QBE has outlined how upcoming changes to the New South Wales workers' compensation scheme may affect employers, brokers, and insurers, following the passage of the Workers' Compensation Legislation Amendment Bill 2025 through the NSW Parliament.
On Nov. 18, the NSW government said it plans to amend the Workers' Compensation Legislation Amendment (Reform and Modernisation) Bill 2025 in line with compromise proposals from independent crossbench members, commission the chief psychiatrist to design a revised psychiatric assessment system for workers' compensation claims, and ask icare to give policyholders early notice of premium movements and existing hardship provisions.
Treasurer Daniel Mookhey said the government will focus on preparing employers and community organisations for premium pressures following the blocking of earlier reform measures in Parliament. “The government will shift its attention now to getting the community ready to deal with some very steep rises in premiums, following the Liberal Party's decision to block reform. Businesses and charities will be slugged with the worst premiums in the country,” Mookhey said.
Under the reforms, psychological injury is defined as including bullying, excessive work demands, racial harassment, and sexual harassment. To be compensable, employment must be the main contributing factor to the psychological injury. QBE has said that the more specific definitions and causation test will affect how liability is assessed in psychological injury claims and how employers and insurers evaluate these matters.
The bill also amends the “reasonable management action” defence in section 11A, setting out clearer parameters around workplace activities such as performance management, allocation of duties, and organisational change. For insurers and employers, this clarification is relevant when assessing whether an alleged psychological injury arises from management decisions that fall within normal employment practice.
For bullying-related psychological injury claims that are disputed, the Industrial Relations Commission (IRC) will now be responsible for determining liability. This means contested bullying matters will be resolved in that forum, which may influence how employers record workplace interactions, respond to complaints, and brief their insurers.
Weekly payments for primary psychological injuries will be capped at 130 weeks (2.5 years), unless a worker’s whole person impairment (WPI) is assessed at 21% or higher. This sets a defined limit on income support for many psychological claims and is expected to be a factor in planning return-to-work and rehabilitation approaches.
The reforms also consolidate permanent impairment assessment rules. Injured workers will generally have one primary WPI assessment by an approved medical assessor. A further assessment is permitted only if impairment is likely to have increased by at least 10 percentage points. For insurers and legal representatives, this may affect decisions about the timing of impairment assessments and the management of conditions that may change over the life of a claim.
A previous proposal to lift the permanent impairment threshold for psychological injuries from 15% to 31% WPI did not proceed, leaving the existing 15% threshold in place. As a result, current access settings for certain lump sum entitlements in psychological injury cases remain unchanged.
The test for approving treatment and medical costs will change from “reasonably necessary” to “reasonable and necessary.” The effect of this change will depend on how decision-makers interpret and apply the revised wording, and it may influence how parties support or contest treatment plans, including for longer-term psychological care.
For psychological injuries, section 59A will shorten the period during which medical expenses can be claimed. Stakeholders expect this change to influence how early intervention, treatment, and return-to-work planning are structured within the available entitlement period.
In relation to fatalities, the reforms allow lump sum death benefits to be negotiated where there is a legitimate dispute about liability. This allows negotiated settlements in complex or contested fatal claims rather than relying solely on formal determinations.
Although the bill has passed the NSW Parliament, QBE has noted that it still requires formal approval by the governor and the making of supporting regulations before it takes effect. Once those steps are complete, the State Insurance Regulatory Authority (SIRA) is expected to issue detailed guidelines, operational rules, and implementation timelines.
Citing data from SIRA showing an increase in psychological injury claims, QBE has linked the reforms to that trend and to changes in predictability for employers and insurers. During the interim period, businesses and brokers may review policies, training, and incident reporting procedures, with particular attention to psychosocial risks and workplace conduct in NSW operations.
