For years, psychological injury sat in the industry’s awkward category: hard to define, harder to manage and notoriously expensive once a matter drifted into dispute. That is changing and the shift matters well beyond workers’ compensation. Safe Work Australia says mental health conditions made up 9% of all serious workers’ compensation claims in 2021-22, up 36.9% since 2017-18, while median time lost was more than four times that of physical injuries and median compensation was more than three times higher. In its 2025 National Return to Work Survey, workers with psychological injuries had a 76.5% return-to-work rate versus 90.2% for physical injuries.
“It’s been fascinating to watch the workers compensation sector finally admit that "invisible" injuries are just as predictable as physical ones if you have the right data,” said Adrian Lewis (pictured), director, business consulting practice at Guidewire.
Lewis argues psych claims are not just another worsening line item. They are a warning about how insurance has to work in a market where losses build slowly, operational signals appear early and the old habit of waiting for formal notification is increasingly too late.
Guidewire is a platinum partner at the upcoming Claims Leaders Summit in Sydney on May 12 where industry leaders will discuss the key challenges facing insurers and their claims processes and the latest advances that could help them.
Identifying psych claims as the “canary in the coal mine” comes at a time when the rest of the market is already being forced to think more dynamically about loss formation. Swiss Re said global insured natural catastrophe losses reached US$137 billion in 2024 and continue to follow a 5% to 7% annual growth trend, with a 1-in-10 probability losses could hit USD300 billion in a peak year. In Australia, the Insurance Council of Australia said insured losses from just two major 2025 extreme weather events had already reached almost $1.5 billion from 126,000 claims by 12 May 2025.
Lewis’s point is that psych claims have forced insurers to confront something general insurance has often preferred to blur: costly claims do not erupt from nowhere. They leave a trail. In workers’ compensation that may be workload pressure, bullying patterns, absenteeism or management failures. In liability, catastrophe and other long-tail books, the equivalents might be staff churn in a care setting, deteriorating maintenance records, claims clustering around a site or other operational anomalies that sit well upstream of the loss notice.
“The biggest takeaway for general insurers, especially those dealing with the slow-burn risks of long-tail liability, is the shift from being a ‘payer’ to a ‘predictor,’” Lewis said.
That shift could be especially relevant for brokers in the current softer market with its volatile geopolitical risks. In fact, even as commercial insurance rates globally were on the decline last year – falling, according to Marsh, 4% globally in the second quarter and dropping by 11% in the Pacific region – casualty was the exception. Last year those rates were rising at a rate of 4%, a reminder that long-tail and liability pressures are not softening in the same way property pricing is.
Meanwhile, for brokers, another ongoing message is that insurers are rewarding clients that can produce credible, real-time evidence about emerging risk instead of retrospective explanations after a claim has matured. That can change the broking conversation because the value is less in narrating last year’s claims experience and more in helping clients show what their live operating environment looks like now: staffing stress, maintenance discipline, incident escalation, remediation speed and intervention triggers.
That logic also fits the market’s broader prevention push. Safe Work Australia’s 2025 return-to-work data found injured workers were more likely to return when employers helped manage the injury or illness before a claim was lodged. In other words, earlier intervention changes outcomes. The same principle travels neatly into general insurance: earlier visibility can change claim severity, reserving confidence and, ultimately, pricing power.
The sharper carriers will be the ones that treat psych claims not as a niche workers’ compensation problem, but as the prototype for modern claims management. The industry has spent years optimising the back end of loss. Lewis is arguing that the next industry winners in claims will be those that move their attention to where human and operational warning signals can still be acted on. For brokers, this could be their next advice story.
