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Minister rejects icare premium plea, caps rises at 8%
By Lucy Cormack
The minister responsible for the state’s embattled workers’ compensation insurer has rejected its plea to increase employer premiums by 22 per cent, insisting they be capped at 8 per cent despite icare’s parlous financial position.
Industrial Relations Minister Sophie Cotsis issued a formal ministerial directive to icare chairman John Robertson on Friday, describing the insurer’s current “dismal” state as “deeply disappointing” and unacceptable to the new Labor government.
Sophie Cotsis, right, is sworn in by Governor of NSW Margaret Beazley earlier this month.Credit: Dion Georgopoulos
The order was issued less than 24 hours after the Herald revealed icare had made an urgent plea to hit 330,000 employers with an eye-watering premium increase equivalent to hundreds of millions of dollars to stay financially viable.
Icare made the appeal to Treasurer Daniel Mookhey in its first briefing with the new government, insisting it was necessary after inadequate rate increases from 2014 to 2021, along with a high inflationary environment, market volatility and increasing psychological injuries across Australia.
“The premium rate is currently 1.48 per cent of wages, which is 22 per cent below the operational break even premium of 1.91 per cent of wages,” an icare document, seen by the Herald, says.
Cotsis, responding to the revelations in a letter to Robertson, acknowledged that small increases put off over the past seven years have now burdened the public with the need for a large increase.
“Since taking office, I have been advised that the Nominal Insurer has been so seriously run down it will not regain financial sustainability without significant premium increases. The picture that has been painted for me is deeply disappointing,” she wrote to Robertson.
“The parlous state the insurer finds itself in is entirely unacceptable to the new government, to injured workers and to the businesses of NSW.”
Cotsis said icare’s proposed “sticker shock” increase of 22 per cent, which would amount to more than $719 million, was not in the public interest.
“I formally direct that the Nominal Insurer premium filing for the next three financial years ... be limited to an average increase of 8 per cent per annum,” she wrote, adding that it was the most sustainable course for the scheme and businesses burdened by rising interest rates and inflation.
“Sadly, the repairs begun from today will take years to correct the neglect. But the required reform starts now.”
Cotsis gave the order under section 7 of the State Insurance and Care Governance Act 2015, which gives the relevant minister powers to give a written direction if they believe it is necessary in the public interest.
The board of icare “must ensure that the direction is complied with,” under the act.
Premier Chris Minns on Sunday said he was concerned that icare had sought to inflict a double-digit premium increase when businesses were struggling with rising costs linked to labor staff shortages and energy costs.
Minns said the insurer’s financial status was the result of the former government delaying decisions to increase premiums over many years.
“Sadly, the repairs begun from today will take years to correct the neglect. But the required reform starts now.”
Sophie Cotsis
“We’ve got to be transparent about the challenges in the economy and forestalling a problem until after the election isn’t really solving anything at all.”
An icare spokesman said the insurer would work with the government to implement the direction.
“Icare acknowledges moderating an increase in premiums balances the cost impacts on NSW businesses with the long-term sustainability of the insurance scheme and the needs of injured workers,” he said.
“As icare has not yet lodged its premium filing for the 2023-24 financial year with the State Insurance Regulatory Authority, it is not appropriate to make any further comment.”
As the largest public sector insurer in Australia, icare covers more than 3 million employees for wages and medical costs for workplace injuries. It collects more than $3 billion annually in premiums.
Icare oversaw one of the biggest underpayment scandals involving a government agency after a joint investigation by the Herald and ABC TV’s Four Corners uncovered deteriorating return-to-work rates and the underpayment of thousands of injured workers.
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