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If you work in workplace health and safety, insurance, employment law or construction management in New South Wales, the NSW Legislative Council’s Public Accountability and Works Committee Report No. 5 (Workers Compensation Legislation Amendment Bills 2025, November 2025) is required reading. It documents, in precise parliamentary language, a workers compensation system under serious stress -and names both icare NSW and SIRA as central contributors to that stress.
This article analyses the Committee’s specific findings and recommendations about both bodies. It does not summarise the proposed legislative cuts in isolation -it focuses on what the report actually says about systemic governance, claims management and regulatory failure. For construction businesses, principal contractors, project directors and anyone managing a workforce in NSW, the implications are direct and immediate.
Important note: This article references the NSW Public Accountability and Works Committee Report No. 5, November 2025. It is informational and does not constitute legal or financial advice. See our legal notice.
What is icare NSW?
icare (Insurance and Care NSW) is the statutory body that administers the Nominal Insurer and Treasury Managed Fund under the NSW workers compensation scheme. It provides insurance and care services for more than 3.7 million workers, 330,000 private employers and 205 NSW Government agencies. It is the largest workers compensation service provider in New South Wales.
icare does not manage claims directly. It outsources claims management to six external Claims Service Providers (CSPs): Employers Mutual NSW Limited (EML), Allianz, GIO, QBE, Gallagher Bassett and DXC Technology. This outsourced model sits at the heart of many of the report’s most critical findings.
What is SIRA?
SIRA (State Insurance Regulatory Authority) was established in 2015 to regulate statutory insurance and care schemes in NSW, including workers compensation, compulsory third party and home building compensation. As regulator, SIRA oversees all workers compensation insurers, including the Nominal Insurer operated by icare.
SIRA launched its SIRA2025 strategy in March 2022 to improve scheme stewardship, design and regulatory functions. Based on the parliamentary committee’s November 2025 findings, the strategy has not delivered.
icare NSW and SIRA: shortcomings identified by the report
The following table draws directly from the Committee’s findings, evidence and recommendations.
| Area | Icare NSW | SIRA |
| Claims management performance | CSP fees increased 40% between 2018–19 and 2022–23 while return-to-work rates declined; no KPIs imposed on CSPs for timely psychological treatment access | Conducted audits confirming significant and deteriorating claims management performance but failed to enforce meaningful consequences |
| Regulatory enforcement | Inadequate enforcement measures on underinsurance, costing approximately $191 million in unpaid claims | Only one civil penalty issued to an insurer -$11,000 -despite systemic breaches across hundreds of claims |
| Return-to-work rates | Nominal Insurer’s 13-week return-to-work rate for mental health conditions: 33%, compared to 53% (self-insurers) and 48% (specialist insurers) | Declining return-to-work rates not adequately addressed through regulatory intervention |
| Liability decision timeframes | July 2023 SIRA audit: insurers breached legislated liability decision timeframes 40% of the time | Audit results documented but insufficient corrective action taken against non-compliant CSPs |
| Information and transparency | Insurers failed to provide all relevant details to workers in 44% of liability decision cases | Complaints handling lacks accountability, resulting in insurers ignoring worker and employer concerns |
| Psychological injury claims | No modelling conducted on the number of suicides or self-harm incidents that might result from proposed legislative cuts | Confirmed suicide remains under-reported within the workers compensation system |
| Legal cost exposure | 1,590 claims from 2018–19 to 2024–25 where insurer legal costs exceeded the total estimated claim liability; legal and investigation costs to the scheme: $332 million per year | Insurers not required to demonstrate reasonable prospects of success before accessing scheme funds for legal defence |
| Outsourced CSP oversight | Labour hire spend increased to over $100 million per annum between 2020–21 and 2022–23 while Auditor-General criticised lack of focus on improvement | No binding KPI framework requiring CSPs to provide psychological treatment access within two weeks of claim despite evidence of 94% improvement in recovery outcomes when treatment is provided within that timeframe |
| Prior recommendations | icare described as failing to deliver benefits intended when it was created, with return-to-work rates dropping and costs increasing (McDougall Review 2021) | Government has failed to fully implement recommendations of multiple previous reviews and inquiries (Finding 18) |
| Insurer conduct | CSPs claimed year-on-year improving return-to-work rates at inquiry despite data presented to the contrary | SIRA audit found insurers failed to proactively follow up for information needed to make liability decisions in 51.17% of cases |
| Conflict of interest | Committee identified ethical concern that a well-remunerated icare Board member, Dan Hunter, led business community support for the 31% WPI threshold without declaring a conflict of interest | Single impairment assessor model proposed in the bills would inappropriately involve SIRA in the management of individual claims (Finding 13) |
| Suicide and self-harm | At least 59 recorded instances of injured workers dying by suicide since 2020; at least 33 further attempted suicides following 2012 entitlement cuts | Suicide under-reported in the workers compensation system; SIRA confirmed this at inquiry |
The McDougall Review: a pattern of failure
The problems identified in the November 2025 report are not new. The McDougall Review (2021) was one of the most significant independent audits of icare ever conducted. It found that:
- The new claims management model introduced when icare was created did not deliver the benefits the legislature intended
- Return-to-work rates dropped
- Costs increased
- Injured workers experienced “very considerable difficulties” accessing the benefits to which they were legally entitled
The McDougall report made 49 recommendations -33 relating to the organisational structure of icare alone. The 2021 Standing Committee on Law and Justice made a further 22 findings and nine recommendations.
