Brokers have backed NSW’s move to define “reasonable management action” in its overhaul of workplace injury compensation laws.

The National Insurance Brokers Association says the proposed wording “provides much-needed certainty for both employers and employees”.

The planned shake-up comes amid concern over the nominal insurer workers’ compensation scheme’s long-term financial viability.

“This clarity will help to minimise disputes over the validity of such claims and prevent the diversion of scheme funds towards matters that fall outside the intended scope of workers’ compensation,” NIBA said.

As reported, state Treasurer Daniel Mookhey says the scheme “will plunge further into deficit” without reforms around liability and entitlements for psychological injury.

He told a parliamentary inquiry into the state’s draft laws that “what is happening here is that a system that was built predominantly to treat physical injury is now having to respond to psychological [injury] … it’s going to need to adapt … it is going to need to modernise.”

The government’s draft reform bill includes changes to the whole person impairment threshold used to assess income support, and the meaning of reasonable management action taken by employers to prevent workplace injury.

The draft bill states reasonable management action means action “taken in a reasonable way, and that is reasonable in all the circumstances”.

NIBA said: “The adoption of this definition promotes fair and consistent application of the law by claims decision-makers.

“Insurers and self-insurers alike will benefit from a common benchmark against which to assess claims, reducing the time and cost associated with protracted liability determinations.”

The broking peak body says the “rapid growth” of mental injury claims is a key contributor to the scheme’s financial pressure.

“Although these claims represent only 12% of total claim volume, they account for a disproportionately high share of scheme liabilities due to their extended duration, increased complexity and greater reliance on specialist mental health treatment and support services,” NIBA said in its submission to the parliamentary inquiry.

“Compounding these issues is the acceptance of claims into the system without a clear causal link to the workplace. Such claims place an unnecessary burden on the scheme, diverting resources away from legitimate cases and undermining the confidence of both employers and genuine claimants.

“NIBA urges the government to address these structural issues as part of its broader program of reforms aimed at restoring sustainability and strengthening the long-term integrity of the scheme.”