Underpayments of statutory benefit entitlements to workers by NSW state insurer icare are estimated to have totalled as much as $40 million.

The figure was revealed by State Insurance Regulatory Authority (SIRA) CEO Carmel Donnelly during budget estimate hearings in Sydney last week.

“I consider it a grave concern,” Ms Donnelly said.

icare first notified SIRA at the end of last month of errors in weekly payment calculations in a sample of now-closed workers’ compensation claims.

The errors were found during a review to test the accuracy of the Pre-Injury Average Weekly Earnings calculation from 2012-2018.

Of around 3000 claim files reviewed, roughly a quarter were potentially underpaid and a further quarter potentially overpaid.

Asked if icare CEO John Nagle had indicated the financial scale of the underpayments, Ms Donnelly said he “had indicated an estimate in the range of $20 million to $40 million”.

ALP opposition finance and small business spokesman Daniel Mookhey noted this “would rank it as one of the biggest underpayment issues that Australian workers are currently confronting.”

SIRA has ordered icare to produce a “review and remediation” plan setting out its proposed approach and timeframe for repaying the underpaid workers, as well as any employers that subsequently paid a higher premium than was appropriate.

icare told insuranceNEWS.com.au it will remediate any underpayments made as each file is fully reviewed.

The insurer is still determining the extent of inconsistencies and is conducting a full review. icare says it will not recover overpayments made.

SIRA has now called for a risk assessment audit for icare’s Treasury Managed Fund, a NSW Government agency workers’ compensation and government property insurance scheme which was not included in icare’s earlier review of claim files.

SIRA officers and auditors EY are reviewing icare claims files as part of a new 21-point action plan and are providing icare daily feedback on files where potential problems are identified.

The regulator has also launched a review of weekly payment calculations across other insurers.