When the Economy Weakens, the Injured Pay the Price

Why NSW’s slow economic growth is colliding with a workers’ compensation system built on chaos, commercial power, and political conflict & denial.

The International Monetary Fund’s latest assessment of Australia landed with a thud: NSW now has the slowest-growing economy since the turn of the century.

Financial services — including insurance — are one of the few strong engines underpinning the state’s fragile economic performance. At the same time, the NSW Government is attempting the most radical overhaul of psychological injury access in a generation.

These two stories are not separate.

They are the same story.

And unless we join the dots, the public will never understand what is happening to injured workers — or why.

The Political Story: “We’re Protecting Jobs”

When the Treasurer warns that charities and small businesses will close unless psychological injury access is tightened, it sounds compassionate. It's the government's line to balance the argument of causing further harm to the injured.....

But, in the context of the IMF’s findings, it reads very differently. It's not the real story.

The truth beneath the narrative is this:

It is politically low-risk to harm injured workers, and politically high-risk to disrupt the financial services industry that NSW now depends on.

Workers’ compensation, structurally, quietly — sits inside NSW’s financial services economy. When the state is struggling, protecting insurance profitability becomes a political instinct. Some would say, a critical responsibility.

The easiest place to cut? The people with the least power to fight back.

So what do you really do when a system has been originally designed to cause this amount of harm to human life, to profiteer out of injured humans and suddenly is in the spotlight that is just not fading? You cut out the maximum harm piece and stick to your guns, in an effort to try and balance the situation.

BUT....

A System That Is Chaotic by Design

NSW now operates a uniquely tangled structure:

• icare is the nominal insurer

• Scheme agents (commercial insurers) run the claims - Allianz, EML, Gallagher Bassett, GIO and QBE.

• SIRA regulates the scheme

• SafeWork sits outside the whole thing entirely

This is the definition of structural dysfunction. The injured worker becomes the rope in a three-way tug-of-war.

And when the Treasurer says rising claim costs threaten the system, he is referring to the part government controls least: the outsourced commercial operators whose behaviour drives deterioration, delays, and harm.

Why Insurers Walk Through Inquiries Untouched

Insurers and scheme agents have walked through recent NSW parliamentary committees almost entirely unscathed. There are pointers to the need for claims management reviews but to date a thorugh, get to the bottom of the harm review, has not happened. Ever.

This isn’t accidental.

It’s structural:

• Committees interrogate Ministers and public servants — not the private operators making the decisions. They turn up, answer a few questions but in reality, that's it.

• icare acts as a political buffer, shielding scheme agents from scrutiny, which is why they hate story after story of the injured being harmed hitting the papers

• Commercial-in-confidence contracts hide fee structures, KPIs, bonuses, penalty regimes and operational incentives of the insurers

• Financial services is now a politically sensitive sector; parliament avoids confronting it

• Injured workers have no statutory representative

• Unions NSW, while very significant to workers' rights and, important, represent a small portion of the workforce

This is why NSW needs a Commissioner for Injured Workers — a structural counterweight with investigative powers and direct reporting lines to Parliament.

Until then, insurers remain the least examined yet most powerful actors in the entire system.

The Oldest Trick in the Book: Fraud, Malingering and “Greedy Lawyers”

As pressure mounts, insurers fall back on a narrative they have relied on for decades:

• fraud

• exaggeration

• malingering

• lawyers “ripping off the system”

This language has never been supported by evidence.Global fraud rates sit at 1–3%, mostly employer fraud.

But the narrative works because it:

• shifts blame onto the injured

• sanitises insurer behaviour

• reduces public empathy

• prepares the community for harsher reforms

• justifies denials and delays

The “fraud” story is not a reflection of reality. It is a strategy.

The Real Cost Driver: Claims Management Failure

Every independent review, including the Dore Review and multiple Auditor-General reports — shows the same truth:

The real cost driver is bad insurer behaviour. Not claimants. Not lawyers. Not treatment. Not “soft” injuries.

Delays cause deterioration. Surveillance retraumatises workers. Denials prolong incapacity. Fragmentation inflates cost.

Yet instead of fixing the machinery, government tightens access.

The Brutal Irony: Insurers Don’t Lose Money When the Injured Stay Away

Here is the reality few will say aloud:

Insurers profit when injured workers are too frightened, exhausted or traumatised to engage with the system.

A worker who gives up is a financial win. A worker who deteriorates slowly is manageable. A worker who cannot fight delays is low-risk.

The only pressure insurers fear comes from:

• employers

• regulators with teeth

• public outrage

Opting out won’t fix the system. Exposing it will.

The Only Workable Path Forward

Some believe the solution is to remove insurers. Others believe the solution is to privatise or nationalise the scheme.

None of these will work.

There is only one sustainable equilibrium:

Rein in insurer bad behaviour while still giving them a stable, reasonable profit.

Every successful compensation system in the world does this.

To achieve it in NSW will require:

• political bravery

• enforced minimum standards

• transparent contracts

• penalties for harmful behaviour

• trauma-informed claims handling

• a Commissioner for Injured Workers

• quarterly data publication

• KPIs that reward recovery, not denial or speedy exits from the system and still unable to sustain employment

It will also require something from insurers: a recognition that the public landscape has changed.

People have seen too many Robodebts, too many institutional betrayals, too many families destroyed by bureaucratic cruelty. They expect and want more from insurers.

Yesterday's thinking won't work again.

The bottom line:

Insurers simply cannot absorb another reputational hit. Not in this climate. Yes they have powerful lobby groups, but they also have to have a relationship with their customers and stakeholders, and if they don't they are in big trouble.

The denial-driven era is over.

The Question NSW Can No Longer Avoid

Is it possible to rebuild a fair workers’ compensation system while the state remains economically dependent on the very insurers who profit from denying care?

If it is possible, it will require courage not yet shown. If it is not possible, then the public deserves the honesty of that answer. Parliament as an obligation to answer that question because families are at the core of our society.

Until NSW confronts the tension at the heart of this model, the system will continue to bend toward the interests of insurers — not the people it was built to protect.