • All employers in Victoria will likely be restricted from transferring to a new agent in the months leading up to 30 June 2021 and potentially for 3 months or more after this date

The above are our best guesses at what will unfold based on our experience and advice from our sources.

What we do know for sure is that the inevitable transition will result in the biggest game of musical chairs regarding job placement and displacement ever seen in the WorkCover scheme. The incumbent agents will need to create and fill hundreds of new roles. But these positions won’t just be filled by CGU staff. Every case manager who has been waiting for a promotion to senior case manager will jump at the opportunity to advance their career, potentially with a new employer, leaving yet another vacancy to be filled.

We saw this happen when QBE lost their WorkSafe license in 2016 and were effectively replaced by EML. The disruption of staffing changes was felt across all agents for 18 months after the change took effect. And QBE only held a 17.6% market share.

How can employers navigate this period of potential disruption?

Right now, and for the next 18 months, it will be more important than ever that employers are minimally reliant on their WorkCover agent in anticipation of future disruption. Take the time now to ensure your claim files are reconciled and up-to-date. Be prepared for information to get lost as a result of someone finishing up in their role by sending correspondence via email that can always be retrieved.

While CGU’s departure is a significant development, the WorkCover scheme has endured many disruptions over the decades. And so have business owners. Yes, there will be a large number of businesses affected by this development, but if you endured the disruption that was 2020, we’re confident you’ll get through this unscathed as well.

  • 8 January 2021