COVID-19 and mental health claims: emerging trends

Mental health issues are on an upward trend in Australia and likely to accelerate because of the impact of the COVID-19 pandemic. Partner Angela Brookes considers the ample data, research and surveys both pre- and post-COVID-19 and highlights the emerging trends of mental health claims in the insurance industry. 

The effects of the global crisis caused by the COVID-19 pandemic are immense and ongoing. With no vaccine yet available, governments and people around the world continue to grapple with the ‘new normal’. While it is too early to assess the full impact, it is clear that the pandemic has had a huge psychological effect, as people struggle with quarantine, social distancing restrictions, changes to working conditions and uncertainty about whether life will ever return to the way we knew it.

More people will likely be impacted by the psychological effects of COVID-19 than actual contraction of the disease. While mental health claims in Australia have been increasing for several years, it is likely that the mental health effects of COVID-19 could trigger a multitude of claims.

As both an employer and a lawyer, I have seen the initial impacts of COVID-19 on our business, on our staff and on insurance claims. During lockdown, I witnessed staff struggling with loss of social contact with peers, clients and friends; worries about job stability; fear of catching coronavirus; the fear created by watching daily news reports and social media announcements; and the inability to switch off from work and juggle work/life balance while working from home. The number of staff accessing our EAP (employee assistance program) has doubled in the past six months. This is a good thing as on the one hand it shows our EAP is doing its job and on the other hand it shows that our staff are comfortable taking steps to ensure they are supported during this pandemic.

Despite restrictions now easing in most states, some of these issues remain or have morphed into new worries. For example, many workplaces and CBDs look very different. There are signs advising how to socially distance. Staff numbers may be reduced or rostered to limit the number of people present in an office or shop at any one time. Mitigating the risk of a contagious disease is now a significant factor in workplace safety systems and in the community.

Mental health in Australia

There is overwhelming evidence to support that mental health issues and claims are on the rise in Australia, with particular risk noted by actuaries in both men and women in early adulthood.

According to the 2019 National Report issued by the Australian Government’s National Mental Health Commission, 45% of Australians aged between 16 and 85 will experience a common mental illness, such as an anxiety, affective or substance use disorder, in their lifetime. One in five Australians experience a common mental illness each year.^[1] These figures reveal the impact of the disease on a human scale.

The financial cost to the community is also significant. The Commission has highlighted that the cost of mental ill-health in Australia each year is around 4% of GDP or about $4000 for every taxpayer. It costs the nation more than $60 billion.^[2]

From a workplace perspective, various mental health surveys have been collated and analysed through the years and reveal an increase in both compensation payment and time off work per mental health claims.

Data from Safe Work Australia shows that over 7000 Australians are compensated for work-related mental health conditions each year, equating to around 6% of all workers’ compensation claims. Critically, typical compensation payment and time off work per mental health claims has significantly increased over the five years between 2011-12 and 2014-15.

COVID-19 impact

COVID-19 has been labelled a mental health catastrophe,^[3] with its consequences emerging and widespread.

The most immediate impacts relate to stress, isolation, fear, loss of work and loss of social contact. Emerging issues include the social media impacts and the consequences from human interaction taking place in a digital, online format. Other issues have also been highlighted such as drug and alcohol dependency and domestic abuse. These mental health issues can trigger a multitude of claims.

There has been a plethora of research undertaken overseas. The research in Australia has, understandably, been more limited.

However, the impact of the COVID-19 pandemic on Australian adults has been recently examined by the University of New South Wales and the Black Dog Institute.^[4]

The research, led by Jill Newby, found that rates of psychological distress, anxiety and depression rose during the outbreak’s peak. Over 5000 Australians were surveyed and the following findings were made:

• Four out of five of the participants reported their mental health had worsened during the outbreak and its peak.
• Four out of five experienced high levels of uncertainty about the future.^[5]
• Half of the respondents reported loneliness and worry about their financial situation.^[6]

A national survey in the first month of COVID-19 restrictions found that mental health problems were acknowledged as being at least twice as prevalent than in non-pandemic circumstances, with depression being the most observed mental health disorder during the pandemic. Researchers noted they had anticipated that anxiety would be the predominant experience but the data showed that the depressive state was more common. They also noted that depression is most likely to occur when people feel ‘trapped, humiliated and powerless.’^[7]

Insurance industry and rise in claims

With the upwards trend in mental health conditions generally, it is not surprising there is an increase in mental health related insurance claims made in Australia for mental health issues.

