Darren Tasker

The unseen forces of AI and cloud computing are never out of the news, yet behind the headlines lies a story of growth and innovation as tangible as bricks and mortar.

The heavy computing power required by AI workloads, and the growing global demand for AI technologies, has seen a building boom take place around the world as developers scramble to build the facilities required to meet these needs. According to market research, up to $7 trillion will be spent on data centers by 2030 – a huge sum driven largely by technology companies in the US and China, while Europe lags a few paces behind. The tech industry’s big three, Amazon, Microsoft and Google Cloud, accounted for almost two-thirds of global cloud revenue in Q2 2025. Combined with Chinese companies such as Alibaba and Tencent, their capital expenditure budgets for 2025 reach hundreds of billions of US dollars, much of it geared towards the industrial scale infrastructure and dependable energy sources that high-performance AI and cloud computing now demands.

The latest Allianz Commercial report, The Data Center Construction Boom, explores the extent of this global buildout and also questions whether the building bonanza can last. Despite the ongoing expansion, several factors could limit future growth, including the surging costs of construction. These have escalated dramatically from $200-$300 million, to projects exceeding $20 billion. According to Allianz Commercial construction experts, average-sized facilities now cost between $500 million and $2 billion. Along with higher construction prices, the complex nature of data center construction and operation requires specialised insurance coverage for risks such as power supply concerns, faulty workmanship, fire or natural catastrophes.

“Construction projects as complex and extensive as data centres require significant time and resources. Typically, they require project-specific policies given their size and their unique risk profile that demands specialised insurance,” says Darren Tasker, Head of Construction, Americas, at Allianz Commercial.

Data centres are fuelling the construction industry

A global buildout is underway to construct the infrastructure needed to support the digital economy. The US will be the largest market for data centers, covering about two thirds of the total global data center power demand with 81 gigawatts (GW) by 2028, while China’s data center market is building out equally aggressively. Greater Beijing alone now accounts for roughly 10% of global hyperscale capacity. Europe is trailing behind the two superpowers but is experiencing a 43% annual increase in pipeline activity, with London and Dublin as the largest markets (each with over 1GW capacity), followed by Amsterdam, Frankfurt, Paris, and Milan.

“The bigger data centres have a huge footprint. The scale of a $20bn+ facility can involve tens of thousands of workers on site at peak times, with significant equipment and building supplies moving in and out,” says Chris Fancher, US Head of Construction Property at Allianz Commercial. “Timings can be tight. This requires expert coordination, as any missteps or faulty workmanship can lead to potential losses or costly delays.”

Data centres combine great processing power with unique risk profile

Building a data centre is a complex, multi-disciplinary undertaking, which presents a multitude of risks. One of the main issues is the soaring power demand that threatens to outpace grid capacity and infrastructure. The electricity demand from data centers worldwide is set to more than double by 2030, to around 945Twh. This is slightly more than the consumption of the whole of Japan today, with its population of 124 million. To avoid power issues, which are the main source of impactful outages with 45%, data center operators are increasingly seeking to reduce their reliance on the grid by generating their own power on site, including renewables, gas, and even potentially small nuclear reactors.

Fire, heat and water are also significant risks for data centres, potentially leading to severe property damage or business interruption losses. Lithium-ion batteries are increasingly being used in server racks in data halls. The fire risk associated with these batteries is well documented, particularly in relation to electric vehicles and charging infrastructure. Large data centres can consume up to 19 million litres of water a day, equivalent to the water use of a town with a population of up to 50,000. Increasing cooling requirements will drive up water and electricity demand, while rising global temperatures pose a growing risk to the resilience of over half the world’s top data centre hubs. This has altered the risk profile of data centres and contributed to the increase in construction and insurance costs.

Risk management crucial with strong growth expected in Asia

The Asia Pacific region accounts for approximately 30% of global data center capacity and is expected to grow at a compound annual growth rate of 21% from 2024 to 2028, a faster pace compared to more developed markets. The region consists of multiple markets, each with distinct drivers and market conditions. China, Japan, and India account for 60% of the total installed capacity in the region, while markets like India, Malaysia, and Indonesia are expected to lead the next wave of growth.

