The Insurance Council of Australia (ICA) has submitted its feedback to the Productivity Commission’s Interim Report on “Delivering Quality Care More Efficiently,” highlighting the growing impact of mental health issues on the insurance industry and the broader economy.
Representing the majority of general insurers in the country, the ICA’s submission places a particular emphasis on the need for coordinated prevention efforts and efficient resource allocation to address the rising burden of mental illness.
According to the ICA, mental health conditions have become increasingly prevalent – with recent government data showing that nearly half of Australians aged 16 to 85 have experienced a mental disorder at some point.
The proportion of young adults reporting mental health issues has also grown significantly over the past decade. This trend is reflected in insurance claims data, where mental illness-related claims are rising across workers’ compensation, CTP, public liability, and life insurance.
“Mental illness has a profound impact on individuals and those close to them as well as on the community more broadly, putting pressure on health systems, workplaces, schools, and both statutory insurance classes (workers’ compensation and CTP) and broader commercial lines like public liability insurance,” the ICA said.
The ICA pointed out that these developments are leading to increased claims costs and greater complexity in claims management.
For example, mental health claims now account for a larger share of life insurance payouts, rising from 25% in 2019 to 44% in 2024.
Workers’ compensation schemes in several states have also reported a notable increase in psychological injury claims, with Victoria and New South Wales experiencing significant growth in both claim numbers and costs.
“The exponential increase in mental illness related claims costs ultimately results in higher premiums for consumers, placing additional pressure on consumers during the current cost of living crisis,” the ICA said.
The ICA’s submission highlighted the substantial economic impact of mental health issues, referencing estimates that place the annual cost to the Australian economy at over $200 billion. This figure includes lost productivity, increased absenteeism, and higher insurance claims.
In Victoria, the cost of poor mental health is estimated at $14.2 billion annually, with a significant portion attributed to workplace impacts such as lost productivity and injury-related expenses.
The workplace implications are particularly notable, with mental health conditions contributing to increased absenteeism and higher rates of employee turnover.
Data cited by the ICA indicates that unresolved mental health issues can significantly reduce productivity, and employees experiencing depression may miss over a month of work each year on average.
The ICA supports the Productivity Commission’s recommendation to establish a National Prevention Investment Framework, arguing that prevention and early intervention are essential to managing the rising burden of mental illness.
The council advocates for a standardised process to assess and fund prevention initiatives, ensuring transparency and consistency in resource allocation.
The submission also called attention to the need for targeted prevention strategies, particularly in mental health, and notes that current systems often prioritise crisis response over early intervention.
The ICA recommended increased investment in public education, early intervention programs, and support for healthier lifestyles, as well as addressing workforce shortages in mental health services, especially in regional and remote areas.
“Given the significant impact on individuals, society, and productivity more broadly, we consider that targeted and strengthened prevention initiatives are critical to address the sharp increase of mental illness in the community,” the ICA said.
