Compo crisis worsens as thousands of workers underpaid

Thousands of injured workers have been underpaid in what is shaping up as the third underpayment scandal to hit the state’s troubled workers’ compensation scheme icare.

Documents obtained by this masthead show that in February icare discovered a potential issue with underpayments – but delayed telling the workers’ compensation watchdog State Insurance Regulatory Authority (SIRA) for seven months.

NSW Premier Dominic Perrottet is a big supporter of the scandal-ridden icare.Credit: James Alcock

Internal minutes of an icare incident review panel of senior executives reveal an estimate of 8900 injured workers were flagged as being affected. However, the real number could be much higher.

Panel members were made aware of the issue at an August meeting and told the error was caused by claims service providers not applying the relevant indexation to payments, so weekly benefits were not properly tied to movements in the Consumer Price Index (CPI) during 2012 to 2019.

In a statement, icare said it didn’t have sufficient information to accurately estimate the number or dollar size of potentially affected claims.

It said after the incident review panel met in August it agreed to notify SIRA and engage consultancy group Deloitte to investigate.

“The current analysis being conducted by Deloitte includes all injured workers who had claims reported between October 2012 and October 2019, which includes all injured workers as part of the PIAWE Remediation Program,” it said.

A source close to icare, who asked not to be named, estimated that this cohort covered 260,000 workers, although it’s unclear how many of these could be affected.

The scandal follows revelations in this masthead on Monday of a continued deterioration in icare’s finances that requires either premiums to rise 33 per cent by 2025 or workers to be terminated from the scheme.

Against this backdrop, icare’s board granted pay increases to 116 of its executives, including chief executive Richard Harding, making him one of the state’s top-paid public servants, earning more than $1 million a year.

Richard Harding, Matt Kean and the Treasury note about icare.Credit:

The August minutes reveal the panel also discussed underpayment errors with icare’s other scheme, the Treasury Managed Fund, which manages workers’ compensation insurance for nurses, police and prison guards. It could also be caught up in the underpayment error.

The minute noted, “at this stage only nominal insurer claims had been reviewed, but it was likely that TMF would similarly be affected”.

Shadow Treasurer Daniel Mookhey lambasted icare over the latest scandal, and said it would be years before it repaid workers.

Shadow Treasurer Daniel Mookhey: icare remains a basket case.Credit: Michael Quelch

“Icare deserves to be known as one of Australia’s most notorious wage thieves.

“The agency has all-but robbed asbestos victims, as well as tens of thousands of injured workers, of the money they were owed,” he said.

“Even though they can manage to hike their own pay at warp speed, they repay injured workers at a snail’s pace.”

The latest wages scandal follows revelations in 2020 by this masthead that icare had underpaid 52,000 injured workers tens of millions of dollars in one of the biggest underpayment scandals involving a government agency in the country.

At the time, icare denied the size of the issue, estimating that it affected between 5000 and 10,000 workers.

The other wages scandal involved a $39 million underpayment of 1300 workers with diseases such as mesothelioma and silicosis due to payment errors.

The agency also underestimated the size of the error in leaked icare briefing documents revealed by the Herald.

Icare was set up by then-finance minister Dominic Perrottet in 2015 to manage the NSW workers’ compensation scheme, known as the Nominal Insurer, which covers more than 3 million employees for weekly payments and any medical treatments they require if injured at work. Employers are legally required to have a workers’ compensation policy as a safety net for workers, and most businesses use icare.

In a letter to SIRA on September 6 this year, icare’s head of risk and governance described the underpayment issue as a “potentially significant matter”, saying it was strictly confidential. “This information is not publicly available and should not be made publicly available,” it said.

At a media conference on Monday, NSW Treasurer Matt Kean said the levers the government was looking at in relation to icare involved improving return-to-work rates and its investment strategy.

In 2015-16, 26 weeks after injury, 93 per cent of staff were back at work compared with the most recent rate of 84 per cent in August 2022. This declining rate pushes up the costs of the scheme due to extra healthcare and extra weekly benefits, which can lead to higher premiums.

– additional reporting by Tom Rabe

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