Christian Sandric, Regional Managing Director of Allianz Commercial Asia, says, “As the demand for data centers in the region surges, it is crucial that parties fully understand the risks involved during construction and operation. Beyond the main risks such as power supply, rising construction costs and supply constraints, fire, and cooling requirements, parties also need to consider aspects such as cyberattacks, and impact on the surrounding environment, ecosystem, and infrastructure. For example, cooling systems may discharge heated water back into local water bodies, and this can raise temperatures and affect aquatic ecosystems.

“These complex and extensive risks call for specialist insurance and expert risk-management guidance, and clients need to work with an experienced team of underwriters who knows the business and can support the project from beginning to end, including multi-year coverage and policy extensions as needed.”

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Professional services firms must continue to properly train and supervise their staff as technology evolves.

Architects and engineers face greater scrutiny over building and fire safety defects. Financial services professionals may be accused of mismanaging investment funds negatively impacted by inflation. A lawyer’s untrained use of artificial intelligence (AI) tools when preparing client cases could result in an error-ridden brief. The emerging risk landscape for professional services firms is multi-faceted.

A new report from professional indemnity (PI) insurer Allianz Global Corporate & Specialty (AGCS) identifies a number of emerging liability trends for companies, ranking them by level of anticipated impact, potential drivers of loss activity and the likely ease with which these risks may be mitigated. Impacted professions include management consultants, auditors, accountants, architects, engineers, solicitors and lawyers, and media executives, all of whom may be held responsible for losses that arise from a perceived breach of their duties.

“Although exposures vary, all these professions face a wide range of civil liability exposures which need to be adequately addressed and mitigated. These could range from accusations of negligence or omissions resulting in harm or damage to the client, to misrepresentation, to failure to identify fraudulent activity, to the unintentional breach of contract, intellectual property rights or confidentiality, and regulatory investigations and actions,” says Diego Assef, Head of the Global Practice Group, Professional Indemnity Claims at AGCS.

Building safety laws and digital dangers such as ‘hackers for hire’ top the trends heatmap

AGCS’ global PI claims experts identify and rank 11 emerging trends in the report with some professions being more exposed than others depending on the risk and the nature of their business. Evolving legislation related to building safety and cyber crime, social engineering and data loss, are both ranked #1 (very high – a critical impact to operations or loss severity could be expected). Although building safety has predominantly been a UK issue following the Grenfell Tower fire tragedy in 2017 some impact will be felt globally too the report notes. In the UK, extended liability periods for building and fire safety defects could bring new legal claims against manufacturers and suppliers, with a potential domino effect on all specialists in a construction project, such as architects, engineers and design and build contractors for example.

Cyber-attacks have increased in recent years – and professional services firms are highly exposed due to the proprietary customer data and intellectual property they process or operate with. For example, cyber mercenaries are increasingly targeting law firms in order to illegally obtain confidential or protected data that could tip the balance in courtrooms. These so-called ‘hackers-for-hire’ provide technical capabilities and deniability of involvement in the cyber-attack should it be discovered. Claims drivers, which apply across all professions, include phishing and spoofing frauds, third party supply chain risks, ransomware or malware, a lack of adequate systems or controls or data loss. Not only does a cyber breach present immediate first-party costs and disruption, it can also result in significant regulatory exposures, including action from data protection authorities and considerable fines. Litigation from affected data subjects may follow, including large group claims. Breaches may also lead to client and third-party liability claims, with claimants alleging losses due to business interruption or leaked information. A breach also carries the risk of reputational damage, resulting in stock drops and securities claims. Smaller firms can be more vulnerable as they typically have less sophisticated cyber-security.

Prepare for volatility and unexpected impacts from inflation and new tech

Among the other risk trends examined in the report are geopolitical, economic and market volatility (ranked #3 – moderate impact to operations or loss severity could be expected). The report notes that regulatory exposures can arise for professionals acting for clients who may potentially be caught by a rapidly evolving sanctions regime, while for construction and design professionals, disruptions to supply chains could bring claims relating to project delays.

