The NSW WorkCover scheme may need to increase premium rates to reduce its $2.4 billion deficit, Auditor-General Peter Achterstraat says in his annual report.

The scheme went into deficit during the global financial crisis in 2009. Its net asset deficiency has increased every year since and is up from $780 million in 2010.

Mr Achterstraat says the scheme aims to maintain an asset to liability ratio between 90% and 110% but this has fallen to 85% from 107% last year.

The premium rate of 1.68% of wages is below the scheme’s break-even rate of 1.73%.

“As a result the scheme needs to earn greater investment returns to address the continuing deterioration,” the report says.

The NSW Government kept rates steady this year but changed the classification system, so expects a slight rise in collection.

Mr Achterstraat says the liability can be reduced by improving claims management, better returns on investments, reducing benefits to injured workers or increasing premiums.

He says payments covering permanent impairment have increased as workers and their advisers have become familiar with the rules for particular benefit entitlements and sought to maximise claims.

“There is increased concern about the extent of second, third and fourth claims for permanent impairment benefits. These additional claims indicate that injured workers are attempting to reach particular thresholds of impairment to establish entitlement to other benefits.”

Workplace injury damages (WID) claims that result in a lump sum payment are also increasing and more proactive management is needed.

“If the ‘lump sum culture’ re-emerges on the scheme, then WID may be considerably higher in future, with dramatically increased scheme costs,” the report warns.

A fall in claims over the past five years is attributed to the economic downturn. The scheme received over 76,000 claims last year.