Mental injury claims are rapidly rising, and workers’ compensation schemes are worried. The solution lies in changing work practices and attitudes to mental illness
By Bernice Han
In the most recent national census Australians were asked for the first time if they have been diagnosed with a health condition. Question 28 of the 2021 Census provided Australians with a list of 10 common long-term ailments to choose from, including cancer, diabetes, heart disease, arthritis and stroke.
Here’s the surprising – or perhaps not so surprising – result. According to the census, mental disorders are the leading chronic illness afflicting Australians. About 2.2 million – nearly 9% of the population – picked the ninth option: depression, anxiety or other mental condition. Arthritis came a close second, at 8.5%.
The sobering statistics are playing out now across the country as workers’ compensation schemes grapple with rising claims for workplace psychological injuries and ways to prevent them from rising further.
Mental injuries accounted for 6.2% of overall serious claims in 2014/15, and by 2020/21 it had risen to 9.3% or 12,155, according to Safe Work Australia, the Commonwealth agency that sets national policy on work health and safety and workers’ compensation.
A claim is defined as “serious” when the incapacity results in a total absence from work for one working week or more.
Mental injuries last longer and cost more to treat
But it is not just the jump in claims volume that is stoking grave fears over the long-term financial stability of the states’ and territories’ mandatory insurance programs, which are funded by employers via premium rates set by governments.
It’s a harsh truth that treatment for a worker suffering a mental injury will typically cost the schemes more than if it had been a physical one. And the time off work to recover is also much longer.
The median compensation paid per serious mental injury claim in 2020/21 was $55,270 and median work time lost was 30.7 weeks, according to Safe Work Australia’s Key Work Health and Safety Statistics 2022 report. Physical injuries, in contrast, cost substantially less at $13,883 and 6.2 working weeks.
“Workplace mental health conditions are one of the costliest forms of workplace injury,” Safe Work Australia says. “Our data show that they lead to significantly more time off work and higher compensation paid when compared to physical injuries and diseases.”
The agency also points out that the median time lost in working hours for mental injuries has risen markedly in recent years. In 2015/16 the median time lost was just 18.8 weeks.
Signs that more and more people in the 13.75 million-strong Australian labour force are under duress are increasingly hard to ignore. It didn’t happen overnight, and the covid-19 pandemic was certainly not the sole culprit.
The 2021 Census findings do reflect partly the psychological toll of the pandemic. Lockdowns were in place and overseas travel was still banned when the census took place in August that year, with most of the country still masked-up and under one or more social restrictions. But long before that workers were already feeling the strain of a long period of depressed wages and rising costs in a sluggish economy after the mining boom ended.
Attitudes are changing as victims decide to speak up
At the same time societal attitudes have changed – for the better. In the past most chose to suffer mental illness issues in silence by default, out of fear they would be judged and discriminated against. But mental health organisation Beyond Blue says covid has made it less taboo to be open about one’s struggles with stress, emotional exhaustion and other disorders.
“The pandemic enabled deeper conversations about mental health and wellbeing,” Lead Clinical Adviser Grant Blashki tells Insurance News.
“We did see a shift in awareness when it came to mental health. It was certainly talked about more and more as the lockdowns took hold and people’s work and family life was disrupted.”
Allianz Australia, a key workers’ compensation insurance provider covering one in eight Australian employers, has seen a “steeper” rise in active primary psychological claims since the pandemic. In 2017 to 2019 the increase was about 12% and in 2020 to 2022 it was 17%.
“Our research shows that many employees are feeling a sense of fatigue and burnout as workplaces adjust to a new normal after two years of disruption,” Chief General Manager of Personal Injury Julie Mitchell told Insurance News.
“It is expected we will continue to see an increase in not only the rate of claims coming from employees but also the amount of time spent away from work per claim moving forward.”
QBE has seen a similar trend in its workers’ compensation business. A spokesman says New South Wales (NSW) mental health claims were already trending up before covid erupted. The insurer supports NSW Employer and Agencies through self-insurance, Treasury Managed Funds and Nominal Insureds as a non-underwriter.
The NSW situation is, according to a QBE spokesman, “attributed to a combination of greater mental health literacy, rapid changes in societal expectations, including changing work and social demands, all leading to a greater self-awareness of individual psychological function and subsequent higher reporting of injury”.
Source: Safe Work Australia
Mental illness claims will double (and possibly triple) by 2030
The Committee for Economic Development of Australia (CEDA), a respected independent business think-tank, laid bare the staggering long-term consequences of faltering mental health on workers’ compensation schemes in a report last November.
It says mental health-related claims are projected to double by 2030 and may even nearly triple assuming a worse-case “high growth” scenario. And that’s a conservative estimate, since the modelling has not taken into consideration the impact of the pandemic on employees’ emotional wellbeing.
However, the CEDA report’s grim forecast doesn’t stop there. It says the financial burden will escalate too, as more in the workforce drop out to seek counselling and medical help to cope with their psychological struggles.
Median compensation cost per claim for mental health conditions has tripled in less than 20 years, rising from $14,300 in 2000/01 to $45,900 in 2018/19. If the trend continues, the start of the next decade could see another tripling in real terms.
“Mental health conditions have the highest levels of compensation,” CEDA says, comparing it to the $14,500 per median cost for overall claims in 2018/19.
In NSW and Victoria, the two largest states by population, workers’ compensation scheme administrators have initiated action to address the worsening mental injury claims trends.
