October 5, 2019
Life insurers pay out more TPD claims stemming from mental health conditions than for any other cause, according to new data from the Financial Services Council and KPMG Australia.
The data, which explored the underlying causes of TPD claims in Australia. found that mental health conditions account for 24.1 percent of all TPD claims.
FSC Chief Executive, Sally Loane, says the collection of new life insurance data, initiated by the FSC with KPMG Australia, means the analysis of the causes of TPD claims can be undertaken every six months.
She added this data collection initiative is unsurpassed anywhere else in the world, and for the first time, shows the extent of TPD claims for mental health conditions.
“The data shows throughout 2018, 88 percent of all TPD claims are paid in the first instance. This moves even higher for TPD claims for mental health conditions, to 91 percent,” Loane said.
A proportion* of data collected also contained the types of mental health conditions and revealed the top four types below accounted for 63 percent of mental health conditions.
1. 22.9% – reaction to severe stress
2. 16.8% – depressive episodes
3. 13.2% – recurrent depressive disorders
4. 10.3% – other anxiety disorders
Partner in Charge, Actuarial & Financial Risk at KPMG Australia, Hoa Bui, whose team carried out the research, says, “Mental health claims tend to take longer to be reported and assessed than other cause of claims, but the pay-out rate by insurers, at 91%, is nevertheless very high.
“Nearly half the population will suffer some sort of mental health condition at some point in their lives. KPMG will continue to gather and analyse even more granular data – which will help inform better products and services for life insurers, and policy development, when dealing with mental health,” Bui said.
Following mental health conditions, the next highest amounts paid out are for TPD claims caused by:
- Musculoskeletal issues (21.6%)
- Accidents (15.6%)
- Nervous system disorders (13.9%)
- Cancer (8.1%)
APRA data found that in 2018, life insurers paid out more than $4.4 billion to 26,150 Australians who are not expected to be able to work ever again – providing an average payment of more than $168,000. Of that total, over $337m was mental health TPD claims.
“…all life insurers are committed to ensuring at peak times of vulnerability, that Australians feel safe and supported…”
“TPD claims are significantly more complex to assess than other life insurance claims because they usually require a judgment as to whether or not the person is expected to work ever again,” Loane said.
“Given this, all life insurers are committed to ensuring at peak times of vulnerability, that Australians feel safe and supported, without financial stress.”
*28 per cent for TPD based on count of claims. The general pattern above is broadly consistent with the results for all claims, where 40 per cent of data had the further breakdown of type of health problem.