By Anna Lopata – ANZIIF senior writer

Australia has been remarkably successful at reducing workplace injuries of all kinds. But now psychological harm is replacing it with new, thorny challenges of diagnosis treatment and recovery.

For generations, workplace safety has focused on preventing visible harm.

Machinery became safer. Protective equipment improved. High-risk tasks were redesigned. Fatality rates declined. Many of the hazards that once defined industrial workplaces became better understood, regulated and controlled.

Australia’s workers compensation schemes evolved alongside that progress. They were built to support workers through physical injury and illness, helping people recover and return to work.

Yet as one challenge has receded, another has emerged.

Psychological injury remains a minority of workers compensation claims, but it is increasingly shaping the future of workers compensation schemes.

According to the Insurance Council of Australia’s Workers’ Compensation Policy Paper, psychological injuries are associated with longer recovery periods, higher costs and more complex claims pathways than many physical injuries.

Unlike a fractured wrist or torn ligament, psychological injuries are often less visible. Their causes may be layered, their recovery uncertain and their outcomes influenced by factors extending well beyond the original workplace event.

The industry can no longer simply concern itself with injury compensation. Increasingly, it must support recovery.

Where workplace injury ends, broader mental health begins

The rise of psychological injury claims cannot be viewed in isolation from broader changes in Australian society.

The Australian Bureau of Statistics’ National Study of Mental Health and Wellbeing found that 42.9 per cent of Australians aged 16 to 85 had experienced a mental disorder at some point in their lives, while 21.5 per cent had experienced a mental disorder in the previous 12 months. Among people aged 16 to 24, the figure rises to almost 39 per cent.

At the same time, mental and substance use disorders have become one of Australia’s leading contributors to non-fatal disease burden. The ICA paper notes that mental illness is among the nation’s fastest-growing chronic health conditions.

Workers compensation schemes were never designed to solve Australia’s mental health challenges. Yet they increasingly encounter workers who may already be managing anxiety, depression, trauma, caring responsibilities, financial pressure or other life stressors before a workplace incident occurs.

The ICA paper notes that pre-existing mental health conditions can prolong recovery, increase treatment needs and add complexity to claims management.

Meanwhile, research from the Black Dog Institute suggests the nature of work itself is changing. Digital connectivity, workforce restructuring, economic uncertainty and evolving workplace expectations are reshaping how Australians experience work and psychological strain.

For workers compensation schemes, the result is a more complicated environment than the one they were originally built to serve.

Recovery is the real challenge

Public discussion often focuses on the cost of psychological injury claims. The more revealing story may be what sits behind these costs.

Safe Work Australia describes mental health conditions as “one of the costliest forms of workplace injury”. The figures help explain why.

Data cited in the ICA paper shows that the median time lost for a serious mental health claim was 30.7 working weeks compared with 6.2 working weeks for physical injuries and diseases. Median compensation payments were $55,270 compared with $13,883.

The issue is not simply the injury itself. It is the length of time people remain disconnected from work, routine, colleagues and community.

The ICA paper notes that while claim frequency has remained relatively stable in some privately underwritten schemes, claim costs continue to rise. Longer-duration claims are becoming a larger proportion of the overall system.

This suggests the future sustainability of workers compensation may depend less on reducing claim numbers and more on improving recovery pathways.

The system around the worker

Given recovery is the challenge, the quality of the support system becomes critical.

One of the most striking themes in the ICA paper is the importance of continuity, communication and collaboration. The report highlights concerns about high turnover among case managers, inconsistent expertise in psychological injury and the disruption caused when workers repeatedly need to retell their story to different people.

In WorkSafe Queensland’s case study of “Alice”, an example of a positive outcome is outlined.

After experiencing workplace violence, Alice developed symptoms of stress and anxiety. Rather than focusing solely on claim administration, her employer, insurer, rehabilitation coordinator and treating doctor worked together to support her recovery. Suitable duties were identified, progress was monitored and support was tailored to her circumstances.

The approach reflects a principle identified in the evidence informed It Pays to Care report, which argues workers are more likely to return to work when “the whole team is onside”.

The phrase captures an important reality. Recovery rarely depends on a single decision-maker.

It is shaped by employers, clinicians, rehabilitation providers, insurers, case managers and workers themselves. When those stakeholders work towards the same goal, outcomes improve. When communication breaks down, recovery can become significantly more difficult.

Can less conflict deliver better outcomes?

Workers’ compensation systems must balance competing responsibilities.

Claims need to be investigated. Evidence needs to be assessed. Scheme sustainability must be protected.

Yet the ICA paper points to research suggesting adversarial attitudes and disputes can reduce the likelihood of a successful return to work.

The report identifies opportunities to simplify processes, improve dispute resolution and reduce unnecessary conflict. It also points to evidence showing workers are more likely to engage positively when they believe they are being heard and treated fairly.

This is a significant shift in thinking.

Traditionally, success has often been measured through administrative efficiency, legal outcomes or claim costs.

Increasingly, attention is turning towards something less tangible but equally important: whether the process itself supports recovery.

For psychological injury claims in particular, trust may be just as important as compliance.

The next stage

Even the most effective claims management cannot overcome one growing obstacle: access to treatment.

The ICA paper highlights significant shortages in mental health professionals, citing comments from the Royal Australian and New Zealand College of Psychiatrists that the current psychiatric workforce meets only 56 per cent of national demand.

Dr Elizabeth Moore, then President of the RANZCP, described Australia as facing a “critical and chronic shortage of psychiatrists”.

The Australian Psychological Society has similarly warned that growing demand is placing enormous pressure on mental health services.

For workers compensation schemes, these shortages create a challenge that sits largely outside insurance.

Claims may be accepted quickly. Employers may be willing to accommodate workers. Rehabilitation plans may be ready to commence. But if treatment cannot be accessed, recovery may still be delayed.

A broader perspective needed

Psychological injury is often discussed through the lens of cost. The ICA paper suggests a broader perspective is needed.

The next challenge is not necessarily making workplaces physically safer, but helping people recover from injuries that are often less visible and more deeply connected to the complexity of modern life.

That task extends beyond insurers, employers or healthcare providers alone.

It requires systems that are connected, responsive and focused on the person behind the claim.

As psychological injury becomes a more prominent feature of Australia’s workers compensation landscape, the question is no longer simply whether workers are compensated.

It is whether they can recover.

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