Their measures are directed not only at keeping a lid on costs but also on improving the claims process for injured workers and getting employers to create mentally healthy workplaces.
WorkSafe Victoria, which manages the state’s workers’ compensation scheme, has also put employers on notice that they have a legal obligation to create “psychologically safe” offices or sites for staff.
Failure to take reasonable steps to prevent mental injury could lead to prosecution under Victoria’s Occupational Health and Safety Act, including potential fines of up to $332,000 for an individual or $1.66 million for a body corporate.
The Victorian regulator says its data indicates the proportion of claims for psychological injuries is set to grow to a third of all claims by the end of this decade. Work-related mental injuries currently account for 15.1% of all new claims in 2021/22, up from 13.1% in the preceding financial year.
Latest figures provided to Insurance News show primary mental injury claim payments have steadily blown out in the years since 2018/19, when it cost the Victorian scheme $305 million, to $559 million in 2021/22.
Kill the stigma: what the experts are doing about the rise in mental illness
Last year the Victorian regulator prepared a toolkit for the business community, offering ideas, tips, tools and good practice suggestions to prevent or limit mental injuries in workplaces.
For example, employers could look further into skill utilisation to give workers more opportunities to use their capabilities. Initiatives such as yoga classes and other recreational activities for employees will also support lifting workplace mental health safety.
“Most people spend a third of their adult lives at work, which is why a psychologically safe workplace is incredibly important to our mental health,” WorkSafe Victoria Executive Director of Health and Safety Narelle Beer told Insurance News.
The regulator has also taken action to improve the claims process. This includes a provisional payments scheme which has been in place since July 2021 to allow eligible workers to access early treatment and support while they await the outcome of their mental injury claim.
Eligible workers can access provisional payments for reasonable treatment and services for up to 13 weeks, even if their claim is rejected.
In NSW the State Insurance Regulatory Authority (SIRA) has also taken a range of steps to improve the prevention and management of psychological injury claims, including actively considering case manager credentialling to lift standards across the industry.
It is also piloting an “outbound assistance” service in the workers’ compensation scheme, similar to what already operates effectively in the compulsory third party (CTP) scheme.
SIRA Chief Executive Adam Dent says there is an opportunity to make things better as the state seeks to improve the workers’ compensation scheme. A parliamentary committee appointed to review the scheme last year resolved to focus on the increase in psychological claims. (Submissions to the review have closed.)
SIRA’s submission to the review says liability for primary mental claims is being accepted more often. In 2020/21 the acceptance rate was 72%, compared with 65% in 2016/17. So have the costs, to $950.35 million in benefit payments, up from $442.42 million over the same comparable period.
State-owned insurer icare, which manages the NSW scheme, has set up a program aimed at reducing psychological injuries in the workplace and helping workers who are impacted to return to health and work as quickly as possible.
The program includes a new claims model for the Nominal Insurer workers’ compensation scheme. The state’s claims service providers – Allianz, EML, DXC and Gallagher Bassett – ¬now offer specialist support to injured workers with psychological injury claims.
“The rising incidence of psychological injury claims presents a major challenge to the sustainability of our workers’ compensation schemes,” a spokesperson for icare told Insurance News.
“This challenge will require a similar mindset and systemic shift to what occurred in the 1970s and 80s in relation to reducing physical injuries in the workplace.”
Beyond Blue’s Dr Blashki says it appears more employers are taking action on workplace mental health, with some undertaking surveys to monitor psycho-social hazards and prioritising work design planning. But there’s still room for improvement.
“It can’t just be fruit bowls and yoga,” Dr Blashki says. “It’s about good job design, job clarity, a strong workplace culture, flexible leave options and leadership that prioritises mental health and takes decisive action to support staff wellbeing.
“Beyond Blue wants to see more workplaces implement a mental health strategy, including a focus on stigma reduction.”
Unnecessarily adversarial?
The New South Wales Standing Committee on Law and Justice, which is required to report on the state’s workers’ compensation scheme at least once every two years, chose to focus on the increase in psychological claims in its current examination of the program.
In one of two hearings held last year, the term “adversarial” cropped up as stakeholders appearing before the committee explained the challenges facing mental injury claimants.
Committee Chair Chris Rath asked if the scheme is “unnecessarily adversarial” and what are some ways to reduce the “combative nature” of the scheme.
Australian Lawyers Alliance spokesperson Shane Butcher said workers are constantly feeling like they have to prove themselves and tell their story over and over again.
“That plays in their mind. And then they feel like their health is binary – you are either better or you are not; you are either depressed or you are fine,” he said.
According to him, they feel insurers are going to have some big “gotcha” moment where they say “well, you can’t be that bad… we have footage of you celebrating your birthday”.
But injured workers need to be able to transition and get life back to normal, he said.
The Law Society of NSW’s Tim Concannon, who chairs its Injury Compensation Committee, said one of the big issues is that if there’s any doubt about the psychological injury claim at all, the insurer engages an investigator.
“That investigator often speaks to fellow workmates and finds out whether there’s any basis for a defence,” he said.
He said change of claim officers is a “really significant” factor as well.
“I see numerous psychological injury claimants who feel very satisfied for a while with their position but then they get a new claims officer who is a hardnose and it becomes the worst thing in the world,” Mr Concannon said.
“I think consistency of claims managers would be very helpful, and experienced claims managers. I think management of workers’ compensation claims for psychological injuries is the key.”
