Mental health cover has arrived in Australian accident and health (A&H) policies but the treatment needed to recover has not come with it. The cost of that gap is now showing up in the data.
According to claims data shared with Insurance Business by personal injury claims manager EML Group, reported psychological claims on EML's largest accident and health portfolio have risen a dramatic 411% since FY21. Psychological injury claims are costing an average of $38,500 compared to the $32,400 average for physical injuries and in the longest claims duration band of 53 to 104 weeks, psychological claims run 19% above their physical equivalents at $113,400.
David Pickering (pictured), group executive of EML Solutions, said so far the industry's response to this pressure is to shrink the benefit rather than fix the design.
"Where the industry is falling short is in recognising that just having income replacement for mental health is not going to drive earlier return to work or help contain costs, without also having some form of rehabilitation or treatment care available within the policy inclusions," he said.
Accident and health policies typically cap income replacement at 104 weeks but mental health inclusions - which Pickering said have featured in policies over roughly the past couple of years - commonly carry shorter periods of between 13 and 52 weeks, precisely because return-to-work rates are lower and durations longer. Unlike workers' compensation, the policies generally cover no medical expenses.
That leaves claimants in a bind. For a physical injury - for example, a broken ankle - Medicare, private health insurance and bulk-billed GPs make treatment and medical certification straightforward. For psychological injury, the system offers no such help and a growing bottleneck of claims is compounding the problem.
"At the moment, the onus is on the individual to seek and pay for treatment not covered by the policy in order to access the income replacement benefits," Pickering said. "Getting access to a psychologist or psychiatrist involves much longer wait times than for any other specialty."
The consequence, Pickering said, is that mental injury claims frequently exhaust even their shortened entitlement periods - not because recovery is impossible but because treatment access delays prolong both the recovery and the income replacement paid in the meantime. It is a pattern consistent with the sector-wide surge that has made mental health the leading cause of total and permanent disability (TPD) claims in Australia's life insurance market.
Pickering's prescription is a redesign, not a retreat: Networks of psychologists and doctors that claimants can access quickly, plus some coverage of out-of-pocket treatment costs, so people engage in care and reach an outcome sooner. Best outcomes on mental health claims, he said, require early access to care, coordinated care and sustained engagement with the workplace.
Whether that can happen sits primarily with the underwriters EML manages claims for. The prevailing approach, he said, has been cost containment through limited inclusions and shortened entitlement periods, viewed through an inclusion/exclusion underwriting lens - rather than the recovery-led model used in workers' compensation, CTP and other statutory schemes. Elsewhere in the market, insurers are testing digital platforms for mental health income claims, and industry leaders have urged coordinated action as mental health claims surge.
For brokers, the EML numbers could offer a concrete conversation prompt with clients and underwriters alike because a policy that replaces income but leaves claimants to source and fund their own treatment isn't containing costs - it is paying out for longer while recovery stalls. The cheaper policy, on this evidence, may be the one that pays for the psychologist.