The inflationary environment also ranks as a #3. If inflationary pressures lead to recessionary conditions, there could be a myriad of potential exposures for professionals, including insolvency-related exposures for auditors and insolvency practitioners, lenders’ claims for solicitors and valuers, and claims arising from due diligence against lawyers and accountants, according to the report. Outside of recessionary conditions, financial services professionals may face mismanagement and suitability allegations relating to funds negatively impacted by high inflation.

At the lower end of the risk rankings scale, but not to be underestimated, is the use of new technologies such as AI tools by professional services firms (ranked #4 minor impact).

“While AI has the potential to operate as a risk reducer, as technological solutions evolve rapidly so do the potential claims drivers,” says Assef. “These include data privacy or copyright issues, the need to preserve confidentiality when using service providers, risks of errors being repeated in volume work, and the level of supervision involved in machine learning tasks.

“Professional services firms must continue to properly train and supervise their staff as technology evolves and to ensure the authenticity of work products considering the emergence of tools such as ChatGPT. Ultimately, a lack of awareness of how generative AI works, as well as untrained use, could lead to legal sanctions and civil claims against all types of professionals.” A New York lawyer recently faced sanctions over a ChatGPT-aided brief used in their client’s personal injury case. The technology cited six non-existent court decisions.^[1]

PI claims – most impacted professions

The report also notes that over the past 20+ years AGCS has processed and handled over 90,000 PI claims globally with a total value of €2.2bn. Analysis shows that for large losses (€1mn+ claims only), solicitors/lawyers are most impacted (30%), followed by construction professionals (27%).

Read the report.

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[1] Reuters, A lawyer used ChatGPT to cite bogus cases. What are the ethics?, May 30, 2023

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Thomas Sepp

A fire at a busy warehouse leaves a company struggling to replace its buffer stock; a ransomware attack paralyzes a company’s IT systems; the use of industrial adhesives in manufacturing results in a costly product recall: every day companies around the globe, together with their insurers, experience losses, in multiple forms, in the millions of dollars.

Over the past five years, fire and explosion, natural catastrophes and faulty workmanship or maintenance have been the major causes of loss by value of insurance claims, according to the “Global Claims Review 2022”^[1] from Allianz Global Corporate & Specialty (AGCS).

“Insurance claims from companies have become more severe over the past five years due to factors such as higher property and asset values, more complex supply chains and the growing concentration of exposures in one location, such as in natural catastrophe-prone areas,” says AGCS Chief Claims Officer and Board Member Thomas Sepp. “The future does not look brighter anytime soon. Companies and their insurers have shown resilience to weather the loss impact of the pandemic, but the ongoing war in Ukraine, a spike in the cost and frequency of business interruption losses and the sustained elevated level of cyber claims are creating new challenges. At the same time, the top two causes of claims, fires and natural hazards, remain significant loss drivers for companies. Last but not least, the impact of soaring inflation around the world will bring further pressure on claims costs.”

Inflation puts undervaluation of assets in the spotlight

Ultimately, inflation brings pressure on claims costs from multiple angles. Property and construction insurance claims, in particular, are exposed to higher inflation, as rebuilds and repairs are linked to the cost of materials and labor, while shortages and longer delivery times inflate business interruption (BI) values. Other lines of insurance, such as directors and officers, professional indemnity and general liability, are also susceptible to inflationary pressures through rising legal defense costs and higher settlements.

“Replacement costs more and replacement takes longer, and this means both the property damage and the business interruption loss are likely to be significantly higher,” says Sepp. “Updating insured values for all new contracts is therefore a pressing concern for insurers, brokers and insureds. If this doesn’t happen, our clients run the risk of not being fully reimbursed in the event of a loss, while insurers run the risk of underpricing exposures. The insurance market has already seen a number of claims where there has been a significant gap between the insured’s declared value and the actual replacement value.” For example, in a claim for a commercial property destroyed in the 2021 Colorado wildfires, the rebuild value was almost twice the declared value, due to a combination of inflation, demand surge, and underinsurance.

An in-depth interview with Sepp on inflation and its impact on claims is available^[2].

What are the top causes of business insurance claims?

