Australia’s workers compensation schemes are under financial strain, with psychological injury claims, longer claim durations, and widening premium gaps between public and private schemes emerging as the central challenges, according to a new Insurance Council of Australia (ICA) report. The ICA is urging governments, regulators, insurers, and health professionals to act in concert to shore up scheme sustainability without compromising support for injured workers or burdening employers with unsustainable costs. The report examines all 11 primary workers compensation schemes across Australian states, territories, and the Commonwealth, charting how each operates and where cost trajectories are diverging. The findings point to a system under growing structural pressure, with no single jurisdiction immune from the trends reshaping claims and premiums.
How a scheme is administered has had a direct bearing on how much premiums have moved. Publicly underwritten schemes – those run by government monopoly insurers in NSW, Victoria, Queensland, and South Australia – saw average premium rates climb 23.03% since 2021/22. Privately underwritten schemes in WA, the ACT, Tasmania, and the Northern Territory, where commercial insurers set rates within a regulatory framework, rose just 0.94% over the same period. Taken together, the blended average across all schemes was an 11.98% increase – below the roughly 24% cumulative inflation recorded nationally between 2020 and 2025, according to figures in the report.
The gap within publicly underwritten schemes was pronounced. Victoria saw a 42% jump in average premium rates from 2022/23 to 2023/24 before levelling off, while NSW has been tracking increases of around 8% per year. The report flagged that NSW, Victoria, and South Australia each posted net funding ratios below 100 as at June 30, 2022, and June 30, 2023, meaning premium collections fell short of projected liabilities in those years. In privately underwritten schemes, average rates peaked in 2022/23 and have since eased, with the five-year movements remaining a fraction of what public schemes absorbed. The gap between what insurers charge and regulator-published recommended rates has also narrowed – in WA, that difference fell from 0.246% in 2013/14 to 0.081% in 2022/23.
Industries where physical injury is more likely pay measurably more for workers compensation cover. Construction and mining sit at the upper end of the premium spectrum across most jurisdictions, a reflection of both the nature of the work and the historical pattern of claims in those sectors. WA data for the three years to 2023/24 placed agriculture, forestry, and fishing; manufacturing; construction; and transport, postal, and warehousing as the four industries with the highest incidence and frequency rates. At the other end, financial and insurance services posted an incidence rate of just 0.2 and a frequency rate of 1.0 in WA over the same period, while professional, scientific, and technical services recorded 0.3 and 1.5 respectively.
Across jurisdictions, published industry rates span a wide range. Sectors such as concrete construction services carry rates as high as 18.00% of payroll, while industries such as accounting services and computer consultancy sit as low as 0.129%, according to Safe Work Australia data cited in the report. The report cautions that direct comparisons across jurisdictions are complicated by differences in industry classification systems, self-insurer populations, and the treatment of levies and premium discounts.
Claim frequency has held relatively steady in privately underwritten schemes, but that stability masks a more concerning shift in claim composition and cost. In WA, total claim numbers rose 6.7% over the four years to 2023/24, while lost-time claims – those involving time away from work – rose at more than twice that rate, up 14.6%. Direct compensation payments to workers in WA grew 23.8% over the same period, with service payments rising 19.6%.
Victoria’s claim count grew from 27,686 in 2019/20 to 35,575 in 2023/24, a 28.5% increase over five years. In NSW, total claim payments went from $4,580,194 in 2021/22 to $6,160,696 in 2024/25. The duration of claims is also shifting. In WA, the proportion of claims running to 60 or more days of lost time climbed from 39.3% in 2020/21 to 45.7% in 2023/24. Safe Work Australia’s national data reinforces this picture: in 2021/22, claims with at least 13 weeks of lost time made up 21.3% of all accepted claims – roughly 48,600 – but consumed 75.6% of total compensation payments, amounting to approximately $4.4 billion.
Mental health-related claims have become one of the more consequential cost drivers in workers compensation, combining high per-claim costs with extended time off work and lower rates of return to employment. Safe Work Australia data cited in the report shows that in 2019/20, workers with serious mental health claims were off work for a median of 30.7 weeks, compared to 6.2 weeks for those with physical injuries or diseases. The median compensation paid was $55,270 per serious mental health claim, against $13,883 for physical claims. Between 2015/16 and 2019/20 alone, the median time lost for mental health conditions rose from 18.8 to 30.7 working weeks.
