Life Insurers are supporting claimants for mental illness more than ever before
Disability insurance claims paid by life insurers for mental illness have risen materially over time. These claims are paid from the following 2 types of products (described in general or broad terms) issued by life insurers :
- Total and Permanent Disability Insurance (TPD) which pays a lump sum based on policy conditions. This typically requires the insured to be so ill or injured that they are likely never to return to work again.
- Income Protection Insurance (IP) that pays a monthly benefit whilst a personal is unable to work because of illness or injury, based on policy conditions.
In a recent research report that analysed claims based on products issued to individual insured clients (as opposed to group insurance arrangements such as via public offer superannuation funds), over the past decade, payments for mental health claims have increased more than those for other physical health claims.
- 79.6% of the increase in the TPD claims rate over the past 10 years is due to an increase in mental health claims. TPD mental illness claims have increased by 433% between 2014 and 2022. Claims for other causes have increased by 199.7%.
- 39% of the increase in the cost of Income Protection Insurance claims over the past 9 years is due to the increase in the cost of mental health claims. Claims costs for Income Protection from mental illnesses increased by 129% over this period, compared to 61% for claims from other causes. Income protection claims for mental illness also run longer than claims for other causes. For claims closed in 2022, the average durations were 2.3 years and 1.2 years respectively.
The information in this article is general in nature. It does not allow for your own needs, goals and circumstances. Consider obtaining personal financial advice before buying these types of insurance. Always read the Product Disclosure Statement (PDS) before buying insurance. The PDS will contain the definitions regarding when a claim would be paid.
Written in December 2024. Information obtained selectively from from “Australia’s Mental Health Check Up” by the Council Of Australian Life Insurers and KPMG Life Insurance. Industry Data Collection 2013-2022. Published November 2024.
