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In response to a significant rise in psychological injury claims, the NSW Government proposes reforms. The Treasurer highlighted concerns that without reform, the system could either become bankrupt or necessitate significant increases in premiums for employers.
"An employer facing no claims against them, operating a psychologically safe workplace, can expect their premiums to rise by 36% over three years to 2027-2028 if we do nothing."
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Key stats:
- Doubling of psychological injury claims: Psychological injury claims have doubled over the past six years, highlighting a rising issue in workplace mental health.
- Disproportionate cost: These claims constitute 12% of total workers' compensation claims but account for 38% of the total costs.
- Increase in claim costs: The average cost of a psychological injury claim has risen from $146,000 in 2019-20 to $288,542 in 2024-25.
How this will impact employers:
- Potential premium increases: Without reform, premiums for businesses with no claims are forecasted to rise by 36% over the next three years.
- Financial imbalance: For every $1 needed to care for injured workers, the state’s main workers' compensation scheme currently holds only 85 cents in assets.
- Reform objectives: The proposed reforms aim to shift the focus from compensation to prevention, intending to reduce both the number and severity of psychological injuries in the workplace.
- Legal and regulatory changes: The reforms include defining psychological injury and reasonable management actions in law to provide clarity and reduce litigation.
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Scenario of increase in your premium (no claims made)
Assuming 12% annual increase over 3 years
- Annual premium starting point: $10,000.00
- Premium increase over three years without reform: 36%
Calculation over three years:
- Year 1: $10,000 x 1.12 = $11,200
- Year 2: $11,200 x 1.12 = $12,544
- Year 3: $12,544 x 1.12 = $14,049.28
Total increase over three years: $4,049.28
Premium at the end of year 3: $14,049.28
As always, thank you so much for reading! We hope you found it useful and insightful.
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