Psychological injury is no longer a side issue in New South Wales workers’ compensation - it’s fast becoming the main headache for the scheme, its actuaries and, ultimately, employers and insurers.
icare’s 2024–25 annual report on the NSW Workers Insurance Scheme paints a pretty clear picture: mental health claims are rising, they’re expensive and they’re making an already stressed balance sheet even harder to manage.
Start with the top line. The scheme posted a net loss of $1.73 billion in 2024–25, following a $1.88 billion loss the year before.
This is happening even though investment performance has bounced back. Investment income jumped to about $1.49 billion from $928 million the year prior. The problem is the underwriting result: still a deep hole at around $2.81 billion in the red.
On top of that, the net outstanding claims liability – the amount the scheme expects to pay out on current and incurred claims – climbed to $25.6 billion, up from $22.0 billion. The tail is long, and it’s getting heavier.
The most striking shift, from an industry lens, is how front‑and‑centre psychological injuries now are in the actuarial commentary.
The scheme actuary notes that the “number of claims with a primary psychological injury has increased over the past 12 months,” and that these claims “have significantly longer durations and higher costs associated with them.”
There’s also an explicit warning about severity: there is “uncertainty over how many psychological claims will have higher whole person impairment and therefore higher claims cost.”
In other words, it’s not just that there are more psych claims – the scheme isn’t entirely sure how many of them are going to turn into very long‑running, very expensive cases. For anyone pricing or reserving, that’s about as uncomfortable as it sounds.
All of this sits against the backdrop of a reform effort that went nowhere. The Minns government floated changes aimed at tightening up some work‑related stress claims. The goal was to slow the psych‑injury cost curve; the politics didn’t cooperate, and the package was pulled.
So the current legal and benefit settings remain in place while claim numbers and severities keep drifting upward. If you’re looking for a circuit‑breaker in the near term, it’s not in legislation.
The liability side of the balance sheet underlines why this matters so much. The scheme’s weighted average discounted time to settle its outstanding claims is 6.7 years (down slightly from 7.1), and more than a third of the discounted net outstanding claims are expected to be paid beyond five years.
The actuary then lays out the usual rogues’ gallery of uncertainties – all of which cut across psych and serious physical injuries:
And then there’s pure assumption risk. The sensitivity analysis shows that a 1‑point move in inflation or discount rates shifts the net outstanding claims position by around $1–2 billion.
The scheme is still targeting a 75% probability of adequacy for its outstanding claims, which equates to an 11% risk margin over the discounted central estimate – about $2.5 billion.
Given the recent run of adverse trends, you could reasonably ask whether 75% is still enough – but nudging that number up would immediately feed into capital and, eventually, pricing.
And that brings us to who actually pays. The report is very clear that, in setting its risk margin, the actuary considers “the requirement of employers to fund any deficit as part of future premiums.”
So while the scheme’s losses sit on icare’s books today, they point straight at higher costs for NSW employers tomorrow.
On the asset side, things look healthier. Investments rose to $18.54 billion from $17.02 billion, spread across unlisted equity, property, infrastructure, alternatives, fixed income and debt.
TCorp runs a risk‑budgeting framework with a 95% one‑year CVaR; as at June 2025, the CVaR is –12.5% (down from –10.2%), so the scheme is accepting a material drawdown risk in exchange for return.
But even a good investment year can only soften, not erase, a multi‑billion‑dollar underwriting gap.
For insurers watching NSW, a few points stand out:
For big employers – especially self‑insurers or those on high deductibles – the message is just as sharp. The way your organisation handles workload, bullying, harassment and return‑to‑work isn’t just a people‑and‑culture issue; it’s now a direct input into funding levels, security requirements and premium negotiations.
NSW is effectively a live experiment in what happens when psych injury trends run ahead of pricing and policy. Unless prevention and early intervention catch up – at the workplace level, not just in the scheme – the cost is going to keep showing up on balance sheets, whether public or private.
