Rise in complex stress claims puts UK employers and insurers on alert

In the UK, there’s a growing trend of increasingly complex and wide-ranging claims connected to work-related stress.

These claims now go beyond traditional issues like workload management, harassment, and bullying. This evolution presents significant risks for employers, insurers, and brokers, especially with upcoming legal changes.

The Employment Rights Bill, which will be effective in 2026, will impose a stricter duty of care on organisations to actively support the wellbeing of their employees. In this article we consider the impact on insurers.

The changing nature of stress claims

There has been a noticeable increase in workers reporting illnesses related to their jobs since before the pandemic, with many saying their conditions are due to stress, depression, or anxiety. Not only are there more claims being made, but these claims are also becoming more complex. In the past, claims typically did not include mental health issues, but now they do, and the number of claims related to severe workplace stress has doubled.

Greater societal awareness of mental health issues, driven by media coverage and cultural shifts, has made employees more willing to not just recognise but also report work-related psychological harm. This is reflected in the sharp rise in disability discrimination claims, many of which involve mental health conditions. Disability discrimination claims now account for a quarter of all claims referred to ACAS, demonstrating a willingness of employees to pursue legal remedies for mental health-related workplace issues. 

Implications for insurers 

Insurers are facing new challenges because more people are making complex claims for stress at work. Usually, insurance policies only cover mental injury if such injury amounts to a medically recognised psychiatric condition, but now people are increasingly seeking compensation for stress or anxiety even if they haven’t been formally diagnosed. This creates confusion about what is covered, so insurers may need to update their policies to make things clearer.

There’s also an aggregation risk where lots of similar claims could be grouped together and treated as one big claim, which increases the financial risk for insurers. For example, claims involving seasonal or temporary workers.

The scale of the problem is huge: in 2023/24, 29.6 million working days were lost due to work-related ill health. The cost of injuries and poor health from current working conditions is estimated at £21.6 billion, and poor mental health at work alone could cost UK employers up to £42 billion a year. These numbers show just how much insurers are exposed as mental health claims become more common and complicated.

Regulatory landscape and enforcement

The rules around mental health at work are changing, with the Health and Safety Executive (HSE) paying more attention to risks like stress and anxiety. In 2024, 1.7 million workers experienced a work-related illness. Of these, 776,000 suffered from stress, depression, or anxiety linked to their jobs. These issues made up nearly half of all work-related health problems and more than half of the days lost from work.

To tackle this, the HSE has launched the Working Minds campaign to encourage better mental health in UK workplaces. At the moment, this campaign is about education and guidance, not enforcement. However, this approach could change. In other countries, regulators are already taking legal action against organisations that don’t protect workers from mental health risks. Given the scale of the problem in the UK, including cases where workplace factors have contributed to suicides, the HSE may start enforcing these rules more strictly in the future.

If the HSE moves from education and guidance to enforcement, employers could face regulatory penalties and even prosecution, on top of civil claims. For insurers, this means there could be more claims, and those claims could be more costly, as mental health risks become a bigger part of workplace safety regulations.

What insurers should do

Insurers need to act in several areas to deal with the growing number and complexity of stress claims at work:

• Review and update policy wordings: Insurers should make sure their policies clearly define what counts as a psychiatric injury or mental health condition. This will help avoid confusion, especially when mental health issues are added to other types of claims (known as 'overlay' claims). Policies should state clearly whether these are covered or not.
• Improve claims assessment: Insurers should build specialist knowledge to handle complex mental health claims. They can introduce early intervention strategies and encourage employers to report stress, anxiety, or mental health absences quickly. This allows rehabilitation teams to step in early and address problems before they get worse.
• Support employer risk management: Insurers may want to help employers update their workplace policies to meet new legal requirements, train managers to spot and deal with stress early, monitor remote workers regularly, offer access to mental health support, and keep good records of all communications.
• Prepare for more legal action: Stress claims are being added to wider complaints, and regulatory changes are on the way. This means mental health-related claims are likely to become a bigger, long-term risk for insurers, requiring careful management and planning.