Originally published by the Australian Institute of Health & Safety

An increase in the volume of taxpayer-funded psychological claims is behind an estimated 50 to 66 per cent decline in return to work rates in recent years, according to a recent NSW report into workers’ compensation claims and state insurer icare.

Medical discharges of police officers who have been assessed as unable to return to the workforce have been the main source of increased psychological injury claims payments, the NSW Auditor-General’s performance audit report into workers’ compensation claims management found.

Taxpayer-funded workers’ compensation payments also increased from $648 million in 2018-19 to more than $1 billion in 2022-23, according to the report.

In response to a significant decline in the performance of workers compensation schemes, icare is implementing major reforms to its approach to workers’ compensation claims management.

However, the report noted that icare is yet to demonstrate if these changes are the most effective or economical way to improve outcomes for the schemes.

“icare’s planning and assurance processes for its reforms to its claims management approach did not adequately assess its existing claims models or conduct detailed analysis of other options to inform decisions on the changes,” the report said.

While icare has implemented several broader organisational improvement programs in recent years, the report also noted that these programs have not focused enough on icare’s accountability for improving return to work outcomes and maintaining the financial sustainability of workers’ compensation schemes.

Furthermore, icare has not given sufficient attention to addressing the increase in psychological injury claims – despite trialling some individual programs.

icare acknowledged psychological injury claims are a growing issue, which has negatively impacted return-to-work rates and financial viability of the schemes. 

The report noted that the State Insurance Regulatory Authority (SIRA) has also raised concerns about the management of psychological injury claims.

A SIRA claims file review published in July 2020 noted that most of the psychological injury claims in its sample did not include sufficient collection of information about the claim. 

Furthermore, there was also inadequate investigation of questions from employers about the causation of the injury in most cases. 

“These findings indicated that claims service providers may have been accepting and making payments for claims without adequate evidence that they were valid. Subsequent claim reviews published by SIRA in 2021 and 2023 made similar findings about weaknesses in the management of psychological injury claims,” the report said.

While it acknowledged the prevention of psychological injuries in workplaces is not primarily care’s responsibility, its ability as an agency to achieve the key objectives of workers’ compensation schemes is significantly affected by this issue.

“Greater focus and attention to the management of psychological injuries is required from all relevant parties, including icare, to address the social and financial challenges the issue is presenting,” it said.