The Financial Services Council (FSC) has welcomed a recommendation from the Productivity Commission that life insurers should be permitted to fund mental health treatments for customers holding income protection and total and permanent disability cover on a discretionary basis.

Last year life insurers paid $1.24 billion to more than 9500 Australians for mental health claims.

FSC CEO Sally Loane says the council strongly supports the Productivity Commission’s recommendation, made in its report into mental health.

“This is a policy the FSC has long advocated for,” Ms Loane said. “We see this as a win-win.”

“A well-designed funding arrangement, with the appropriate safeguards to ensure that consumers and their treating doctor are placed at the centre of the decision-making process, will help improve health and wellbeing outcomes for consumers and help to reduce the claims costs for life insurers to help keep premiums more affordable for all customers.”

The life insurance industry is the largest financial contributor for people with a mental illness after the Government.

The FSC’s latest life insurance claims data confirms mental illness is the highest cause of claims for total and permanent disability and the third-highest for income protection.