Over the past decade, the number of people accessing financial support because they are not able to work due to injury or illness has surged in Australia, with 2m more Australians now claiming income support payments.
New research commissioned by the Council of Australian Life Insurers (CALI), which was prepared by SuperFriend, shows that growing demand is putting the nation’s financial safety net under significant pressure.
Income support claims are rising across government, employers and insurers, with mental health conditions the key driver, according to the research.
“This report shines a light on a major productivity challenge facing our nation. More and more Australians are taking time off work and getting financial support because they are injured or sick, with mental health conditions often the main reason,” CALI CEO Christine Cupitt said.
“The surge in mental health claims is testing the income support safety net’s ability to cope because it was not built with mental health in mind.”
Ms Cupitt added, “No single part of the safety net can tackle this challenge alone. We need a connected and coordinated approach, led by the Federal Government, to respond to the productivity challenge of mental ill-health in our community.”
In a statement, she also noted that the lack of coordination across systems can leave people making difficult financial decisions, with consequences extending beyond health and into long-term financial security.
“Without clear, coordinated pathways and earlier access to support across the ecosystem, Australians risk missing out on help that could make a real difference to their recovery and their connection to work,” Ms Cupitt said.
The report found that 8.5m people accessed some form of income support in the past year, claiming a total of A$78.9bn ($57.1bn).
The role of life insurance
The statement also highlighted the ‘Cross Sector Project Update, Mapping Australia’s ecosystem of income supports’ report, which mapped 11 distinct income support systems that together make up Australia’s broader income support ecosystem.
Life insurance plays a distinct role within the ecosystem, typically supporting people later in their income support journey. Mental ill-health accounts for around one in three total and permanent disability claims and one in five income protection claims.
“By the time someone turns to life insurance, they have often moved through other parts of the ecosystem. These claims tend to be more complex and longer in duration,” Ms Cupitt explained.
In 2023 and 2024, life insurers paid A$8.3bn in income protection and total and permanent disability benefits, supporting approximately 55,000 Aussies unable to work. The amount represented 11% of the total national income support.