The NSW Workers Compensation Legislation Amendment Bill has failed to pass the state’s upper house and been referred back to a committee for another inquiry and report.

The Labor government had argued the reforms, which aim to address rising psychological injury claims, would ensure businesses do not face an “unnecessary” $1 billion annual insurance premium rise. It said without reform, premiums paid by businesses could increase 36% over three years to 2028.

As insuranceNEWS.com.au has reported, the plan passed the lower house earlier in the week, but yesterday it failed to gain enough support in the upper house.

Opposition leader Damien Tudehope told the Legislative Council that while the Coalition supports Labor’s objective of making the scheme more affordable, it believes the government has gone about it wrong. He said an initial inquiry was too short and the bill potentially targets “people who are at their most vulnerable as they suffer from psychological injury”.

“We want to see if there are other opportunities for reform,” he said. “We want to see the manner in which icare and the State Insurance Regulatory Authority operate in managing claims.”

Treasurer Daniel Mookhey said accepting the Coalition’s position means missing the opportunity “to begin fundamentally repairing a system everyone acknowledges is broken”. 

“If anyone disputes how broken the system is, they should look at the facts,” he said. “When it comes to physical injury, the system is returning workers to their health and their jobs at a rate of 93% within 12 months. When it comes to psychological injury, it is half that.

“To put it into some really simple figures, the scheme is going backwards in the private sector by $5 million a day … Every day we leave the bill, we allow the scheme to get weaker and we call into question people’s confidence in it.”

After further amendments, the bill was sent to the Public Accountability and Works Committee, which will table a report at an unspecified date.

The Law Society of NSW, which has raised concerns over some aspects of the bill, has welcomed the outcome.

“Evidence-based examination of the bill creates a greater likelihood that the parliament can legislate for a sustainable workers’ compensation scheme that is fair to genuinely injured workers and affordable for businesses and the taxpayer,” president Jennifer Ball said.

However, Business NSW, which campaigned in support of the proposed reforms, has criticised the delay.

“We are really disappointed that the reform has not progressed as presented this week,” CEO Daniel Hunter said. “Every day we delay these reforms, the scheme goes $5 million in deficit.

“The deficit in the scheme now stands in the billions and this can only be made up by premium increases for hard-working businesses in NSW.”