Income support system cannot handle claims surge: CALI

Australia's support income system is facing significant strain, with a sharp rise in people unable to work due to illness or injury, particularly mental health conditions.

New research commissioned by the Council of Australian Life Insurers (CALI) and prepared by SuperFriend demonstrates around 8.5 million Australians accessed some form of income support in the past year, totalling $78.9 billion in payments.

Over the past decade, the number of people relying on support has grown significantly, with two million Australians now claiming benefits across a fragmented system.

The report identifies 11 separate income support streams, including employer sick leave, workers compensation, social security, life insurance, and early access to superannuation. This complexity, combined with a rising demand, is making the system increasingly difficult to navigate.

Mental ill health is a key driver of the increase. It accounts for roughly one in three total and permanent disability claims and one in five income protection claims, placing sustained pressure on insurers and government programs.

CALI chief executive Christine Cupitt said the system was not designed to oversee the scale and nature of mental health related claims it's now seeing.

"This report shines a light on a major productivity challenge facing our nation. More and more Australians are taking time off work and getting financial support because they're injured or sick, with mental health conditions often the main reason," said Cupitt.

Life insurers play a critical role later in the support journey, often assisting individuals with more complex and long- term conditions. In 2023 to 2024, the sector paid out $8.3 billion in benefits to around 55,000 Australians unable to work, representing 11% of the total national income support.

However, gaps in coordination between systems can leave individuals uncertain about where to turn, delaying access to support and access to recovery outcomes.

SuperFriend chief research officer Ross Illes said maintaining a connection to work is key, noting the likelihood of returning to employment declines the longer someone remains out of the workforce.

Industry groups are calling for a more coordinated, whole of system approach to better manage rising demand and improve outcomes for affected Australians.