The recommendations in the McKinsey report into NSW workers’ compensation should, “for the first time”, give WorkCover full financial responsibility for the scheme’s $3.2 billion deficit, according to the Insurance Council of Australia (ICA).

ICA Deputy CEO Dallas Booth says that despite complaints from the Auditor-General over many years, WorkCover has “never been accountable for the underwriting performance of the scheme and the deficit has never appeared as a liability on the Government's accounts”.

Under the report’s recommendations, WorkCover NSW would become a principal contractor rather than a licensing authority, and would own the financial consequences of the arrangement, including the scheme’s underwriting performance.

“This will in turn invite close scrutiny of WorkCover’s total management approach, including underwriting, claims oversight, and funds administration,” Mr Booth said.

“A key recommendation of the HIH Royal Commission was that State governments should apply relevant prudential requirements to government insurers and statutory fund schemes,” he said.

Mr Booth warned however that a recommendation to introduce special claims management once a claim is three years old will “do nothing for the efficient and effective handling of workers’ injury management” and that long-term claims need special attention “after 12 weeks, not three years”.