An “alarming” number of Australians in their 30s are leaving the workforce permanently because of their mental health, according to new research commissioned by CALI.
The council says the Australia’s Mental Health Check Up report by KPMG “…shows there’s been an unprecedented 732% in Total and Permanent Disability claims for mental health for 30-to 40-year-olds over the past decade. It is the biggest spike across all age groups.”
CALI CEO Christine Cupitt says the unprecedented number of people leaving the workforce permanently in the prime of their working life has huge implications for them personally, for their loved ones, for the national economy and for stretched government support systems.
“These are very concerning generational trends that show the frequency and severity of mental ill-health is rising exponentially in our community. No one wants this to be their story,” she says.
The data shows Australians are leaving the workforce for good because of mental ill-health at a younger age than before, with the average age of people who claim now 46 years old. The average was around 49 years a decade ago.
CALI says by comparison, the average age for other physical causes of permanent disability claim has remained stable at 49 years of age over the same timeframe.
“The research also shows men are more likely to be classed as permanently unable to work because of mental ill-health with an almost 60% higher claims rate compared to women.”
CALI says life insurers are the largest private sector provider of financial support to people experiencing mental health challenges, second only to the Federal Government.
“We’re helping people every day and will continue to sustainably play our part. Australia’s life insurers are investing more than ever in this kind of data so we can share it with the community and show just how significant the impacts of mental ill-health are on Australians,” says Cupitt.
CALI notes too that almost 80% of the overall increase in the number of permanent disability claims over the past decade is due to the exponential increase in mental health claims.
“They have gone up by almost 10% every year while the rate for other physical causes of claim has only increased by half a percent annually.”
Cupitt says that at the end of the day “…it’s Australian taxpayers who’ll be footing the bill if these trends continue as government safety nets and payments are stretched beyond capacity.”
…life insurers fear this unprecedented rise could have a flow on effect on the affordability of life insurance…
CALI states that Australia’s life insurers fear this unprecedented rise could have a flow on effect on the affordability of life insurance and the ability of insurers to provide meaningful cover for what is a rapidly growing number of people who are severely incapacitated by mental ill-health.
“This is far bigger than us. While governments are already thinking seriously about Australians’ mental health, we now have further evidence that our community needs more including a stronger and earlier safety net to keep people from falling through the cracks,” Cupitt says.
…This can’t just be left to private industry to manage once people are at the end of the road…
“This can’t just be left to private industry to manage once people are at the end of the road. No one wants to find themselves severely unwell with no other option than to make the life changing decision to leave the workforce permanently.”
Meanwhile Trevor Battersby the Director and Founder of TPD Claims Support Services, told Riskinfo that while the rise in mental health stats is not surprising, it is alarming and his firm has been inundated with mental health claims post Covid.
He notes that while the TPD definitions remain the same, the “permanency” is the part most clients or planners need to focus on when preparing a submission.
“The insurer is looking to assess the permanency of the mental health condition and unlike a physical condition you cannot simply do an ECG or an x-ray and identify fairly quickly, or assess, the severity and permanency,” he says.
Click here to read the full report. CALI notes data relates to retail life insurance policies and doesn’t cover policies obtained through superannuation funds.
There is something going on in our life insurance industry with successful TPD claims occurring where the specified disabling illnesses is of a mental health nature.
Every TPD definition in the industry contains the use of the word “permanent”. Yet apparently insurers are awarding TPD payouts where it may not be clear that the disability has been certified as permanent.
In their most severe forms, depression, major depressive disorders, anxiety, and bipolar disorder can make it impossible to properly function, and this includes going to work and performing your job role. My understanding is that claimants suffering from this degree of mental health are more likely to be adjudged as a permanent disablement. That’s a given!
But there are no published statistics that I can find which would support a finding that the majority of mental health conditions that do cause disablement could in any way be classified as permanent. Remember that certification of permanent disablement has to be provided initially by the treating psychiatrist. Long experience tells me specialists are reluctant to come to such a final conclusion.
It seems that our life insurance industry is today applying a more generous set of guidelines in deciding when disablement associated with a mental health diagnosis can be classified as permanent. Over in the workers compensation field, it is extremely difficult for a workers compensation insurer to accept a verdict of permanent disablement because of a mental health condition.
What’s going on? As usual advisers are in the mushroom club, kept in the dark and fed BS when it suits the industry. I suspect that insurers are suddenly much more concerned about what used to be called “The Court of Public Opinion”. In the past insurers could obfuscate (media manage) after a failed TPD claimant appeared crying on “A Current Affair”, but these days the Court belongs to AFCA. Only TPD claims in industry super seem to make the Federal Court.
Let’s look at example of activism. AFCA recently directed an insurer to pay a claim for TPD as an ex-gratia payment, after actually stating that they believed the insurer was within their rights to rely on a lower back exclusion, issued at the time of application, to reject the claim. Apparently, because we cannot yet sight the decision, AFCA have made their decision on a non-contractual basis: there was no evidence that the insurer, over the decades since the insurance was issued, had ever offered the insured an opportunity of a review of the exclusion.
AFCA is an ombudsman. It should not be an activist, and nor is it a regulator. Their “activism” appears to have now placed pressure on insurers to give in on TPD claims that essentially should not have been paid because of lack of evidence of permanent disablement. Again, that is speculation on my part because we still unable to see the AFCA determination on the Teagle case
No doubt the life insured would be happy. This generosity will have two rather severe outcomes if if it’s left unchecked: firstly there has to be an increase in TPD premiums and we are seeing that as we watch. Secondly insurers will start fiddling with definitions and severity in TPD definitions, so that only genuine permanent TPD claims are actually paid. There is no long-term winners in that situation, except awyers and asctuaries, both of whom always seem to get paid
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