Complete anecdata, but the parents in my close friend group are split between "parents with a more free-range kid mindset" and "typical upper-middle-class parental paranoia."
The free-range kids are mostly happy-go-lucky, emotionally stable, and thriving. Almost every single kid over the age of 10 with paranoid parents is diagnosed with a mental health condition of some sort. I mean I literally can only think of one who is not in therapy or taking medication. I think the isolation and lack of unsupervised group activities that you describe is a big part of it.
One of my more paranoid friends made a judgmental comment recently regarding my other friend's daughter not being in therapy. I was extremely confused and asked if the kiddo was having emotional issues. Her response was, "Well not yet, but 12 is a very stressful age, and I think that when you have the money to do so, it's just good parenting to ensure your kid is talking to a therapist on a regular basis."
The level of paranoia needed to believe that every single perfectly stable 12-year-old needs weekly visits with a mental health professional to ensure their health and safety, and that not supplying this is neglectful, is just... bizarre.
I cannot help but believe this sort of behavior is severely damaging the psyche of these kids. And I also don't see how it can't be hurting the parents as well. Imagine how incredibly stressful it must be to be a parent who believes every stranger, every walk around the block, and every pre-teen mood swing is a serious danger to their child.