New compensation pathways are a wake-up call for providers
Last updated on 28 May 2025
The Aged Care Act 2024, set to take effect on 1 July 2025, introduces significant reforms aimed at enhancing the quality and safety of aged care services.
These changes impose new statutory duties on providers and their key personnel, establish compensation pathways for breaches, and necessitate a reassessment of insurance and risk management strategies.
Key statutory duties
Under the new legislation, two primary duties are introduced:
Provider Duty: Aged care providers are required to proactively prevent harm and uphold care standards, ensuring their conduct does not adversely affect the health and safety of care recipients.
Responsible Person’s Duty: Individuals in leadership roles, such as executive decision-makers, those with significant operational influence, and registered nurses overseeing nursing activities, must exercise due diligence to ensure compliance with the provider duty. This duty does not extend to individuals solely managing daily operations.
Non-compliance can lead to substantial penalties, with the most severe breaches attracting fines up to 4,800 penalty units (approximately $1.5 million).
Compensation pathways
The Act establishes a new avenue for individuals to seek compensation if harmed due to a provider’s breach of duty. Applications for compensation can be made to the Federal Court or the Federal Circuit and Family Court of Australia, either by the affected individual or the Aged Care Quality and Safety Commission.
According to Gallagher, these courts may order the provider concerned to compensate the individual for serious injury or illness if the provider is liable for a civil penalty and the serious injury or illness resulted from the contravention.
The compensation will not replace existing compensation arrangements for personal injury.
Implications for insurance and risk management
The heightened accountability and potential for litigation necessitate a thorough review of existing insurance policies and risk management practices:
Insurance Coverage: Providers should assess their current insurance arrangements, including Directors and Officers (D&O) liability, professional indemnity, and public liability insurance, to ensure adequate coverage under the new regulatory landscape.
Risk Mitigation Strategies: Implementing comprehensive staff training, robust compliance programs, and meticulous documentation of care delivery and decision-making processes will be critical in mitigating risks and demonstrating due diligence to insurers.
Broker Collaboration: Engaging with insurance brokers who specialise in the aged care sector can provide valuable insights and tools to navigate the complexities of the new Act and tailor insurance solutions accordingly.
The Aged Care Act 2024 represents a significant shift in the regulatory framework governing aged care services. Providers must proactively adapt to these changes by reinforcing their governance structures, enhancing risk management protocols, and ensuring their insurance coverage aligns with the new statutory requirements.
For more detailed information, refer to the original article from Gallagher here.