Navigating NDIS reform: potential risk and insurance implications for NDIS providers

The Federal Government’s introduction of the NDIS Amendment Bill 2024 (opens a new window) (NDIS Bill) on 27th March 2024 marked the first concrete step towards transformative changes in the way disability services are delivered and managed.

It comes in the wake of an independent review (opens a new window) into the NDIS, which proposed 26 recommendations and 139 supporting actions (opens a new window) aimed at providing a practical blueprint to facilitate foundational change.

While NDIS reforms hold the promise of enhancing the effectiveness and sustainability of the NDIS, they are also set to bring forth a host of challenges and implications for disability service providers.

As stakeholders await further developments, there is anticipation tempered with a recognition of the complexities ahead.

In this article, we examine the latest updates on NDIS reform and how Lockton stands ready to support disability service providers in navigating the risk and insurance implications stemming from these transformative changes.

Understanding the Impact of NDIS Reform

Since its inception, the NDIS has played a transformative role in the lives of Australians with disabilities, offering personalised support and fostering inclusivity.

However, despite its successes, the NDIS has faced its share of challenges, including escalating costs, a general decline in quality of service, and systemic issues.

The proposed NDIS reforms aim to address these challenges and ensure the long-term viability and sustainability of the scheme.

The NDIS reform roadmap

The roadmap for NDIS reform, as outlined in the final report of the NDIS Review (opens a new window), is structured around four overarching themes:

1. Develop a unified system of support for people with disability.

The Review envisions the creation of an 'ecosystem' encompassing enhanced collaboration among stakeholders.

Introducing the concept of NDIS 'navigators' to facilitate smoother transitions between services, the Review proposes a more graduated system of support, inclusive of 'foundational supports' to bolster sustainability.

2. Markets and support systems that empower people with disability.

The second theme underscores the importance of market reforms and robust support systems.

These recommendations focus on improving access to information, pricing transparency, and workforce quality, alongside restructuring safeguarding mechanisms to enhance participant experience.

3. Stewardship of the unified ecosystem.

The third theme focussed on greater cost-sharing and regulatory alignment across all levels of government.

A proposed ‘Disability Intergovernmental Agreement’ aims to clarify funding and governance responsibilities, while innovative initiatives like the ‘Disability Research and Evaluation Fund’ aim to drive continual improvement through data-driven insights.

4. A five-year transition.

Finally, the Review outlines a five-year transition plan to implement these reforms gradually.

The Review envisages a roadmap prioritising consultation and collaboration, alongside legislative reform, comprehensive risk assessments, and robust stakeholder engagement.

The establishment of an ‘NDIS Review Implementation Advisory Committee’ underscores the commitment to ongoing dialogue and refinement throughout the transition process.

Key Changes and timeframes of the NDIS Bill

The NDIS Bill introduces key reforms aimed at improving the effectiveness and efficiency of the scheme, including:

  • Transitioning towards a needs-based assessment for entry into the scheme, focusing less on diagnosis.

  • Providing participants with longer plans of up to five years and greater flexibility in budget allocation.

  • Establishing a clear definition of "NDIS support" to prevent misuse of funds.

  • Expanding the powers of the NDIS Quality and Safeguards Commission to enhance oversight and regulation.

It is anticipated that even the immediate changes to the legislation will not be imminent, as the Government has advised that the reforms will be rolled out gradually over a five-year period, emphasising a careful and phased approach to implementation.

Likewise, a consultation period spanning 18 months underscores the Government's commitment to a gradual rollout and collaborative approach in implementing reforms, ensuring thorough engagement with stakeholders and thoughtful consideration of feedback before enacting changes.

Governance reform likely to be a key issue

As with the current aged care reforms (opens a new window), governance is likely to be a central focus of the NDIS reforms.

Draft new aged care legislation includes heightened penalties for board members and responsible individuals of registered providers, including substantial fines and up to five years of imprisonment for severe offences.

This underscores the vital necessity for disability service organisations to ensure they have robust governance structures and practices in place, alongside effective risk management processes and appropriate insurance cover.

