Get ready for higher premiums as cases linked to bullying, harassment and work pressure spike
A sharp rise in psychological injury claims — including cases linked to bullying, harassment and work pressure — is helping to drive New South Wales’ workers’ compensation system deeper into deficit, with losses of $1.7 billion in the private sector and $179 million in the public sector.
The latest annual report from the state insurance agency, Insurance and Care NSW, or icare, shows that mental health claims are no longer a marginal issue but a central driver of worsening finances in the Workers Insurance Scheme. The trend also underscores the failure of the Minns Labor government’s attempt to rein in psychological claims through legislative change, after proposed reforms were abandoned in the face of opposition.
Longer, costlier claims
Actuaries for the scheme report that the number of cases in which the primary injury is psychological increased over the past 12 months, and that these claims “have significantly longer durations and higher costs associated with them.”
They also warn that there is “uncertainty over how many psychological claims will have higher whole person impairment and therefore higher claims cost,” making it harder to predict how large the bill will ultimately be.
For employers, that combination — more claims, longer recovery and increasing severity — translates into a growing cohort of complex cases that can stretch over years and carry substantial wage, medical and legal costs.
Heavy losses despite strong markets
The Workers Insurance Scheme recorded a net loss of $1.73 billion in 2024-25, only a modest improvement on the previous year’s $1.88 billion loss.
Those losses came in spite of notably stronger investment returns. Investment income rose to about $1.49 billion from $928 million a year earlier. Even so, the core insurance business remained deeply unprofitable, with an underwriting loss of roughly $2.81 billion.
The scheme’s net outstanding claims liability — its estimate of what it will ultimately pay on existing and incurred claims — climbed to $25.6 billion from $22.0 billion. In valuing that liability, actuaries explicitly factor in the “incidence of future psychological claims,” alongside other assumptions such as discount rates and inflation.
Reform effort stalled
The Minns government had sought to tighten access to benefits for some work-related stress claims, arguing that psychological costs threatened the sustainability of the system. Unions and mental health advocates attacked the proposals, saying they would deter workers from seeking help and unfairly narrow coverage. The government ultimately pulled back, leaving the schemes exposed to current trends in claim numbers and costs.
The report suggests those trends extend beyond mental health. It notes that the number of serious physical injury claims reaching high levels of whole-person impairment has also risen, with such cases carrying “significantly longer durations and higher costs.”
At the same time, attendant care expenses for the most severe claims have risen faster than general economic inflation, and the actuaries highlight “uncertainty around the future experience and potential for periods of hyperinflation” in medical and care costs.
Employers in the cross hairs
Ultimately, the burden of closing the funding gap is likely to fall on employers. When setting its risk margin — the buffer added to its central estimate of claims — the scheme notes that it takes into account “the requirement of employers to fund any deficit as part of future premiums.”
In practice, that means businesses should brace for:
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Higher workers’ compensation premiums, particularly in sectors with a heavy load of psychological injury claims.
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Tighter scrutiny of how they prevent, investigate and manage bullying, harassment and workload-related stress.
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Stronger expectations from regulators that employers focus on prevention and early intervention, not just post‑injury management.
icare’s broader risk framework points to how that pressure may be applied. Insurance risk is defined as the risk of fluctuations in the “timing, frequency and severity of insured events and claims settlements, relative to expectations.” To manage it, the scheme relies on detailed actuarial reviews, close monitoring of claims and expenses, and premium formulas that reflect the cost of injuries in particular industries and, for large employers, their own claims performance.
That structure effectively links an employer’s workplace culture and psychological safety record to the price it pays for coverage.
Psychological safety as a financial imperative
From the scheme’s perspective, the actuarial message is stark. Psychological injury claims last longer, cost more and add a layer of uncertainty to future payouts that is difficult to hedge.
For human resources leaders, the report turns what might once have been seen as “soft” issues — leadership behavior, bullying complaints, unmanaged workloads — into hard financial risks. Investments in training, early intervention, confidential reporting channels and evidence-based mental health programs now double as a form of balance‑sheet protection.
Unless claim patterns shift, the pressure on premiums and on benefit design is likely to intensify. For now, icare’s numbers offer a clear signal: the cost of psychological harm at work is no longer a distant policy concern but an immediate fiscal problem for employers, workers and the state itself.
