If you’ve reached a breaking point at work, whether due to bullying, harassment, or a toxic environment, and your mental health is suffering, you may be considering a workers’ compensation claim for psychological injury. Before you take that step, it’s worth understanding the landscape you’re entering.
This article draws on direct professional experience working with clients through the workers’ compensation system. What follows is not speculation; it is consistent with findings reported by major Australian media outlets, independent investigations, and recent parliamentary inquiries (references listed at the end).
A word of caution first: If you are at crisis point, the single best thing you can do right now is slow down. Before obtaining a medical certificate from your GP, consider taking a couple of weeks of stress leave to reflect on your options. Those who have been through the system will often tell you that, as distressing as the original workplace situation was, the day they lodged their workers’ comp claim was when things became truly overwhelming.
When an insurer receives a psychological injury claim, they move quickly into damage-control mode. The financial stakes are significant. Workplace bullying alone is estimated to cost the Australian economy between $6 billion and $36 billion per year, a figure based on Productivity Commission and Australian Human Rights Commission data that has been cited for over two decades. A 2023 peer-reviewed study in the Journal of Industrial Relations argued that figure is now conservatively out of date, and that adjusted for current prevalence rates, the real annual cost is likely between $10 billion and $60 billion. On top of this, psychological injury claims now make up 12% of all workers’ compensation claims nationally, but account for 38% of total scheme costs, with the average claim cost in NSW rising from $146,000 in 2019–20 to $288,542 in 2024–25. Insurers are, therefore, highly motivated to find grounds to dispute or deny your claim. Here are five ways they do it.
1. “Doctor Shopping”: Biased Independent Medical Examinations
When you lodge a claim, the insurer will refer you to what they call an Independent Medical Examiner (IME), typically a psychiatrist, to assess whether your claim has merit. The word “independent” is doing a lot of heavy lifting here. Insurers tend to favour IMEs whose assessments align with their financial interests.
In practice, this psychiatrist will often probe your personal history at length, looking for alternative explanations for your current distress; a difficult divorce, postnatal depression years ago, a childhood medical event. The goal is to attribute your symptoms to something other than what happened at work.
What you can do:
Treat the IME appointment like a media interview. Politicians are masters at acknowledging a question while redirecting the conversation to their own key messages. Do the same. If asked about a painful event from your past, briefly acknowledge it, then bring the focus back to recent workplace events and their specific impact on you.
For example: “That was difficult at the time, but I recovered well. What I can tell you is that after my manager publicly humiliated me in front of the team, I began experiencing panic attacks and I haven’t slept properly in weeks.”
Also be aware that IMEs sometimes deliberately downgrade diagnoses; for instance, classifying what meets the clinical criteria for Post-Traumatic Stress Disorder (PTSD) as the less severe Adjustment Disorder, which attracts lower compensation. To counter this, engage a lawyer who can refer you to an independent psychiatrist, and consider commissioning a psychological assessment using a validated psychometric tool (such as the Personality Assessment Inventory – PAI). While a psychologist’s report carries less legal weight than a psychiatrist’s, a thorough, well-documented assessment can meaningfully strengthen your case.
2. An Adversarial Process Designed to Exhaust You
The burden of proof rests with you. To succeed in a claim, you need a clear, coherent account of what happened, supported by credible evidence; and you need to present it at a time when stress may be seriously impairing your ability to think clearly and advocate for yourself.
This is not accidental. Insurers understand that the more difficult and drawn-out the process, the more likely claimants are to give up before reaching a resolution. A 2025 parliamentary committee report in NSW formally found that insurer practices include delays in treatment approvals, adversarial claim handling, poor return-to-work outcomes, excessive legal and investigation spending, and a systemic lack of accountability. The same report noted that psychological injury claims where treatment occurs within two weeks cost 20 times less than those where treatment is delayed, yet insurers routinely take months to act.
What you can do:
Build a strong support team early. A specialist employment lawyer and an experienced psychologist can help you navigate the process with clarity, prepare evidence effectively, and buffer you against the emotional toll of an adversarial system. If this is your first time through the process, which it likely is, having knowledgeable advocates in your corner allows you to respond strategically rather than reactively. Start by gathering contemporaneous records: emails, incident notes, witness accounts, and anything that documents what occurred and when.
3. Bonus Structures That Incentivise Claim Denial
Insurance companies operate performance incentive schemes for their claims agents. While not inherently problematic, these structures can create perverse incentives. Agents may be financially rewarded for closing claims before key milestones, commonly at 13, 52, and 104 weeks, or penalised for failing to do so. This can motivate some agents to obstruct, delay, or apply pressure to resolve claims on terms that favour the insurer.