An increase in Total Disability Claims due to COVID-19 and mental health has been flagged as an area for alarm by the insurance industry.

Mental health accounted for more total permanent disability (TPD) claims than any other single cause in 2019; a trend set to continue through COVID-19, according to Financial Services Council data.^[8]

As regards workers compensation claims, it is still unclear the exact impact that COVID-19 will have on claims and, given the nature of the condition, the nature of the impact may not be realised for many years to come.

From a claims perspective, insurers need to be conscious of those who may already have a disposition to mental health issues. For example, disability claims, workers’ compensation claims and claims where people have sustained physical injury but may also have a secondary psychological injury or has an unrelated psychological condition.^[9] Insurers may consider implementing a small management team for claimants already flagged with mental health issues to monitor treatment, rehabilitation, and return to work.

It is important not to underestimate how COVID-19 restrictions are affecting workers. In many cases, face-to-face communication has been lost and people are adjusting to working purely online. Employers need to consider how they manage remote workers and ensure they have good lines of communication in place to help promote wellbeing.

During COVID-19, many support groups, organisations and individuals, such as The Black Dog Institute, Beyond Blue and Lifeline, have identified at risk groups and published checklists and online resources to help people cope.

Safe Work Australia and national and state insurers have also issued a plethora of information to assist both workers and employers.

Data gathering will be ongoing and in time actuaries will shed more light on trends.

What’s next?

Pre-COVID-19 mental health conditions and claims were already trending upwards and it is a reasonable assumption it will continue to trend, although time will tell. COVID-19’s impact on mental health and claims remains to be seen but it’s important to consider the potential future impact.

Mental health and wellbeing will remain a real focus, with the Federal Budget announcement of investing $5.7 billion in that area.^[10] There is no doubt that it should be a topic that continues to be considered as the community’s wellbeing is of utmost importance.

This article was written with the assistance of Joseph Dwyer, Paralegal.

^[1] Monitoring mental health and suicide prevention reform: national report 2019, National Mental Health Commission, at page 27.

^[2] Economics of mental health in Australia, National Mental Health Commission, at paragraph 1.

^[3] Delia Izaguirre-Torres & Raul Siche, in Med Hypotheses, October 2020, ‘COVID-19 disease will cause a global catastrophe in terms of mental health: a hypothesis.’

^[4] Newby JM, O’Moore K, Tang S, Christensen H, Faasse K (2020) ‘Acute mental health responses during the COVID-19 pandemic in Australia.’ PLOS ONE 15(7): e0236562. https://doi.org/10.1371/journal.pone.0236562

^[5] Newby JM, O’Moore K, Tang S, Christensen H, Faasse K (2020) Acute mental health responses during the COVID-19 pandemic in Australia. PLOS ONE 15(7): e0236562. https://doi.org/10.1371/journal.pone.0236562

^[6] Mental health of people in Australia in the first month of COVID-19: restrictions: a national survey, The Medical Journal of Australia, June 2020.

^[7] Mental health of people in Australia in the first month of COVID-19: restrictions: a national survey, The Medical Journal of Australia, June 2020.

^[8] KPMG & FSC, October 2019, ‘The impact of psychosocial factors on mental health and their implications in life insurance.’

^[9] Iles R, Hogan C, Craig A & Collie A. Work-connected interventions for people with mental health conditions: A literature review. May 2020. Insurance Work and Health Group, Monash University: Melbourne, Australia.

^[10] Department of Health, 6 October 2020, ‘Media release: Record health and aged care investment under Australia’s COVID-19 pandemic’.