Cross-system reforms are needed to address rising mental health impacts, as changes in one area can lead to increasing burdens elsewhere, according to an EML white paper.

“Without greater alignment across Australia’s income protection and work incapacity schemes, people’s mental health needs don’t disappear – they are too often left unsupported in a fragmented system,” the report says.

University of Melbourne modelling commissioned by claims manager EML shows tightening eligibility for psychological injury in workers’ compensation in Victoria could drive a 19% increase in income protection claims within superannuation over the next decade.

NSW has recently announced similar changes, while Queensland and Tasmania are signalling reviews of psychological claim entitlements within workers’ compensation.

“Evidence indicates that changes to mental health eligibility or benefit duration – particularly in workers’ compensation – can drive increased demand into life insurance and social security, while creating periods of financial vulnerability that worsen recovery and return to work outcomes," EML says.

“A credible reform agenda therefore requires cross-scheme measurement, earlier intervention and deliberate handover design, rather than isolated scheme optimisation.”

Proposed changes in the short term include that insurers and super funds train claims teams in mental health awareness and, where feasible, assign each claimant a dedicated case manager.

The paper suggests a simple minimum standard should be adopted across funds and insurers covering response time frames, the timing and clarity of evidence requests, proactive check-ins and escalation pathways for vulnerable claimants, including financial hardship flags.

Government, regulators and peak bodies should work towards improving education and navigation across systems, while if a workers’ compensation claim is ending or disputed, there should be a structured process to connect a person with their superannuation insurer or other support.

Early intervention should involve providing structured psychological and vocational support from the point a claim is lodged, not after liability is determined or a member’s condition has become entrenched.

Medium-term proposals include standardising processes and definitions across schemes, and where possible moving towards shared, evidence-based approaches to work capacity and mental assessment.

“Monash University research shows that when one system tightens in isolation, demand shifts elsewhere and handover harm rises.” the paper says.

In the long term, policymakers and industry should explore reforms to link or harmonise Australia’s various schemes into a cohesive safety net, or at least a more consistent framework for assessing and supporting work incapacity due to mental health, EML proposes.