The growth in psychological claim volumes has been consistent across jurisdictions. In Victoria, mental injury claims have gone from 2% of all claims in 1985 to 16% today, with WorkSafe Victoria projecting a further 5.5% annual increase in new mental injury claims through to 2030. NSW has seen psychological injury claim numbers double since 2018, with average claim costs also doubling since 2020. The return-to-work gap is stark: 50% of workers with psychological claims are back at work within a year, against 95% for those with physical injuries. The average size of a serious mental injury claim – defined as one with at least one week of time lost – now sits at approximately $65,000 nationally, more than three times the overall average, according to the report. Mental injury claims also take more than four times the median time of other claims to resolve, and the growing recognition of secondary psychological injury claims arising from initial physical injuries is adding further cost pressure.
The availability of mental health professionals to treat these workers is itself a constraint. The report cited the president of the Royal Australian and New Zealand College of Psychiatrists, Dr. Elizabeth Moore, as saying the current psychiatric workforce meets only 56% of current national demand. The Australian Psychological Society president, Dr. Catriona Davis-McCabe, was cited as describing the shortage of psychologists as “breaking the mental health system.” High turnover among workers compensation case managers compounds the challenge. Reviews in both Victoria and NSW have flagged the problem, with anecdotal figures placing annual case manager attrition at around 40% in some jurisdictions. The ICA report links continuity of case management directly to claim outcomes, noting that rapport and claim history are lost whenever a worker is assigned a new manager – a particular issue in complex or long-duration claims.
Several jurisdictions have moved to adjust their schemes in response to mounting pressure. Victoria’s reforms took effect on March 1, 2024, lifting the average premium rate to 1.8% of remuneration, establishing Return to Work Victoria, and narrowing eligibility for mental injury claims – including excluding claims where stress or burnout is the primary cause from ongoing weekly benefits after two and a half years. In NSW, the Workers Compensation Legislation Amendment Bill 2025 cleared Parliament in November 2025. A second legislative tranche – the Workers Compensation Legislation Amendment (Reform and Modernisation) Bill 2026 – passed on Feb. 4, 2026. That legislation phases in higher whole-person impairment thresholds for psychological injury claims, introduces revised return-to-work arrangements, and creates new dispute resolution pathways. Key provisions took effect in March 2026, with further changes set for July 1, 2026. The NSW government stated that without the reform package, premiums for employers without claims were on track to rise by at least 36% over three years.
Dust diseases – silicosis and asbestosis among them – represent a separate but related long-tail risk for workers compensation schemes. Australia banned the use, supply, and manufacture of engineered stone from July 1, 2024, followed by import restrictions from Jan. 1, 2025. The report notes, however, that the latency between dust exposure and disease onset can span decades, meaning the volume of future claims from existing exposures remains uncertain. In Victoria, 90% of the 536 silicosis workers compensation claims lodged over 32 years arrived between 2015 and 2022 – a 27-fold increase from the prior eight-year period. NSW has established a new expert taskforce to address silica-related health risks for workers in tunnelling projects, where significant silica exposure has occurred over approximately the past decade.
The report also points to the administrative complexity created by operating 11 separate workers compensation schemes with differing definitions, coverage rules, premium-setting methods, and dispute processes. For employers operating across state lines, this patchwork requires duplicated compliance efforts and raises the risk of inadvertent non-compliance. The ICA recommends that governments consider harmonising workers compensation obligations, or at minimum aligning core principles and processes, to ease that burden.
The report’s recommendations span prevention, treatment, workforce, claims management, legislation, and scheme design. The ICA is calling for greater government investment in mental health prevention and early intervention, targeted action on shortages of psychiatrists and psychologists in regional and remote areas, improvements to case manager retention and mentoring within the insurance sector, and legislative reviews to keep scheme settings aligned with evolving claim patterns. “A coordinated effort involving governments, regulators, insurers, and health professionals to address existing and emerging issues would help ease pressure on workers compensation schemes, while ensuring the needs of injured people are met, providing certainty for employers and ensuring the long-term sustainability of the schemes,” the ICA stated in the report.
