Mental disorders, musculoskeletal conditions, and neurological disorders together accounted for close to 60% of Zurich’s 2025 claims in Australia, according to new research from Zurich Financial Services Australia, a concentration that mirrors the structural pressures now reshaping the country’s life insurance market.
The figure, drawn from Zurich’s retail, group, and direct claims across total and permanent disability (TPD), income protection, and death cover, appeared in “The Value of Chronic Care,” a report published July 8 that ranks how 38 OECD health systems manage long-term illness. The claims breakdown lands as Australian regulators, insurers, and reinsurers grapple with a shift from acute, short-duration risk toward chronic, hard-to-reserve morbidity – the segment that has proven most difficult to price sustainably. The signal carries weight in part because of the source: Zurich held 23.5% of individual advised death cover annual premium as of December 2025, second only to TAL’s 27.5%, according to Australian Prudential Regulation Authority (APRA) statistics, making it one of the largest retail life writers commenting on a trend that hits its own book.
Zurich identified mental disorders as Australia’s leading morbidity contributor, affecting close to one in three people, followed by musculoskeletal conditions at one in five and neurological disorders at one in 10. Neoplasms, or cancers, drove the largest share of mortality at two in five deaths, ahead of cardiovascular diseases at around a quarter.
The distinction matters commercially. The report, prepared by econometrics firm Mandala Partners in consultation with Zurich and drawing disease data from the Institute for Health Metrics and Evaluation, found that across OECD countries morbidity has grown faster than mortality over the past decade. Conditions requiring long-term management – mental health and neurological disorders in particular – have increased their share of total disease burden, while high-mortality conditions such as cancer and cardiovascular disease have eased slightly as survival rates improve. For insurers, that trajectory converts one-off claims events into multi-year liabilities.
“People are living longer than ever before, but often with long-term illnesses that significantly impact how they live and work, as well as their financial security,” said Tim Kane, head of retail at Zurich, in the company’s statement.
The report placed Australia eighth of 38 on its composite Chronic Care Index, with a score of 72, ahead of New Zealand, Japan, Sweden, Canada, the US, and the UK. Switzerland ranked first, followed by the Netherlands, Luxembourg, Norway, and South Korea. Australia recorded low mortality – sixth globally but ranked 21st on morbidity, and the report grouped it among “resilient leaders” whose outcomes will increasingly hinge on sustaining care as long-term illness rises.
That morbidity gap is the commercially relevant signal, and it aligns with claims data now confronting the sector. APRA and Australian Securities and Investments Commission (ASIC) statistics for the 12 months to December 2025 show advised income protection claims accepted at 94.4% and advised TPD at 82.9%. Income protection dispute lodgements rose from 124 per 100,000 lives insured in 2018 to a peak of 364 in 2024 before easing to 289 in 2025, according to APRA data – a trajectory consistent with a market that repriced and redesigned income protection heavily over that period.
The pressure Zurich’s claims data reflects is now an explicit regulatory concern. At the 2026 All Actuaries Summit, APRA executive director Jane Magill said mental health accounts for one in three TPD claims paid, and that mental health TPD claims among Australians in their 30s have risen more than 700% over the past decade, citing data from the Council of Australian Life Insurers (CALI). The two “one in three” figures measure different things: Zurich’s describes how widespread a condition is across the population, while Magill’s describes what insurers actually pay out on, and the two do not move together. “TPD was not built for today’s dominant claim drivers,” Magill said, adding that the lump-sum structure creates a mismatch for claimants whose conditions are episodic rather than permanent.
APRA and ASIC convened a joint CEO roundtable on April 15, 2026, bringing together 19 life insurers and reinsurers alongside Treasury and CALI, where the regulators described the challenges facing TPD as “significant and likely to persist without action.” Magill indicated APRA does not intend to intervene through prescribed product definitions or capital adjustments as it did with individual disability income insurance – the product that generated more than $3.4 billion in industry losses over five years and drew APRA’s 2019-2020 sustainability measures – describing TPD as a more complex problem without a single solution.
The financial scale is material. CALI estimates for 2023-24, referenced in a SuperFriend-researched white paper commissioned by CALI, show life insurance income protection supported 32,766 recipients at roughly $4.3 billion, and TPD cover 22,089 recipients at around $4 billion – the highest average per-person expenditure among Australia’s 11 income support systems. Several large superannuation funds have announced TPD premium increases of up to 40% from June 2026, attributing the rises to disability and mental health claims from younger members.
The report frames chronic disease as extending financial risk across decades rather than concentrating it at diagnosis, and points to a role for insurers in earlier intervention and continuity of support. Zurich has tied the research to its own advocacy: its fourth Mental Health Roundtable, held in Sydney in May 2026, drew clinical bodies including the Royal Australian and New Zealand College of Psychiatrists and Lifeline Australia to examine disability product redesign. Chief executive Justin Delaney said life insurance sits behind only government as a financial safety net for Australians with mental health conditions.
The tension the report leaves unresolved is the one the regulators have put at the centre of the market: products designed for acute, short-duration events are increasingly being asked to carry chronic, long-duration risk, and premium increases have so far done more of the adjusting than product redesign. Zurich Financial Services Australia has operated in the market since 1920 and, following its 2019 acquisition of OnePath Life from ANZ, insures more than 1.5 million customers.