In one of the industry’s most comprehensive analyses, AGCS has identified the top causes of loss for companies from more than 530,000 insurance claims^[3] in over 200 countries and territories that it has been involved with between 2017 and 2021 (typically a number of insurers provide coverage jointly considering the huge values at stake in the corporate sector). These claims have an approximate value of €88.7bn, which means that the insurance companies involved have paid out – on average – over €48mn every day for five years to cover losses.

The analysis shows that almost 75% of financial losses arise from the top 10 causes of loss, while the top three causes account for close to half (45%) of the value. Despite improvements in risk management and fire prevention, fire/explosion (excluding wildfires) is the largest single identified cause of corporate insurance losses, accounting for 21% of the value of all claims. Fires have resulted in more than €18bn worth of insurance claims over five years, according to the analysis. Even the average claim totals around €1.5mn.

Natural catastrophes (15%) ranks as the second top cause of loss globally by value of claims. Collectively, the top five causes (based on more than 20,000 claims around the world) – hurricanes/tornados (29%); storm (19%); flood (14%); frost/ice/snow (9%) and earthquake/tsunami (6%) account for 77% of the value of all disaster claims. Hurricanes and tornados are the most expensive cause of loss, driven by the fact that two of the past five Atlantic hurricane seasons (2017 and 2021) now rank among the three most active and costliest on record, as well as recent record-breaking tornado activity. Insurers are also seeing new scenarios. During 2021, the ‘Texas Big Freeze’ in the US and flooding in Germany stood out as events that were both large but had unexpected claims. For example, the ‘Texas Big Freeze’ in February caused huge disruption to infrastructure and manufacturing, with many companies forced into shutdowns by widespread power outages, resulting in property damage and in some large contingent business interruption (CBI) losses. This event alone is estimated to have caused economic losses up to $150bn.

Faulty workmanship/maintenance incidents are the third top cause of loss overall (accounting for 9% by value) and are also the second most frequent driver of claims (accounting for 7% by number, ranking only behind damaged goods with 11%). Costly incidents can include collapse of building/structure/subsidence from faulty work, faulty manufacturing of products/components or incorrect design.

The other top 10 causes of loss are: aviation collision/crash (#4; 9%), machinery breakdown (#5; 5%), defective product (#6; 5%), shipping incidents (#7; 3%), damaged goods (#8; 3%), negligence/misadvice (#9; 2%) and water damage (#10; 2%).

Fire/explosion and negligence/misadvice each account for 20% of the value of all claims in Australia, while natural catastrophes (15%) rank third. A similar trend is observed in Singapore, where fire/explosion (#1; 24%) is the top cause of loss followed by negligence/misadvice (#2; 18%) and machinery breakdown (#3; 16%). Notably, while fires rank first in terms of total loss value in Singapore, they rank low in frequency, only occurring in 4% of claims by number. In China, the top 3 causes of loss include fire/explosion (#1; 19%), defective product (#2; 13%) which is driven by China’s status as the world’s largest goods manufacturer, and then shipping incidents (#3; 12%).

“Although bushfires and the recent floods in Australia make the headlines, fires in factories and other industrial production sites contribute to the largest share of losses,” says Volker Ziegs, Regional Head of Claims, Asia Pacific, AGCS. “Against a backdrop of higher property and asset values, as well as the interconnected nature of today’s supply chains, fires can have significant downstream effects on other businesses around the world, resulting in severe interruptions to operations and culminating in higher final loss totals.”

Business interruption losses on the rise

The claims analysis also highlights the growing relevance of BI as a consequence of losses in property insurance, and the fact that CBI claims have reached a new high over the past year. Costs associated with the impact of BI following the aftermath of a loss can significantly add to the final bill from an incident. The average BI property insurance claim now totals in excess of €3.8mn compared with €3.1mn five years ago. For large claims (>€5mn), the average property insurance claim which includes a BI component is more than double that of the average property damage claim.

The number of CBI claims has increased year-on-year for the past five years, exemplifying the growing interdependence and complexity of corporate supply chains. The automotive industry alone has seen several CBI events during this period, with the overall growth in CBI claims exacerbated in the last two years by a large loss in the semi-conductor manufacturing sector and the ‘Texas Big Freeze’ event. The claims from these two events more than tripled the number of CBI claims in the previous three years.