What you can do:
The specifics of any insurer’s internal bonus structure are confidential, so there is limited recourse here. The most effective response is informed persistence. Understanding from the outset that these dynamics exist, and that resistance is a feature of the system, not a sign your claim lacks merit, can help you stay the course.
4. Deliberate Delays in Payment
Stalling is a well-documented tactic. Insurers routinely delay reimbursement of medical expenses and settlement payments, and some still process payments by cheque rather than electronic transfer, creating additional delays that can stretch to several weeks when processing and clearance times are factored in.
This has a practical knock-on effect: many healthcare providers decline to invoice third parties directly, having had poor experiences with insurers. This leaves claimants out of pocket and waiting on reimbursements.
What you can do:
Plan for delays from the beginning. Even if your claim is accepted, it may be many months, sometimes over a year, before it is fully resolved. Develop a financial contingency plan early: understand what savings or support structures you can access, what your legal costs are likely to be, and how you will manage living expenses in the interim. Do not let payment delays discourage you from accessing the professional support you need.
5. Systematic Rejection of Claims in High-Risk Industries
Workers in certain industries face disproportionately high rates of claim rejection, particularly for psychological injuries. Police officers, paramedics, emergency service workers, and healthcare professionals are frequently exposed to traumatic events on the job; and yet their claims are rejected at far higher rates than those for physical injuries.
This disparity is well-documented. In these cases, IMEs are sometimes directed to argue that PTSD or other psychological conditions arose from causes unrelated to workplace exposure, despite the clear weight of evidence to the contrary. Recent proposed reforms in NSW would have required workers to first establish a bullying and harassment claim through the Industrial Relations Commission before being eligible to lodge a compensation claim at all, an extra legal step that critics, including mental health advocacy groups such as Beyond Blue, argued would worsen outcomes for exactly those most vulnerable workers in high-risk industries.
The human cost of this is significant. Some claimants, already exhausted by trauma and the demands of the claims process, have not survived the experience. A NSW parliamentary committee inquiry in 2025 found that proposed threshold increases carried a genuine risk of self-harm and suicide among claimants. This is not a dramatic overstatement; it is a finding of an official government inquiry, and one that no insurer or employer has been held adequately accountable for.
What you can do:
Public accountability remains one of the few meaningful levers available in these situations. When insurers or employers face media scrutiny, they tend to respond. If you have the resilience and the evidence, working with a journalist on your story can prompt the kind of institutional response that internal processes do not. This is an advanced strategy, however, and should only be considered when you are in a stable enough position to withstand the additional pressure it brings. If you pursue it, learn how to write an effective press release and build relationships with journalists who cover workplace or health issues.
The Changing Landscape: Recent Legislative Reforms
It is important to note that the workers’ compensation landscape has shifted considerably in the years since this article was first written, and not always in favour of claimants.
In Victoria, reforms that took effect on 1 March 2024 lifted average premium rates and narrowed eligibility for mental injury claims, including denying claims where stress or burnout is the primary cause from ongoing weekly benefits after two and a half years. Victoria’s psychological claim count grew by 28.5% over five years, from 27,686 in 2019–20 to 35,575 in 2023–24.
In NSW, the Workers’ Compensation Legislation Amendment Bill 2025 passed parliament in November 2025, followed by a second tranche, the Workers’ Compensation Legislation Amendment (Reform and Modernisation) Bill 2026, which passed in February 2026. Together, these laws phase in higher whole-person impairment thresholds for psychological injury claims, with access to common law damages requiring at least 25% Whole Person Impairment (WPI) from July 2026, rising to 28% by 2029. Weekly benefits beyond 130 weeks will similarly require meeting higher impairment thresholds.
Unions, legal groups, and the Law Society of NSW opposed these changes, arguing that more than 95% of current psychological injury claimants would fall below the new thresholds. Mental health advocates warned of increased risk of self-harm and suicide. The NSW parliamentary committee described early versions of the proposed threshold as “blatantly unacceptable.”
The upshot for claimants is this: access to compensation for psychological injury is becoming harder, the evidentiary bar is rising, and the financial window for receiving support is narrowing. This makes early legal advice, thorough documentation, and a qualified support team more important than ever.
In Summary
Pursuing a workers’ compensation claim for psychological injury is a serious undertaking. It requires preparation, support, and a clear-eyed understanding of the obstacles you are likely to encounter. The system is adversarial by design, and navigating it alone is extremely difficult.
