In December, the Council of Australian Life Insurers (CALI) and KPMG, with contributions from more than 15 insurance firms, published an alarming report. Australia’s Mental Health Check-Up showed that the frequency and severity of mental health issues in the country is rising exponentially, particularly for workers aged 30 to 40.
This is posing big challenges for workers’ compensation schemes.
Data in the same report, from Safe Work Australia, showed that mental health related claims among work-related injuries increased by more than 40% during the decade up to 2022. In a 2023 analysis, Safe Work found that the average time off work due to work-related mental health conditions was four times longer than for physical conditions. More of this agency’s data shows that the average mental health related payout now costs nearly $60,000, about four times physical injury compensation.
“We are seeing an increase in mental injuries and mental [health] related injuries,” said Ahmed Farag (main picture, left side), Markel’s local head of casualty for Australia. “I think that's something prevalent across the country, and we’ll probably continue to see that.”
Markel is the insurance division of the giant Markel Group. Ahmed said the majority of the mental health injuries he’s seen are actually related to physical injuries at a workplace.
This mental health crisis is probably not unique to Australia. In the United States, a 2022 survey by the Kaiser Family Foundation and CNN found that 90% of the public think there is a mental health crisis in that country.
However, what could be unique to Australia, is how publicly funded workers’ compensation schemes here are struggling so much under the cost burden of the rising numbers of mental health claims.
In the United States, according to data from the National Council on Compensation Insurance (NCCI), in recent years, workers’ compensation has been the country’s most profitable major commercial insurance line.
“It’s a completely different story in the US,” said Mia Finsness (main picture, right side), Markel's global executive underwriting officer for casualty. New York-based Finsness recently visited Australia.
“Workers' compensation [in the US] has been very profitable,” she said. “The reserve releases in workers’ compensation for the past few years has really offset the reserve increases on the GL [general liability] lines for a lot of carriers.”
Finsness suggested that one reason for the workers’ compensation profits enjoyed by insurers could be workplace safety measures.
“In the US, the reason why it's been so good is the losses have been far fewer and we think that's attributable to the increased workplace safety measures that have been put in place in the last 15 years,” she said.
The casualty expert said these reforms have helped push losses down.
However, she said Markel is keeping a close eye on the situation in the US following rate decreases for consecutive years.
“A variety of potential headwinds and risks have surfaced,” said a Swiss Re report mid-way through last year. In The State of the US Workers' Compensation Insurance Market, chief underwriting officer Laure Forgeron cited a number of issues.
“Reserve releases in recent years have served to mask underlying deterioration of accident year combined ratios (CoR),” she said.
Strong competition in states such as California, said Forgeron, had led to significant premium rate reductions and a softer market, raising pricing concerns. Medical inflation has increased costs, she said, and a tighter job market could lead to the hiring of less experienced workers which can lead to more injuries and claims in certain industries.
The Australian government is undertaking an important independent review of one of the country’s workers’ compensation arrangements: the Comcare Scheme.
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