While not appearing in the top 10 causes of loss, the number of cyber claims has significantly increased over the past few years, driven by the rise of threats such as ransomware attacks, but also reflecting the growth of cyber insurance. AGCS has been involved in more than 1,000 cyber claims in both 2020 and 2021, compared with fewer than 100 in 2016. Claims frequency has begun to stabilize however, albeit at elevated levels.

The Covid-19 legacy and the Ukraine crisis

The report also investigates the insurance impact of recent specific claims events such as the pandemic and the Ukraine crisis. Insured losses from Covid-19 are in excess of $40bn according to industry estimates, with the bulk of claims coming from event cancellation insurance and BI claims from companies affected by lockdowns. The pandemic has also had knock-on effects such as stressed supply chains, heightened inflation, and financial insolvencies.

Meanwhile, Russia’s invasion of Ukraine is likely to result in a significant, yet manageable, loss for the global insurance industry. Insurers exposure to the conflict are limited by war exclusions, which are standard in most property/casualty insurance contracts. Expected insured losses from the war in Ukraine are comparable with a mid-sized natural catastrophe, according to AGCS, but specialist markets like aviation insurance could yet suffer disproportionately.

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Notes:
[1] https://www.agcs.allianz.com/content/dam/onemarketing/agcs/agcs/reports/AGCS-Global-Claims-Review-2022.pdf
[2] https://www.agcs.allianz.com/news-and-insights/expert-risk-articles/inflation-impact-claims.html
[3] https://www.agcs.allianz.com/news-and-insights/reports/claims-in-focus.html

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Ludovic Subran

Allianz has unveiled the twelfth edition of its Global Wealth Report, which puts the asset and debt situation of households in almost 60 countries under the microscope.

Saved from the crisis

2020 was the year of extreme contrasts. Covid-19 destroyed millions of lives and livelihoods and the world economy plunged into its deepest recession since World War II. At the same time, monetary and fiscal policy mobilized unimagined sums to support the economy, markets and people. With success: Incomes were stabilised and stock markets recovered quickly. With this tailwind, household wealth weathered the Covid-19 crisis: Global gross financial assets Financial assets include cash and bank deposits, receivables form insurance companies and pension institutions, securities (shares, bonds and investment funds) and other receivables. increased by 9.7% in 2020, reaching the magic EUR 200 trillion mark for the first time.

Savings were the main driver: As lockdowns drastically reduced consumption opportunities, the global phenomenon of “forced savings” was born. Fresh savings jumped by 78% to EUR 5.2 trillion in 2020, an absolute record. Inflows into bank deposits – the default option of forced savings, simply leaving unspent income in the bank account – almost tripled (+187%). Bank deposits accounted for half or more of fresh savings in all markets considered. As a result, for the first time, bank deposits worldwide grew at a double-digit rate of 11.9%; the previous peak growth was 8% in the financial crisis year 2008. While the asset class securities – buoyed by the strong stock markets – grew by 10.9%, insurance and pension fund assets showed much weaker development, rising by 6.3%.

Vaccinated

Despite a subdued start, despite continued bottlenecks in world trade, and despite new virus variants forcing new restrictions, global GDP will grow strongly in 2021, powered by the vaccination campaign which allows economies to reopen and (partially) return to normality. Moreover, loose monetary policies and generous fiscal support remain in place. The upshot for savers around the world? Bar any major stock market corrections, 2021 should turn out to be another good year for them, with overall growth in financial assets globally of around 7%.

“The head numbers are very impressive”, said Ludovic Subran, chief economist of Allianz.“But we should dig a little deeper. Most households did not really save but simply put their money aside. All this idle money on bank accounts is a wasted opportunity. Instead, households should invest in their retirement and the green transition, enabling societies to master the paramount challenges we face, climate and demographic change. My fear is that if households start eventually to dishoard, money will end up in revenge consumption and will only fuel inflation. We urgently need a new ‘savings culture’.”

