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Built to Break, How Claims Management Reforms Are Re-Injuring the Injured

Apr 9

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Black hourglass with glowing red sand, digital symbols flowing into it, on dark cracked surface, creating a mysterious, digital mood.

Updated November 2025

In 2024, the NSW Auditor-General delivered one of the most damning assessments ever issued about the state’s workers’ compensation system:

“icare has not focused enough on its core responsibilities — improving return to work rates and maintaining financial sustainability.”— NSW Auditor-General, 2024 Review of Workers Compensation Claims Management

That single line exposes the breach at the heart of the system.

Workers give up their right to sue. Employers pay compulsory premiums. The State promises recovery.


And every year, that promise is broken, not by accident, but by design.


What the Audit Confirmed

Workers’ compensation in NSW now covers 4.7 million workers and processes around 110,000 claims per year.Two schemes sit inside it:

Scheme

Who it covers

Who funds it

Nominal Insurer (NI)

Private sector workers

Employer premiums

Treasury Managed Fund (TMF)

NSW public sector workers

NSW Government revenue

icare manages insurance. SIRA regulates.NSW Treasury controls the money. No single agency is accountable for outcomes.


Reforms Without Rigor

The Auditor-General’s finding was blunt:

icare is implementing major reforms to its claims model — but cannot demonstrate they are the most effective or economical way to improve outcomes.

Translated: They changed the system without proving the old one failed, or the new one would work.


No verified baseline. No published alternative analysis. No evidence-based decision making.


Just another restructure imposed onto a system already in structural distress.


The New Payment Model: Incentivising Harm

Under icare’s revised contracts, Claims Service Providers (CSPs) are now paid base fees below the cost of delivering the service, meaning they only break even if they hit performance targets.


Performance = speed, closures, cost reduction. Not care. Not recovery. Not long-term health outcomes.


In plain terms: The system financially punishes providers who spend time, money, or compassion on complex cases, especially psychological injury.


The model doesn’t just allow harmful behaviour. It commercialises it.


Why Psychological Injuries Are Being Pushed Out

Long, complex trauma-based claims don’t fit the speed-and-targets logic. So instead of fixing the system, the NSW Government now proposes to raise the eligibility threshold for psychological injury from 15% to 31% whole-person impairment.

That is not reform.It is removal.

It is cheaper to deny the harmed than to heal them.


Fragmented System + Broken Technology

Since WorkCover was split in 2015:

Function

Agency

Status (2025)

Insurance & claims

icare

Modern Guidewire platform

Regulation & data

SIRA

Digital uplift still in progress

Workplace safety

SafeWork NSW

Auditor-General confirmed 20-year-old core IT system (Feb 2024)

Three agencies. Three data systems. Zero shared measure of recovery.

A system that can’t see itself, cannot fix itself.


AI: Automation Without Accountability

In April 2025, icare stated:

“icare does not utilise AI in any workers compensation decision-making.”

That may be technically true under a narrow definition of AI, but industry evidence tells a different story.


The Insurance Council of Australia and CSIRO (2024) describe live use of:

  • automated triage engines

  • rule-based decision workflows

  • templated communication generation

  • predictive claims risk scoring


If that is not “AI”, it is still algorithmic decision-making shaping human outcomes without audit or consent.


Injured workers report:

  • automated rejection letters sent within minutes

  • repeated requests for documents already supplied

  • unexplained treatment delays no one can account for

These are not “bad case workers.” They are signals of a machine under the surface.


Psychological Reality: The Process Becomes the Injury

For thousands of workers every year, the harm does not come from the original incident — it comes from the claims process itself:

  • medical gaslighting

  • forced redeclarations of trauma

  • delayed or denied treatment

  • income uncertainty

  • adversarial surveillance

  • suicide risk

The NSW Government claims the system is “trending better” yet still cannot answer the only question that matters:

How many people actually recover?


There is still no verified dataset not for physical injury, and certainly not for psychological harm.


The Turning Point No One Can Ignore

Employers are now realising what injured workers have known for years:

They are paying premiums into a finance system masquerading as care.

A system where:

  • outcomes aren’t measured

  • reform means removing the injured

  • automation replaces judgment

  • and harm has no consequence

No employer will continue funding a system that injures their staff and raises their premiums.


The State cannot keep promising “recovery” while designing structures that make recovery impossible.


The Reckoning Ahead

This is no longer a debate about policy. It is a public-interest, economic and human-rights failure.


A system built to control cost has now destroyed trust. The next collapse won’t be financial, it will be moral and legal.


The time for “reform plans” is over. The time for proof, transparency and accountability is now.


Because a workers’ compensation system that cannot heal the people it harms has no legitimacy left to defend.


Sources


(All sources are official and publicly accessible. No allegation of individual misconduct is made.)

Apr 9

4 min read

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67

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