NSW WorkCover Authority CEO Lisa Hunt and Chairman Greg McCarthy have quit amid plans to fast-track reforms of the agency.

The NSW Government is poised to merge the authority with a group of other state compensation schemes in a bid to cut costs. They include the Motor Accidents Authority, the Dust and Diseases Tribunal, the Sporting Injuries Committee and the Lifetime Care and Support Authority.

Finance and Services Minister Greg Pearce says he has “made it clear the WorkCover scheme in its current form is untenable. The deficit is growing and WorkCover must be reformed to get it back in the black.”

Last year’s WorkCover annual report showed the scheme posted an accumulated deficit of $2.36 billion in the year to June 30 2011 – a 49% increase from the $1.58 billion deficit at the end of the previous financial year.

The value of the scheme’s claims has blown out to $3.53 billion from $2.52 billion and the underwriting result almost doubled to $1.02 billion from $583.68 million in 2009/10.

Mr Pearce told the NSW Parliament last year that the increased cost of claims was driven by more workers opting out of the statutory benefits scheme and seeking negligence-based damages.

He says the scheme was in surplus for only two and a half of the past 16 years – from 2006 to 2008 – funded partly by bumper investment returns.

“The variations show the folly of relying on investment returns to fund the scheme,” he told Parliament.

Mr McCarthy, who has driven the reform program, will be replaced by Deputy Chairman Nicholas Whitlam until a replacement is found. CFO Julie Newman will also act in the CEO’s role.

Mr McCarthy had been on the WorkCover board since 2002 and was chairman since 2005.

“Both Mr McCarthy and Ms Hunt agree there was a need to reform WorkCover and the Government will now press ahead with the reforms under a new leadership team,” he said.