Australia: Another bumper year

Gross financial assets of Australian households rose by 5.2% in 2020 (2019: 12.8%), well in line with the region’s average (Oceania: 5.0%). Main drivers were bank deposits which increased by a whopping 12.4%, the fastest increase since the Global Financial Crisis (2008: 19.3%), fueled by record inflows of EUR 18.5 billion, over twice the level seen in 2019. Almost one half of fresh savings for Australian households in 2020 ended up in bank accounts, against a portfolio share of just 22%. Insurance and pension funds asset grew by a modest 3.1%.

Liabilities, grew slightly by 2.0%. Although this is the slowest growth since the beginning of our records, it is miles away from the double-digit leap of the years preceding the GFC. The debt ratio (liabilities as% of GDP) jumped to 129.3%, not as a consequence of the debt growth, but because GDP contracted in 2020. This ratio is well above the average of Advance Economies (82.6%). Net financial assets increased by 7.5% (2019: 21.6%). With net financial assets per capita of 88,740 euros, Australia remained in 13th place in the ranking of the 20 richest countries (financial assets per capita, see table). For 2021, a similar dynamic development can be expected, mainly thanks to a buoyant stock market and generous social transfer in the first half. In the first six months, financial assets of Australian households already rose by around 5.2%.

Long Covid

In 2020, financial assets in emerging markets (+13.9%) grew again faster than in advanced markets (+10.4%), returning to familiar patterns of growth after three years. As a result, the prosperity gap between rich and poor countries has also narrowed somewhat. The trend reversal that we diagnosed last year – the renewed drifting apart of the poorer and richer countries – thus appears to have been halted for the time being. However, it is (much) too early to sound the all-clear. While many developing countries performed surprisingly well in the first year of the pandemic, there are indications that the long-term consequences and challenges – from insufficient vaccination and reconfigured supply chains to the digital and green transformation – could primarily affect the poorer countries.

The same can be said with regard to national wealth distribution. While the national middle class has shrunk in recent years as their share of total national wealth has declined in many countries, for 2020 at least, the immense social transfers seem to have successfully counteracted a further drifting apart of the wealth classes. But this happy affair may not last when state support expires and the direct effects of the crisis – the loss of millions of jobs – will once again be felt. Moreover, the crisis led to a significant impairment in school education. Covid-19 is thus likely to further entrench social immobility. The gradual disappearance of the middle class has only temporarily stopped.

“The pandemic is a much bigger challenge for poorer countries”,commented Patricia Pelayo Romero, co-author of the report. “Very likely, Covid-19 will continue to hold back economic development in this group of countries for much longer than in the advanced markets. But the real challenge comes afterwards: These countries will find themselves in a post-pandemic world that will make it increasingly difficult for them to play out their comparative advantages in a proven way, given the lasting changes in technologies, politics, and life styles. The gradual closing of the global prosperity gap – the defining development over the last decades – can no longer taken for granted.”

Read the report.

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Mr Stewart will assume responsibilities for Allianz Australia Life Insurance Limited and Allianz Retire+ Powered by PIMCO (Allianz Retire+), taking over from Matthew Rady, who will be leaving the business.

Mr Stewart was formerly Head of Client Management, APAC ex-Japan for PIMCO and before that, Head of Australia and New Zealand for the firm. During his tenure at PIMCO, Mr Stewart founded Allianz Retire+ and has served as a Board Member since 2018.

David Plumb, Chairman of Allianz Australia Life Insurance Limited, stated: “I would like to thank Matt for his strong leadership in guiding the Allianz Retire+ team through the successful transition from project to business across his three-year tenure. Matt leaves having built a solid platform for the company and we wish him every success in the future.

“In appointing Adrian as acting CEO, the Board is instilling a proven leader with a deep understanding of the worldwide capabilities of the Allianz Group in retirement income and life protection solutions. Adrian’s strong track record in growing client-focused financial services businesses in the Australian market keenly positions us for significant growth.”

Adrian Stewart commented: “The unique capabilities across this business deploying the global resources of Allianz are unrivalled and present a significant opportunity in meeting the long-term retirement income and life protection needs of Australians.

“Since launch, the team has built a strong market presence and established key distribution channels. Our focus will be to continue this momentum, ensuring we offer our partners a broad suite of innovative and market-leading products.

