Look, I get where the idea for this mechanic comes from. Grimdark of the future war etc etc, people get scared fighting monsters, they run away / get less effective.
But, let's be clear - this mechanic is in the table top games to add drama / reflect the lack of direct control a general has over the reactions of their troops. It is an abstraction to show the horrors of war, and it absolutely has its place on both the table top 40k game and in Inquisitor.
But... In an ARPG?
ARPGs should be focus on HEROIC actions, smashing stuff, getting loot, showing off flashy abilities. I don't see where this fits. It artificially inflates difficulty by increasing CDs and reducing movement speed when fighting large packs of mobs. It means that "boss" mobs like the dreadnoughts take FOREVER to kill, even after you isolate the mob.
It is an *anti*-fun mechanic that breaks the flow of combat, makes me feel less powerful and artificially inflates difficulty, as opposed to forcing me as a player to be better at moving and skill selection versus enemy abilities.