An “unprecedented” surge in mental health claims could have dire consequences for affordability and availability of cover, the Council of Australian Life Insurers warns.

The life industry is paying out more than ever for mental health conditions, it says in a report released today.

The cost of mental health permanent disability claims increased by $169.2 million, or 433.3%, between 2014 and 2022, compared with a $385.4 million rise, or 199.7%, for physical causes.

The report says the proportion of insured Australians who are permanently disabled due to a psychological condition has more than doubled.

And about 80% of the rise in the permanent disability claims rates over the past 10 years is due to mental health, according to the report prepared by KPMG.

Such claims have risen almost 10% every year, while the rate for physical causes has increased by only half a per cent annually.

The report says there has been a record 732% increase in total and permanent disability claims for mental health among 30- to 40-year-olds over the past decade.

“It is the biggest spike across all age groups,” CALI says. “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.”

The report says permanent disability due to mental health conditions is now occurring earlier in life. The average age of people who make a mental health claim is 46, compared with 49 a decade ago.

“This is far bigger than us,” CALI CEO Christine Cupitt said. “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.

“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.”

See the report here.