“I look forward to working with the team to deliver on our strategic objective of expediting our product development capabilities and deepening our client partnerships across the institutional and wealth management channels.”

Mr Stewart brings over 28 years of investment and financial services experience to the firm. Before joining PIMCO in 2014, he was the head of wholesale distribution, marketing and product management at Macquarie during his seven years with the Australian bank.

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New research reveals 4 in 5 Australian employees want workplaces to do more on mental health initiatives.

A call to action: New Allianz research reveals 4 in 5^[1] Australian employees want workplaces to double down on mental health initiatives.

Allianz workers compensation claims costs relating to mental health^[2] – or primary psychological workers compensation claims – have increased by 80 per cent, rising an average of 22 per cent year-on-year, since 2017^[3] . The findings are part of the new Allianz Future Thriving Workplaces report, which has also revealed an overwhelming 80 per cent of the Australian employees surveyed are now calling on their employers to take action to address mental health in the workplace.

The Allianz Future Thriving Workplaces findings illustrate the long-term impact mental health conditions can have on individuals’ holistic wellbeing. The report has found benefits paid to primary psychological injury claims are on average, up to four times higher per annum than for claims relating to physical injuries, and on average take far longer to recover from than physical injuries, with nearly 75 per cent of primary psychological claims experiencing time off work, compared to only 50 per cent of physical injuries^[4] . SafeWork Australia data shows $543 million was paid in workers compensation for work-related mental health conditions^[5] , highlighting the scale of the issue and reinforcing the importance of employers proactively addressing employees’ mental health.

COVID-19, a catalyst for change: Empowering employers to better support employees Expedited by COVID-19, one in two managers surveyed say they now feel an increased responsibility for their employees’ mental health at work, and almost one half of them (47%) think there is a stronger need for mental health initiatives in their industry. The Allianz Future Thriving Workplaces report also revealed some employers have already taken action by starting to implement programs during the COVID-19 pandemic, as six in ten Australian workers surveyed say their employers had already introduced mental health initiatives, and 55 per cent of managers state they or their organisation plans to implement mental health initiatives within the next 12 months.

Commenting on the findings, Julie Mitchell, Chief General Manager of Workers Compensation at Allianz Australia says, “As employers, we’re unequivocally concerned about our employees’ wellbeing. We know that improved mental health in employees across all industries greatly benefits employers and their businesses. It positively impacts individuals’ productivity, talent retention and ultimately, business performance. Yet, the challenge now is to bridge the gap between awareness of mental ill-health in the workplace, and taking action. We can’t take a scatter-gun approach. The priority is addressing each individual’s wellbeing – as thriving employees will lead to positive team and business outcomes. Our actions need to be meaningful to employees, and embedded throughout all organisations.”

“Allianz is committed to empowering employers with the right knowledge, resources and initiatives to better support employees facing mental health issues. Especially as we sadly anticipate seeing a rise in workers compensation psychological claims as a result of the COVID-19 pandemic, highlighting it’s even more important for Australian workplaces to implement the required changes to tackle these challenges now, and work to prevent them in the future. We believe that prioritising the wellbeing of employees, particularly the rising number of Australians experiencing mental health conditions, is key to building future, thriving workplaces,” she concluded.

The barriers to achieving mentally healthy workplaces: Preventing stigma and poor culture The report has identified the leading pain-points employers need to tackle to drive positive change, as three quarters of Australian employees (76%) note there are factors preventing mental health initiatives from being implemented at their workplace. Stigma appears to be a key hurdle to overcome in addressing mental ill-health in the workplace, with four in ten surveyed employees (38%) feeling that mental health issues will not be taken as seriously as physical illnesses. However, a positive shift is underway – as this is a significant improvement from last year’s Allianz Awareness into Action report which found eight in ten (85%) believed that managers are more likely to think an employee’s need for time off is genuine if they say they are suffering from a cold or flu rather than stress or anxiety.

