Rising Mental Health Claims Impact Australian Life Insurance Industry

In financial terms, AIA Australia's payments for mental health claims have nearly doubled, rising from $280 million in 2023 to $557 million in 2024. This substantial increase highlights the escalating financial burden on insurers and the critical need for effective mental health support systems.

Breaking down the data further, Total and Permanent Disablement (TPD) claims related to mental health have seen a notable rise. In the first five months of 2025, 28% of TPD claims lodged were associated with mental health conditions, up from 27% in 2024. Additionally, a significant proportion of these claimants are younger Australians, with 32% of mental health TPD claimants and 28% of Income Protection claimants in 2024 being under the age of 40.

These statistics reflect a concerning trend: younger Australians are increasingly affected by mental health issues that impede their capacity to work, leading to a rise in insurance claims. This situation presents challenges not only for insurers but also for the broader community, as it indicates a growing need for mental health support and intervention strategies.

In response to this trend, AIA Australia has emphasised the importance of preventative measures and early intervention. The insurer advocates for increased physical activity as a means to support mental wellbeing. Research conducted by AIA Australia in collaboration with Quantium Health found that individuals who take 10,000 steps per day experience half the rate of depression compared to those taking fewer than 2,000 steps. This finding suggests that incorporating regular physical activity into daily routines can serve as a protective factor against mental health issues.

For policyholders, the rise in mental health-related claims underscores the importance of understanding the mental health coverage within their income protection and life insurance policies. Given the increasing prevalence of mental health conditions, ensuring adequate coverage is essential for financial security during periods of illness or disability.

In conclusion, the surge in mental health claims within the Australian life insurance sector highlights the pressing need for comprehensive mental health support and proactive measures to address this growing issue. Insurers, policymakers, and the community must collaborate to develop strategies that promote mental wellbeing and provide effective support for those affected, ensuring that individuals have access to the resources they need to maintain their health and financial stability.