An inevitable surge in mental health claims

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By Gabriella Janu, Lawyer

Insurers should be prepared for a considerable increase in a multitude of mental health claims triggered by the COVID-19 pandemic over the next few years.

The Australian Institute of Health and Welfare reported that between 16 March and 27 September 2020 almost 7.2 million Medicare subsidised mental health-related services were utilised by Australians, and that the major crisis support mental health services including Lifeline, Beyond Blue and Kids Helpline had experienced a significant increase in demand.

Much of this demand increase was attributed to the psychological challenges presented by extended periods of lockdown in the early days of COVID-19 Australia. Even for those with a healthy mentality, a combination of a fear of the virus, the loss of social contact, job stability concerns, increased care responsibilities and constantly changing health messages brought an anticipated increase in primary incidences of mental health conditions. For those with existing mental health conditions, it is feared the consequences could be devastating, including the prospect of primary conditions becoming chronic and the emergence of secondary conditions.

Given that mental health claims normally take longer to report than other claims, it may be a while before insurers see the true effect of the mental health consequences of COVID-19, but it is expected that most COVID-19 related mental health claims will be permanent disability claims and disability income insurance claims, from both existing claimants and other policyholders. Workers compensation is another area of projected claim increase with Safe Work Australia reporting that out of 533 COVID-19 related workers compensation claims received at 31 July 2020, 179 related to mental health impacts related to COVID-19.

What about now though? The vaccine is being slowly distributed across the Australian public, cases are a few and far between and when cities are being plunged into lockdown after a case is detected it is only for a few days or so. So do we still need to worry about the impacts of COVID-19 on the healthy mentality of Australians? Should we still expect a considerable increase in mental health claims?

In short, yes.

While Australians are enjoying a much greater sense of normality now compared to 6 to 12 months ago, many have been experiencing financial pressure, long acclaimed as a major cause of prolonged anxiety and depression, for almost a year, and as time goes on, the challenges these people are experiencing are increasingly met by reduced government funding.

Further, the last 12 months has taught us that COVID-19 has a habit of throwing curve balls when we least expect it and for all we know, another outbreak or mutant strain could be right around the corner, plunging Australians into further periods of isolation, and halting our recovering economy once again. The possibility of this alone is a real cause for stress and anxiety among the general public.

Ultimately, COVID-19’s true impact on mental health claims remains to be seen, but insurers should certainly be prepared for a considerable increase in claims. The Financial Services Commission reported $1.47 billion being paid out by insurers for mental health claims in the previous financial year. It seems highly unlikely that this figure will drop in the next reporting period.

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