Allianz workers compensation data has also revealed that work-related harassment and work pressure are the most prevalent causes of primary psychological claims^[6] . According to the Allianz research, the most commonly reported workplace behaviours that employees claim to have negatively influenced their mental health are as follows:

• Ineffective or unfair management (39% of employees impacted)
• Workplace culture (33% of employees impacted)
• Bullying and harassment (24% of employees impacted)
• Organisational structure (24% of employees impacted)

Leadership-driven empathy: Fostering mentally healthy workplaces

To tackle stigma and negative behaviours, Australian employees feel the first step to mentally healthy workplaces is starting with conversation around mental health. Three in four Australian employees surveyed (75%) agree there must be more dialogue and discussion around mental health and wellbeing at work. Awareness days – such as Mental Health Awareness Month in October – can be a means of encouraging conversations and garnering advocacy to destigmatise mental ill-health – a key factor in implementing effective mental health programs for employees.

Matthew Johnstone, mental health expert and collaborator on the Allianz Future Thriving Workplaces report, says employers can work collaboratively with their employees to develop the right attitudes, resources and initiatives to best respond to their needs. “Employers don’t need to see mental health strategies as being difficult, box-ticking or costly to implement. Leaders can simply start with empathy, conversation, a good ear and a plan to properly address the emotional needs of their people. Once they have that mindset; job design, employee-employer relationships, work-life balance and collaborative workspaces, are key elements that businesses can improve on to help build a mentally healthy workplace. A company, after all, is only as good as the people who work for it. Invest in them and they will deliver returns far greater than just profit,” he said.

• • The Allianz Future Thriving Workplaces report explores the top causes of mental ill-health in the workplace, the top barriers employers and employees are facing, and what future mental health strategies may look like. Alongside the report, Allianz has released a range of resources to help employers – across all industries – to foster mentally, healthy workplaces – whether that be in-person or virtually. With the new ways of working in mind, the report has identified the five key areas employees would like to see improvement in: Built-in flex: 41 per cent would like flexible work options
  • Extra time off: 38 per cent want additional paid leave, including mental health leave
  • Proactive check-ins: 34 per cent would like more open conversation and employee check-ins
  • Wellbeing programs: 33 per cent would like employers to introduce workplace wellbeing programs
  • Awareness & Prevention training: 32 per cent are keen to see the introduction of mental health awareness training

For more data, insights, tips and resources to creating future, thriving workplaces, and to download the full report, visit the Allianz Workers Compensation Mental Health Hub. Allianz is also a proud Founding Member of the Corporate Mental Health Alliance Australia. The Alliance is business-led, expert-guided, and made up of 15 of Australia’s largest employers, all championing a culture of good mental health for all workers.

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[1] According to Allianz Workers Compensation data, the total cost of active primary psychological claims across its Insurance for NSW (IFN) and Privately Underwritten (UW) portfolios increased, on average, by 80 per cent since 2017, on average 22 per cent per year
[2] According to Allianz Workers Compensation, workers compensation psychological injury claims refers to injuries caused by mental health complications of a work environment
[3] According to Allianz Workers Compensation data, the total cost of active primary psychological claims across its Insurance for NSW (IFN) and Privately Underwritten (UW) portfolios increased, on average, by 80 per cent since 2017, on average 22 per cent per year
[4] According to Allianz Workers Compensation, across both of Allianz’s Privately Underwritten (UW) and Allianz’s Insurance for NSW (IFN) portfolios, primary and secondary psychological claims, on average, receive benefits for a longer duration relative to physical injuries primary psychological claims result in more time off work and take significantly longer to return to work than physical injuries, with roughly 75-80 per cent of primary psychological claims experiencing time off work, compared to only 50 per cent of physical injuries
[5] www.safeworkaustralia.gov.au. (n.d.). Mental health | Safe Work Australia. [online] Available at: https://www.safeworkaustralia.gov.au/topic/mental-health#:~:text=7%2C200%20Australians%20are%20compensated%20for [Accessed Sep. 2020].
[6] According to Allianz Workers Compensation claims data covering Allianz’s Privately Underwritten (UW) portfolio and Allianz’s Insurance for NSW (IFN) portfolios. Further, service industries such as the retail sector in the UW portfolio claim twice as frequently as the result of work-related harassment compared to White and Blue Collar industry workforces

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