Built to Break, How Claims Management Reforms Are Re-Injuring the Injured

Prediction - A System Collapse, Yet Again.

In 2024, the NSW Auditor-General’s review of workers compensation claims management process delivered a damning verdict:

That single line should shake every employer, worker, and policymaker to their core. At the heart of any workers compensation system is the simple promise.

If you're injured doing your job, you’ll be cared for and supported to get back to work.

That promise is being broken every single day under icare’s current model.

What Is Report About

About Workers' Compensation

Workers compensation schemes in New South Wales provide workplace injury insurance for around 4.7 million workers. The effective management of workers compensation is important to ensure injured workers are appropriately supported and provided with prompt treatment to ensure timely, safe and sustainable return to work.

There were around 110,000 injured workers compensation claims in 2022–23.

The two main workers compensation schemes in NSW are the Nominal Insurer (NI), which is for the private sector and is funded by premiums paid by employers, and the Treasury Managed Fund (TMF) which covers public sector workers and is funded by the NSW Government.

Reforms Without Rigor

When we analysed the Auditor-General report we found that it exposes a pattern of reckless decision-making. Major changes to icare’s claims model were being implemented without proper analysis or assurance processes.

How can you change course on something as critical as people’s health, without understanding what went wrong with the previous model?

Seemingly, reforms were pushed through without asking the most basic questions:

Will this work?

Is it better than what we had?

Will it actually help people?

The absence of evidence doesn’t just suggest poor planning. It suggests a willingness to gamble with people’s lives and livelihoods. Again.

Reforms Lacking Proper Evaluation

The report criticizes icare for implementing major reforms without adequately assessing existing claims models or analysing alternatives. Are there alternatives? Was there even a consultation process on alternatives with anyone other than CSP, who have a vested interest in advocating for what works for them.

Recommendations for Improvement

To address these critical failures, the Auditor-General recommended that icare

• Clearly outline its legislative objectives in its annual Statement of Business Intent

• Monitor and evaluate its scheme reforms

• Implement a quality assurance framework to ensure claim payments are accurate and fair

Our Analysis

The Devil Is In The Detail

Remuneration at a Cost

Dig deeper into the reforms and you’ll find a dangerous experiment underway—one that places financial pressure on Claims Service Providers (CSPs) in ways that may directly harm injured workers.

icare’s revised remuneration structure sets base fees below CSPs’ expected operating costs. In other words, unless they hit performance targets, providers are guaranteed to operate at a loss.

These changes are not yet fully implemented, as several CSPs only commenced work in late 2023 and the transition is being staged, so it is too early to assess the effectiveness of the changes to the remuneration structure at this point.

For at least the first year of the new model, icare has committed to paying a proportion of the performance-based outcome fees to CSPs even if they do not achieve their targets. This is intended to support CSPs to invest in their systems with the goal of achieving better longer-term performance.

This model doesn’t just “incentivise” performance—it penalises care. It rewards speed, claim closures, and cost-cutting—not compassion, quality, or recovery.

Therein lies the tension in this system design: the need for speed, efficiency, and transparency to maintain public confidence in the Workers' Compensation Scheme — but when providers are forced to choose between their own survival and providing quality service, it is the service that suffers — and injured workers bear the consequences.

If the Government chooses to outsource the management of claims to Claims Service Providers (CSPs), it must introduce legislation to ensure accountability. Currently, there is no recourse when the harmful behaviors of insurers towards vulnerable, ill individuals go unaddressed. Without clear duty of care or good faith legislation, insurers face no consequences for their actions. No other industry is permitted to harm individuals with such impunity. Compounding this issue is the fact that CSP contractual agreements are made with employers, not the injured party, leaving those who are most vulnerable without proper protections.

In many ways, this system mirrors the flaws of managed care models like those in the U.S. healthcare system, where the focus shifts from patient care to cost containment. In both systems, financial incentives drive decisions that can undermine the quality of service and place the needs of the injured party last. Just as managed care providers in the U.S. may deny or limit services to protect their bottom line, workers' compensation providers are incentivized to minimize costs, often at the expense of the very people they are meant to support.

The bottom line to all of this: if you are injured at work and end up on a workers' compensation claim you become trapped in this system unless you have a very loud supportive employer who demands the CSP does their job to help you recover and get back to work. That does not mean pushing people beyond their health capabilities. A gentleness that is synonymous with care is just so lacking in this system.

Backgrounding this: In many ways it has historically suited the government to have employers and employees metaphorically at war in this system. Those days are now at an end. No employer is going to continue to pay the government to harm their employee and wear the consequences of an increase of premiums. It just won't happen once employers at scale become more aware as to what is actually happening.

This system has abused ill, sick people for decades and it must stop. This isn't just healthcare and wages (for a period) for the injured - it is a finance system masquerading as care run by bankers pretending to be healers, with zero health ministerial oversight.

Creating Incentives for Harm

Of course, no insurer or business for that matter, will willingly absorb financial losses. Under this model, CSPs are likely to

• Deny or delay treatment.

• Push for premature return-to-work.

• Avoid complex injuries, especially psychological ones.

• Treat workers as liabilities, not people.

This is not theoretical—it is structurally built into the way icare’s system now operates. It doesn't facilitate bad behaviour. It makes it a business strategy. You can also see clearly why the government is trying to rid itself of psychological claims. They are too expensive and complex for this system to manage.

Other Considerations

AI: Automation of Harm?

As CSPs look to cut costs further, Artificial Intelligence (AI) is becoming a new tool in the system. And while AI has potential to streamline admin, its unchecked use in a system already incentivising denial and speed over care could automate injustice at scale.

Expect to see:

• AI-driven triage, pushing simple cases forward and sidelining complex ones.

• Chatbots replacing case workers, dehumanising the injured experience.

• Predictive analytics used to deny treatment, not improve it.

• Bias baked into algorithms, targeting already-marginalised groups.

AI in the wrong hands doesn’t improve outcomes. It expedites harm—efficiently, quietly, and without recourse.

Psychological Impact: When the Process Becomes the Injury

The psychological toll on injured workers trapped in this system is immense. Under icare’s current approach—and especially with AI and cost-cutting taking precedence, injured people are experiencing.

Medical Gaslighting

When pain and suffering are questioned or dismissed, injured workers are made to feel like they’re exaggerating, lying, or broken beyond help.

Anxiety, Depression & Trauma

Uncertainty, delayed care, and adversarial claims processes trigger:

Panic attacks

Ongoing depression

Trauma reactivation, especially for psychological injuries

Financial Stress

When treatment or income is denied:

Bills go unpaid

Housing and food security are threatened

Mental health worsens

Social Isolation & Shame

Injured people are often made to feel like burdens. Their identity, purpose, and trust in the system evaporate.

Permanent Psychological Disability

Even workers with physical injuries can develop long-term psychological harm because of the system—not the incident. This includes.

PTSD symptoms

Suicidal thoughts

Avoidance of future medical or work settings

The process doesn't just fail—it becomes the injury.

Conclusion: Time for a Reckoning

The 2024 Auditor-General’s report leaves no room for doubt: systemic failure will likely continue to define workers compensation claims, harming the very people it was created to protect.

It is now undeniable that injured workers and employers must unite. They are both being failed by a system that’s bleeding money, trust, and lives.

Only through unity can they demand a system that delivers on its most basic promise:

Timely, fair, and effective support for injured workers, and financial stability for the employers who fund it.

The time for patchwork fixes is over.

The time for truth, transparency, and transformation is now.

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