The most important steps you can take are: seek early legal advice from a specialist employment lawyer, engage a psychologist who can document your condition thoroughly, gather evidence from the outset, and build a financial buffer for a process that may take longer than you expect.
You deserve fair treatment. Understanding how the system works is the first step to getting it.
Note: This article reflects the author’s professional experience and is consistent with findings published by The Age, the ABC, the Herald Sun, the Canberra Times, and more recent parliamentary, academic, and media sources cited below.
Original Reference Articles
- The Age: “My Life Turned Into A Nightmare Dealing With Worksafe’s Insurers”
http://www.theage.com.au/national/investigations/my-life-turned-into-a-nightmare-dealing-with-worksafes-insurers-20160910-grde80.html
- The Age: “Dirty Tactics By Insurance Companies Make Injured Workers Miserable”
http://www.theage.com.au/victoria/dirty-tactics-by-insurance-companies-make-injured-workers-miserable-20160909-grd648.html
- The Herald Sun: “Judge Slams Victorian WorkCover Authority Conduct”
http://www.heraldsun.com.au/news/judge-slams-victorian-workcover-authority-conduct/story-e6frf7jo-1226099303940
- The Age: “Victoria WorkSafe System Failing ‘Particularly Vulnerable People’: Ombudsman”
http://www.theage.com.au/victoria/worksafe-system-failing-particularly-vulnerable-people-ombudsman-20160912-gre7li.html
- ABC Four Corners: “Insult To Injury”
http://www.abc.net.au/4corners/stories/2016/08/01/4509000.htm
- Canberra Times: “Psychological injury claims placing stress on APS departments”
http://www.canberratimes.com.au/national/public-service/psychological-injury-claims-placing-stress-on-aps-departments-20151027-gkjl6d.html#ixzz3po7NWjAX
Recent Related Articles (2024–2026)
- Insurance Business Australia (June 2026): “Workers’ Compensation Schemes Crack Under Psychological Claims and Widening Premium Gaps” — Reports a 28.5% increase in Victoria’s psychological claims over five years and details sweeping legislative reforms across NSW and Victoria tightening eligibility for mental injury claims.
https://www.insurancebusinessmag.com/au/news/workers-compensation/workers-compensation-schemes-crack-under-psychological-claims-and-widening-premium-gaps-576913.aspx
- Jameson Law (May 2025): “Psychological Injury Claims Under Review: NSW Workers’ Compensation Reforms 2025” — Examines proposed threshold increases and the disproportionate impact on frontline workers including nurses, police and paramedics.
Psychological Injury Claims Under Review: NSW Workers’ Compensation Reforms 2025
- Stacks Law Firm (January 2026): “Move to Increase Psychological Injury Threshold in NSW Workers Comp Bill Defeated” — Details how a parliamentary committee found proposed threshold increases were “blatantly unacceptable” due to risks of self-harm and suicide among claimants.
Move to increase psychological injury threshold in NSW workers comp bill defeated
- Independent Med Management (November 2025): “Workers Compensation Legislation Amendment Bill 2025” — Documents official findings of adversarial claim handling, delays in treatment approvals, poor return-to-work outcomes, and lack of insurer accountability.
https://imedmanagement.com.au/blog/workers-compensation-legislation-amendment-bill-2025
- SafetySure (October 2025): “Mental Health Workers Compensation Claims Australia 2025” — Analysis of Safe Work Australia data showing a 161% increase in mental health claims over 10 years, with workers experiencing a median 35.7 weeks off work.
https://www.safetysure.com.au/research/mental-health-workplace-claims-australia-2025-statistics/
- McCullough Robertson Lawyers (December 2025): “Managing the Rise in Workers’ Compensation Claims for Psychological Injury” — Legal analysis of employer and insurer obligations under current and proposed legislation.
Managing the rise in workers’ compensation claims for psychological injury
- Deady et al., Work (2025): “Psychological Workplace Injury and Incapacity: A Call for Action” — Peer-reviewed research documenting how injured workers face hostility and systemic obstacles, and how stressful claims interactions reduce return-to-work rates.
https://journals.sagepub.com/doi/10.1177/00221856241258561
- Ballard & Bozin, Journal of Industrial Relations (2023): “The True (Financial) Costs of Workplace Violence in Australia” — Peer-reviewed paper arguing the long-cited $6–$36 billion annual cost of workplace bullying is now out of date, with a revised conservative estimate of $10–$60 billion annually.
https://journals.sagepub.com/doi/full/10.1177/1037969X231174672