The November 2025 Committee found that the NSW Government had failed to implement fully the recommendations of previous reviews and inquiries in relation to claims management processes (Finding 18). This is a pattern, not an anomaly.
The $332 million legal cost problem
One of the report’s most striking figures is the $332 million per year spent on legal fees and investigations by insurers within the scheme.
While injured workers must demonstrate reasonable prospects of success before accessing legal support through the scheme’s Independent Legal Assistance and Review Service (ILARS), insurers face no equivalent threshold test before accessing scheme funds to challenge claims. The result, as Unions NSW submitted to the Committee, is that insurers have nothing to lose by mounting expensive legal challenges to claims -if they win, they avoid the payout; if they lose, public funds and employer premiums absorb the cost.
The data is confronting:
- 95% of ILARS grants that resulted in a final outcome saw the worker improve their position
- 1,590 claims over seven financial years where insurer legal costs exceeded the total estimated claim liability
- 8,302 workers compensation complaints made to the Independent Review Office in 2023–24, up 9% on the prior year, with delays in determining liability as the top issue
For construction employers and their workers, this adversarial dynamic has direct consequences. Litigation delays treatment access. Delayed treatment worsens psychological injuries. Worsened injuries increase long-tail claim costs and push premiums higher.
HSE Direct has written on how adversarial claims environments interact with WHS obligations in its articles on workers compensation fraud crackdown and the ultimate return-to-work guide for NSW.
Return-to-work rates: the metric that exposes the gap
SIRA’s own open data for August 2025 shows the 13-week return-to-work rate for mental health conditions:
- Self-insurers: 53%
- Specialist insurers: 48%
- Nominal Insurer (administered by icare): 33%
The Nominal Insurer manages the majority of NSW workers compensation claims. A return-to-work rate 20 percentage points below self-insurers -for the same category of injury -is not a marginal underperformance. It is a structural failure.
The Committee noted that inadequate return-to-work outcomes cost the scheme an estimated $100 million per year in weekly payments alone. The Committee’s Recommendation 12 calls on SIRA to conduct a review into why self-insurers and specialist insurers are outperforming the Nominal Insurer, with the aim of lifting Nominal Insurer performance.
For construction businesses managing return-to-work obligations and psychosocial risk, these rates have direct relevance to premium calculations, employer liability exposure and the practical management of injured workers.
The premium problem: who is paying for systemic dysfunction?
Premiums in the NSW workers compensation scheme have increased 8% per year for three consecutive years, and the Treasurer’s own projections suggest a further 36% increase over the three years to 2027–28 if the system is not reformed.
The Committee and expert witnesses identified several structural problems:
- The current premium model underweights individual employer performance in favour of industry-wide rates, reducing the financial incentive for employers to invest in injury prevention and early return-to-work
- Prior to the 2012 reforms, higher-performing employers were materially rewarded through lower premiums -this incentive structure has been largely removed
- Specialised insurers “cherry-pick” better-performing employers, leaving the Nominal Insurer as the insurer of last resort with a disproportionately high-risk pool
- Underinsurance by some employers costs the scheme approximately $191 million in unpaid claims, spreading that cost to compliant employers and the broader scheme
The Committee’s Recommendation 13 calls for a review of the premium model to restore the balance of weighting back towards individual employer performance and away from industry-wide rates.
For construction businesses with strong safety performance and active safety management systems, this is a critical policy development. Employers who have invested in WHS audits, proactive incident investigations and workplace health and safety consulting should be rewarded under a reformed premium model.
The psychological injury dimension
The report devotes significant space to the treatment of psychological injury claims -and the evidence is damning for how the scheme currently handles them.
Key data points from the report:
- Psychological injury claims make up 12% of total claims but 38% of total cost
- The average cost of a psychological injury claim increased from $146,000 in 2019–20 to $288,542 in 2024–25
- Only 40% of workers with a psychological injury have not returned to work within a year, compared to 12% for physical injuries
- Workers who receive their first payments within two months of claim have a 24% higher return-to-work rate and cost the scheme almost 20 times less
- Despite this, there is no KPI requiring CSPs to provide psychological treatment access within two weeks, even though evidence shows a 94% improvement in capacity for claims where psychological treatment is assessed within that timeframe
The Chair’s foreword notes that at least 59 recorded instances of injured workers dying by suicide have been documented since 2020, with at least 33 further attempted suicides -in significant part linked to the 2012 legislative cuts. icare confirmed it had done no modelling or calculations as to the number of suicides or self-harm incidents that might result from the proposed 2025 legislation. SIRA confirmed suicide remains under-reported in the workers compensation system.
For context on how psychosocial duties interact with WHS obligations, see HSE Direct’s resources on psychosocial risk solutions and psychosocial hazards and the hierarchy of control.
What the Committee recommended
The Committee’s specific recommendations directed at icare and SIRA include:
- Recommendation 1: Establish a formal, permanent injured workers advisory committee with whom both icare and SIRA boards must regularly consult
- Recommendation 6: Conduct a comprehensive review of claims management practices with full stakeholder engagement
- Recommendation 8: Develop financial modelling to explore whether icare should bring claims services provision in-house
- Recommendation 9: Require insurers to obtain legal advice confirming reasonable prospects of success before accessing scheme funds to defend claim denials
- Recommendation 10: Cap public funds used by insurers to investigate and defend claim denials at 50% of the cost of the claim
- Recommendation 11: Require SIRA and icare to establish a KPI for CSPs requiring psychological treatment access within a maximum of two weeks following a claim
- Recommendation 12: SIRA to review why self-insurers and specialist insurers are outperforming the Nominal Insurer on return-to-work rates and identify improvements
- Recommendation 13: Review the premium model to restore meaningful incentives for employers to prevent injury and support return to work
What this means for NSW construction employers
Construction employers and principal contractors in NSW are directly affected by the scheme’s dysfunction. Higher premiums, adversarial claims management and poor return-to-work outcomes erode project economics and place additional compliance and management burdens on businesses with genuine safety commitments.
The report makes clear that the path to financial sustainability lies not in cutting injured workers’ entitlements but in fixing how claims are handled -including timely treatment access, accountable CSP performance, and genuine regulatory oversight by SIRA.
Construction businesses can position themselves ahead of a reformed premium model by:
- Maintaining robust WHS management systems and incident prevention records
- Engaging independent WHS auditors to identify and close systemic safety gaps before they generate claims
- Implementing structured return-to-work programs and early intervention frameworks for psychological and physical injuries
- Using psychosocial risk management solutions to reduce psychological injury claim frequency
- Ensuring safety consultants are involved in pre-claim and early claim management to support timely worker recovery
HSE Direct provides expert workplace health and safety consultants and independent safety consulting services across NSW including Sydney and Armidale. Contact us to discuss how your WHS program interacts with your workers compensation exposure.
Frequently asked questions
Q1. What is icare NSW and what does it do?
icare (Insurance and Care NSW) is the statutory body that administers the Nominal Insurer and Treasury Managed Fund, providing workers compensation insurance and care services for over 3.7 million workers and 330,000 employers in NSW. It outsources claims management to six external Claims Service Providers.
Q2. What did the 2025 parliamentary report find about icare NSW?
The report found that icare has failed to improve return-to-work rates despite significantly increasing fees paid to outsourced claims managers; that it conducted no modelling on suicide risk from proposed legislative cuts; and that the Auditor-General criticised icare for a lack of focus on improvement.
Q3. What did the report find about SIRA?
The report found SIRA’s complaints handling procedure lacks accountability, insurers ignore regulatory obligations with minimal consequence, and only one civil penalty of $11,000 was issued to an insurer despite systemic documented breaches. SIRA’s own audits confirmed significant and deteriorating claims management performance but enforcement action was inadequate.
Q4. How do poor return-to-work rates affect construction employers?
Poor return-to-work rates directly increase premium costs for all employers. The Nominal Insurer’s 33% 13-week return-to-work rate for psychological injuries -compared to 53% for self-insurers -costs the scheme an estimated $100 million per year in weekly payments. This flows into employer premiums.
Q5. How can construction employers protect themselves in this environment?
By investing in genuine injury prevention, proactive WHS management, early return-to-work frameworks and psychosocial risk programs. A reformed premium model is likely to restore individual performance weighting, meaning employers with strong safety records should benefit materially.
This article is published by HSE Direct for informational purposes only. It does not constitute legal or financial advice. Review our legal notice for full terms. For further WHS resources visit hsedirect.com.au/whs-resources. For the latest industry news see hsedirect.com.au/industry-news.