Mental health tops TPD claim causes, doubles pay-outs in 5 years

New research from the Council of Australian Life Insurers (CALI) has found mental health is now the top reason behind total and permanent disability (TPD) claims, with insurers forking out almost double the amount in payments in 2024 compared to five years before.

The data, sourced from CALI and KPMG’s Cause of Claims Results Report for the second half of 2024 found life insurers had paid out more than $2.2 billion for retail mental health claims, with mental health TPD claims accounting for one-third of total claims paid.

CALI also found mental ill health made up 20 per cent of income protection claims and resulted in pay-outs of $887 million just in 2024.

The data reflects a growing trend first noted by the council last year, after the commissioned Australia’s Mental Health Check Up report by KMPG found there had been a 732 per cent rise in permanent disability claims among people in their 30s with 36 per cent of these now attributed to mental health conditions – compared to 10.1 per cent recorded back in 2013.

CALI chief executive, Christine Cupitt, said while claimants were receiving a lump sum pay-out this may not provide enough financial security especially for younger Australians who still had decades to spend in the workforce.

“Australia is reaching a tipping point. The entire safety net, not just life insurance, is under pressure,” she said.

“Every year we see a growing number of people, particularly younger Australians, leaving the workforce for good due to mental health conditions.

“This should not be the story of young Australians experiencing mental ill-health. People are being left with little choice but to label themselves totally and permanently disabled, even where the medical evidence shows there is a chance they could return to work.

“It’s a square peg in a round hole and clear evidence that more needs to be done to build a mentally fitter community. Insurers will always be there for the Australians who are most deeply affected by mental ill health but we are having to rethink how we better serve customers in the decades ahead.”