Potential risk and insurance implications of the NDIS reform process

For boards and executives of disability service providers, understanding the nature and scope of their existing insurance program is crucial.

As the reform process advances, it’s equally vital to ensure that these insurances evolve alongside the organisation’s risk mitigation framework to ensure comprehensive coverage throughout.

The unfolding reform process, particularly concerning governance and safeguarding, is poised to exert substantial implications on disability service providers.

1. Impact on governance risk and insurance

The expanded powers of the NDIS Quality and Safeguards Commission to bolster oversight and regulation are poised to significantly influence governance risk and insurance dynamics for disability service providers.

This heightened scrutiny raises the probability of directors being held accountable for governance shortcomings within their organisations, thus impacting related insurance classes.

This increased accountability for governance failures may diminish Directors and Officers (D&O) insurers’ appetite to provide cover to disability service providers, potentially leading to a reduction in market capacity.

Moreover, the pressure on disability service providers' D&O insurance will also extend to their Public Liability and Professional Indemnity/Medical Malpractice policies, resulting in significant impacts across multiple insurance fronts.

These policies serve as critical pillars in providing financial support to disability service providers, enabling them to address claims of liability brought forth by third parties for instances of personal injury, negligence, or failure to meet duty of care obligations.

Over recent times, Public Liability and Professional Indemnity/Medical Malpractice claims have surged both in frequency and quantum, attributed to heightened scrutiny on the sector, especially following the conclusion of the Disability Royal Commission.

2. Potential impact on safeguarding insurance

Navigating the risk of failing to provide a safe environment for individuals with disabilities, particularly in safeguarding against physical or sexual abuse, presents one of the most intricate and challenging areas for providers to mitigate.

As a result, obtaining insurance in this regard has continued to be persistently problematic.

For disability, home care, and community services providers, insurers have either exited the market altogether or offered cover with high premiums, steep deductibles, low coverage limits, and very limited or no retroactive cover.

Providers offering accommodation services have been particularly hard-hit, as the majority of markets have confirmed that accommodation services fall outside of their appetite.

In a welcome development, the market is cautiously beginning to open up with new entrants, notably from the London market.

However, insurers are understandably proceeding with caution and careful consideration.

Proactive approach recommended

Taking a proactive approach to risk management and insurance is strongly recommended.

Lockton recommends that providers act early, establishing a clear plan for integrating the NDIS reforms as they are rolled out.

This proactive approach will greatly assist providers in seeking the most cost-effective and appropriate insurance program available in the current insurance market.

By demonstrating a consistent focus on and investment in improving risk management outcomes across their entire organization, with a specific emphasis on safeguarding, prevention of neglect, clinical risk governance, and cybersecurity, disability providers can enhance their position.

In doing so, aged care providers can potentially make their risk more appealing to insurers who may otherwise hesitate to engage with the disability services sector.

Preparing for reform

As the proposed reform journey unfolds, disability service providers are encouraged to take proactive steps to prepare for upcoming changes, including:

1. Stay Informed

Keep abreast of developments in the reform process, including consultations and legislative updates.

2. Update Systems and Processes

Ensure that internal systems and processes are aligned with the evolving NDIS framework.

3. Prioritise Compliance

Proactively address compliance requirements to uphold NDIS registration standards.

4. Engage in the legislation co-design process

Input from providers will be crucial in shaping a legislative framework that truly reflects the sector's experience and requirements.

Lockton encourages providers to remain active in this reform journey.

For more information about how to engage in the co-design process, go to the NDIS website (opens a new window).

Navigating NDIS reform

Lockton is committed to assisting and advocating on behalf of disability service providers as they navigate the risk and insurance implications of the upcoming NDIS reforms.

Our team of risk and insurance experts for the disability service provider sector stand ready to provide the necessary support, tailored solutions and strategic guidance to help disability service providers mitigate risks, optimise insurance coverage, and adapt to the upcoming NDIS reforms.

The contents of this publication are provided for general information only. Lockton arranges the insurance and is not the insurer. While the content contributors have taken reasonable care in compiling the information presented, we do not warrant that the information is correct. It is not intended to be interpreted as advice on which you should rely and may not necessarily be suitable for you. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication.