Workers’ compensation in New South Wales (NSW) has traditionally focused on physical injuries. However, psychological injury claims have doubled in the past six years, reflecting greater awareness of mental health and workplace stress. This has led to a sharp increase in medical and psychological payments, placing pressure on the NSW Nominal Insurer (icare) and the businesses that fund the scheme.
Key Drivers of Rising Payments
- Increased Awareness & Reporting
- Extended Recovery Times
Psychological injuries often require longer treatment and rehabilitation compared to physical injuries, resulting in higher medical costs. - Systemic Challenges
The NSW Government has acknowledged that the compensation system is “unsustainable” without reforms to eligibility and claim management. - Legislative Reforms
In 2025, the Minns Government introduced reforms to improve prevention, recovery rates, and return-to-work outcomes for psychological injuries. A $344 million Workplace Mental Health package was announced to strengthen support and reduce future claims.
What Employers Should Do
- Invest in Mental Health Programs: Proactive support reduces risk of claims.
- Review Workplace Practices: Address stressors such as workload, bullying, or poor communication.
- Engage with icare Updates: Stay informed about legislative changes and premium adjustments.
- Seek Expert Guidance: Partner with specialists like ABILITY GROUP to navigate reforms and implement cost-effective strategies.
Conclusion
The rise in psychological and medical payments is reshaping NSW’s workers compensation landscape. While reforms are underway, employers must adapt by prioritizing mental health, monitoring costs, and engaging with trusted advisors. For businesses, this is not just a compliance issue—it’s a strategic imperative to safeguard both employees and financial stability.
Further data will be available next quarter.
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