Embattled NSW insurer needs extra $660 million as work, property claims rise

The embattled workers’ compensation insurer icare will need a state government top-up of more than $660 million within the next two weeks to ensure it can continue to pay injured frontline public servants.

Treasurer Daniel Mookhey said the one-off payment was needed to guarantee injured public sector workers had access to financial support, but acknowledged the funding injection would add to the government’s gross debt, which is projected to reach $187 billion by 2026.

An increase in workers’ compensation claims, a rise in medical malpractice and historical child sex abuse liabilities, as well as property damage from last year’s northern rivers floods, have contributed to the need for the top-up.

NSW Treasurer Daniel Mookhey said a $669 million top-up to icare would add to the state’s gross debt levels.Credit: James Alcock

Icare manages the Treasury Managed Fund and Insurance for NSW, which cover the state’s insurance risks, including payments for NSW public sector workers’ compensation and property damage.

As the largest public sector insurer in Australia, the agency covers more than 3 million employees for wages and medical costs for workplace injuries. It collects more than $3 billion annually in premiums.

The latest top-up is a result of a requirement that the value of the schemes’ assets be at least 105 per cent of the value of their liabilities. The most recent valuation as at December 31, 2022, shows the schemes’ ratio of assets to liabilities is about 101 per cent rather than 105 per cent.

Mookhey said the $669 million injection by June 30 would help ensure public sector workers receive financial support when they needed it.

“This investment shows our commitment to backing the men and women who work towards protecting the rest of us,” Mookhey said.

“The Treasury Managed Fund was created so NSW government agencies are fully covered when something goes wrong.”

However, Mookhey said lagging return-to-work rates had been a persistent issue for the state’s insurance system.

“Reduced injury rates, reduced severity of injuries and better return-to-work outcomes are the key reforms needed to ensure these protections are available to workers today and in the future,” he said.

“This additional contribution will likely result in an increase in gross debt impacting the budget, but it is necessary to ensure our public sector workers and property are properly insured.”

Icare has had a troubled past after overseeing one of the biggest underpayment scandals involving a government agency. A joint investigation by the Herald and ABC TV’s Four Corners uncovered deteriorating return-to-work rates and the underpayment of thousands of injured workers.

In April, the state government rejected icare’s plea to increase employer premiums by 22 per cent, insisting they be capped at 8 per cent despite the insurer’s parlous financial position.

Industrial Relations Minister Sophie Cotsis issued a formal ministerial directive to icare chairman John Robertson, describing the insurer’s current “dismal” state as “deeply disappointing” and unacceptable to the new Labor government.

The directive followed icare making an urgent plea to be allowed to make 330,000 employers pay an eye-watering premium increase of 22 per cent, equivalent to hundreds of millions of dollars.

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