‘Scheme failing injured workers’: $60m underinsurance fear

The state’s workers compensation regulator has sounded the alarm over widespread underinsurance, revealing employers may have underpaid up to $60 million in premiums due to underreported wages.

A state’s workers compensation regulator review found a lack of quality assurance activities had contributed to a decline in employer compliance and an increased risk of under insurance.

Exclusive: The state’s workers compensation regulator has issued a scathing report about soaring underinsurance in the system, resulting in possible underpayments of $60 million in premiums.

The report followed a review undertaken by the State Insurance Regulatory Authority (SIRA) last year as part of its role to ensure workers compensation premiums are fair, affordable, and financially viable.

The review was conducted across the nominal insurer – which is responsible for covering private sector employers – and is managed on behalf of Insurance & Care NSW

(icare).

The SIRA report found employer compliance in providing the nominal insurer with a declaration of actual wages for the calculation of the premium had declined over the past five years, resulting in possible underpayments of $60 million in outstanding premium.

It also found the nominal insurer’s wage audit program in the 2024 financial year identified $674 million in “under declared wages” across 1000 employers – roughly 0.29 per cent of all policies.

Treasurer Daniel Mookhey said the scheme was now carrying “a $6 billion deficit”. Picture: Rohan Kelly

About 75 per cent of the employers audited were under insured with the main cause

being failure to submit an actual wage declaration, the review said.

A lack of quality assurance activities had also contributed to a decline in employer compliance and an increased risk of under insurance.

The review also raised concerns at wage declarations that were submitted by employers being “placed on file without processing” or being “unable to be located”.

Outstanding wage declarations were also being adequately followed up, with employers not informed of their legal obligations and the potential regulatory actions for non compliance.

The insurance regulator watchdog has recommended the Minns government toughen laws to increase compliance, noting that without adequate deterrants there was “little incentive” for employers to accurately report wages.

Mark Latham joined the Liberal Party and the Greens in blocking proposed reforms. Picture: NewsWire/ Jeremy Piper.

The government is proposing stiffer penalties – including fines and or imprisonment – as part of its proposed workers compensation reform package, which has passed through the lower house but has failed to be debated in the upper house after being referred to another parliamentary committee.

Responding to the rise of under insurance in the system, Treasurer Daniel Mookhey said recovering $60 million in a scheme that was now carrying “a $6 billion deficit” would not save its future.

However, he claimed it was further evidence that the former Coalition government had neglected to protect the system.

The proposed reforms – that were being blocked by the Liberal Party, Mark Latham and the Greens – would address the issue with a new offence targeting those employers who recklessly under-declare wages to reduce their premiums, he said.

“We now have a scheme that is failing injured workers, failing businesses and failing the state,” he said.

“Every day this is delayed means workers are being left underinsured and businesses who are doing the right thing are faced with increasing pressure in the marketplace.

Originally published as ‘Scheme failing injured workers’: $60m underinsurance fear