NSW WorkCover will be improved by an earlier reduction in benefits and centralised independent medical assessment, the Insurance Council of Australia (ICA) has told the parliamentary joint select committee investigating the scheme.

ICA’s submission says proposed measures to encourage people back to work will strike a balance between protecting injured workers while ensuring premiums are affordable for employers.

The committee is examining the scheme’s financial sustainability and whether it is promoting better health.

ICA says shortening the duration of weekly benefits will encourage people back to work.

It supports an impairment threshold of 30% for serious injuries, saying this will ensure the full resources of the scheme can be available to those who need the most assistance, while work capacity testing will reduce the length of less significant claims.

The committee has heard that the scheme is unsustainable and has a deficit of $4.1 billion.

The 2011/12 premium of 1.68% of wages compares with an estimated breakeven of 1.85%.

The 16 recommendations being considered include dropping cover for journeys to and from work, work capacity testing and reducing lump sum payments. None of the proposals has been costed.

PricewaterhouseCoopers actuary Michael Playford told last week’s committee hearing that 8-10% of yearly claims relate to motor vehicles, with most being journey claims. Such claims are excluded from the “experience” premium calculations, so there is an incentive to miscode motor vehicle claims as journey claims to reduce premiums.

Ernst & Young partner Peter McCarthy said medical costs have increased well above inflation.

Legal firm Slater & Gordon’s submission says WorkCover’s administrative costs have risen from $70 million in 1999 to more than $600 million, and payments to insurers – who act as agents to WorkCover – have risen from $134 million in 2001 to $446 million in 2009.

Jeremy Gormly, Chairman of the NSW Bar Association’s Common Law Committee, told the committee there is more difficulty with WorkCover’s administration than the payments being made, describing the scheme as “impenetrable, ineffective and somewhat unresponsive”.

He said WorkCover needs to become an administrator rather than a “complete over-arching controlling body”, leaving insurance issues to insurers and medical issues to healthcare professionals.

Australian Federation of Employers and Industries CEO Garry Brack said he gets 80 calls a month from members about WorkCover claims, often complaining that a claim has been approved without proper investigation or the employer being consulted.

He said employers are frustrated by their inability to challenge decisions by WorkCover or its agents.