Unions identify hundreds of millions in insurer waste to be cut from workers comp

Unions NSW has called for sweeping reforms to stop insurance companies using workers compensation scheme funds to run cases with no reasonable chance of success. Citing official data, legal fees and investigations cost the scheme $332 million annually with minimal benefit to workers or employers.

One case involved an insurer spending $85,000 of public money to fight $5,000 knee surgery that her doctor said she needed, and the tribunal ultimately approved. The cost breakdown included $10,500 for seven medical examinations, $24,500 in legal advice, and $50,000 for the tribunal hearing – all to contest a procedure that was ultimately ordered anyway.

Under current rules, insurers face no financial risk when challenging claims – if they win, they avoid payouts, but if they lose, only taxpayers and businesses bear the wasted costs. This creates perverse incentives for unnecessary litigation, with data showing 95% of workers who receive legal aid improve their position, suggesting most insurer challenges lack merit.

"This inquiry has exposed the shocking waste happening right under our noses – $332 million a year being spent on legal fees and investigations that achieve virtually nothing for workers or the scheme's sustainability," said Mark Morey, Secretary of Unions NSW. "While politicians argue about fictional fraud epidemics, insurers are bleeding the system dry with impunity."

The submission argues while fraud concerns dominate political debate, the scheme's Senior Medical Assessor for Psychiatry told the inquiry "the vast majority of people who come to me are sincere" and fraud represents only "a minor problem."

Instead, Unions NSW identifies systemic waste in insurer practices as the real drain on scheme finances. Unlike injured workers, who must prove "reasonable prospects of success" to access legal support, insurers face no such test before launching expensive challenges.

The submission also targets poor return-to-work outcomes, with official data showing delays in treatment collectively cost the scheme an estimated $100 million per year in extended weekly payments.

A second case study features a worker who fell from a ladder and was denied urgent physiotherapy and hydrotherapy. Without proper supervision, she used mobility aids incorrectly, causing further injuries and eventually developing Complex Regional Pain Syndrome.

"Under the current rules, insurers have absolutely nothing to lose by launching expensive legal challenges," Morey said. "Win or lose, someone else picks up the tab."

The submission notes that workers with psychological injuries who receive treatment within two weeks show 94% improvement in work capacity, while those who receive first payments within two months have 24% higher return-to-work rates and cost the scheme almost 20 times less.

Unions NSW proposes four main reforms: requiring insurers to obtain legal advice confirming "reasonable prospects of success" before accessing scheme funds; limiting the number of independent medical examinations of injured workers by the insurer to one per claim; capping insurer investigation costs at 50% of the claim value; and improving accountability measures for return-to-work performance.

Contact: Mark Morey 0425 231 812