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Life insurers fork out more for mental health

Life insurers are continuing to pay out more for mental health related claims, as Australians take longer to return to work, according to new analysis.

The latest edition of KPMG and the Financial Services Council's five year study on life insurance claims shows Australian life insurance companies are paying out record amounts in disability claims.

Accidents sit atop the list of causes for disability insurance claims at 38%, with musculoskeletal (18%), mental disorders (11%) and cancer 10% rounding out the top four.

However, over the last five years the number of claim benefits paid for mental health conditions has doubled. As has the total amount of retail disability income claim benefits paid out ($4.9 billion) through financial advisers when compared to the preceding five-year period.

The analysis revealed claims paid due to mental health are now 53% higher than they were in 2013, with a 125% increase in the incidence of claims amongst men due to mental health.

KPMG Actuarial partner Briallen Cummings said the increase in mental health claim pay-outs was notable despite the increase across the board. Rather than an increase in mental health pay-outs being due to an increase in the incidence of claims, it is the length of time Australians are spending on claim which has caused the spike.

"Total claims benefits for mental health conditions have more than doubled in the past five years. More people are now focusing on their mental well-being, which we see in people taking longer to return to work after a mental health event," Cummings said.

While most causes of claim see average claimants return to work after 12 months, claims for mental health stretch out to 18 months.

"Mental health claims tend to take longer to be reported and assessed than other cause of claims, but the pay-out rate by insurers is high and reflects the importance of our community in supporting these individuals in a return to health and work," Cummings said.

FSC chief executive Sally Loane said the data project is designed to help steer the local life insurance industry towards a sustainable and affordable disability income insurance product.

"This is, of course, a key goal for the life insurance industry, and even more so, for Australian consumers,"

Read more: Mental healthLife insuranceBriallen CummingsKPMG ActuarialFinancial Services CouncilSally LoaneFSC
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