State insurance scheme’s $4.9bn deficit set to explode to $14.6bn, workers comp data reveals
The state’s workplace insurer is $4.9 billion in deficit, according to bombshell internal documents which have revealed the industries with the most workers getting compensation for psychological injuries.
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The state’s workplace insurer is $4.9 billion in deficit, according to bombshell internal documents which have revealed the industries with the most workers getting compensation for psychological injuries.
The documents also reveal that the state’s “nominal insurer” only has 78 cents in funding for every dollar it expects to pay out in claims – with the scheme running at a larger deficit than previously thought.
Treasurer Daniel Mookhey presented the documents to a parliamentary committee examining proposed reforms to the workers compensation scheme on Thursday, during a private hearing.
They show that the “nominal insurer” is in even worse shape than previously thought; as of December 31, it had a “funding ratio” of 78 per cent – meaning that it was short 22 cents on every dollar it expected to pay out in liabilities.
According to the figures, the scheme was running at a $4.9 billion deficit at the end of last year.
Without increases to business insurance premiums, that deficit is set to explode to $14.6 billion by 2032 – if the number in psychological injury compensation claims continue to balloon.
Mr Mookhey has previously warned that businesses face premium increases of 30 per cent if the system is not overhauled.
Documents tabled to the parliamentary inquiry reveal that the “public administration and safety” industry accounted for the most of all psychological injuries last financial year, with 1,778 claims.
The majority of those – 1,439 – related to public sector workers. More than 30 per cent of workers compensation claims lodged by public sector workers in the education sector were for psychological injuries last financial year.
Parliament is debating whether to crack down on psychological injury compensation claims including by hiking the “impairment threshold” a person must meet to get ongoing payments.
Labor wants to kick people off ongoing payments after 2.5 years unless they meet an “impairment threshold” of 31 per cent, while the Coalition wants to keep the threshold at its current rate of 15 per cent.
While opposing an increase to the impairment threshold, the Coalition has proposed inserting a ‘capacity to work’ test to determine whether injured workers would continue to receive payments.
The Coalition, under Opposition Leader Mark Speakman, has angered business groups by opposing the workers compensation crackdown. Coalition MPs have also privately complained about their leaders’ decision to “abandon” small businesses.
The documents also show that government agencies are spending hundreds of millions of dollars to prop up the separate insurance scheme looking after public sector workers.
NSW Police had the largest single bill, paying $747 million into the “Treasury Managed Fund” last financial year. Workers compensation insurance for NSW Police officers has since been overhauled.
Education has forked out the second largest sums with $295m diverted to the scheme in 2023-24.
That, government sources said, was more than enough money to build a new high school.
In his opening statement to the Upper House committee inquiry last month, Mr Mookhey said he would not allow any more money to be pumped into the scheme until reforms are made.
The government wants the reforms to go to a vote in parliament this month.
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Originally published as State insurance scheme’s $4.9bn deficit set to explode to $14.6bn, workers comp data reveals
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