Mental health-related claims are adding strain to Australia’s range of income support systems, with new research from the Council of Australian Life Insurers (CALI) and SuperFriend indicating rising use of payments across government, employer, and insurance schemes.
The analysis reports that about 8.5 million people drew on some form of income support in the past year, with total outlays of $78.9 billion. The research concludes that mental health conditions are a significant driver of this demand across multiple parts of the safety net.
“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’re injured or sick, with mental health conditions often the main reason. The surge in mental health claims is testing the income support safety net’s ability to cope because it wasn’t built with mental health in mind,” CALI CEO Christine Cupitt said. She said the pressures identified in the report cannot be resolved by any single part of the system. “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,” she said.
The findings are set out in the Cross Sector Project Update, Mapping Australia’s ecosystem of income supports, which describes 11 separate systems that together comprise the broader income support framework for working-age Australians. These include employer-funded sick leave, workers’ compensation, group and retail life insurance, social security payments, motor vehicle accident compensation, veteran entitlements and pensions, and early access to superannuation.
CALI notes that people often move between these schemes over time as their health, employment status, and eligibility change. Cupitt said the absence of clear linkages can result in difficult decisions about treatment, work, and finances, with implications for long-term financial stability. “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,” Cupitt said.
Within this structure, life insurers generally become involved later in a person’s income support journey. CALI’s data indicates that mental ill-health now accounts for roughly one in three total and permanent disability (TPD) claims and one in five income protection claims across the sector. “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,” Cupitt said. In the 2023-24 financial year, life insurers paid $8.3 billion in income protection and TPD benefits to about 55,000 claimants who were unable to work. CALI estimates that these payments represented around 11% of total income support delivered across the mapped systems.
SuperFriend’s contribution to the project describes the difficulties many people experience in working out where to seek help when they become unwell or are injured. “This report shows that Australians don’t have a single, clear income support pathway. Many people need financial assistance when they are unwell or unable to work, and it can be confusing to find out where to go and how to apply,” said SuperFriend chief research officer Dr Ross Iles.
Iles said the research also points to the importance of maintaining a link to employment where it is safe and appropriate. “Participating in work has clear health benefits, both on physical and psychological levels for individuals, and on multiple levels of society in general. However, the longer someone is out of work, the less likely they are to return to work,” he said. These findings indicate a role for claims management approaches that support evidence-based rehabilitation and return-to-work planning and coordination with other schemes such as workers’ compensation and social security to reduce duplication and gaps in support.
Research from Allianz Australia suggests that pressures associated with mental ill-health are also present inside workplaces, with implications for workers’ compensation portfolios and psychological injury trends. Allianz reports that nearly two million Australian employees say they often lose sleep due to work-related stress and pressure. Survey data indicates that 74% of workers believe their organisation does not have a clear strategy to address burnout, despite an estimated $36.2 billion being allocated by employers to wellbeing and cultural initiatives and one in 10 organisations planning to spend more than $100,000 this year.
When asked which measures they would prioritise, 45% of surveyed employees nominated mental health days and wellbeing leave. Around 31% said efforts to cut unnecessary administration and non-core tasks that contribute to cognitive overload would be valuable. More than a third (35%) said they want improved in-office benefits such as free coffee and lunches to support social interaction and breaks, while almost one in five (18%) indicated they would consider trading part of their salary for flexible or hybrid work arrangements.
Allianz’s claims experience shows a 17.3% relative increase in primary psychological workers’ compensation claims between the 2024 and 2025 calendar years. The insurer reports that 42.3% of psychological claims were linked to mental stress and work pressure, and that psychological injuries cost 2.7 times as much as physical injuries on average. The research further indicates that close to two million employees hold negative feelings towards their work, and about three-quarters say they lack clear channels to discuss burnout with their manager. Fifteen per cent (15%) report that work demands are having a negative effect on their relationships with friends and family.
The CALI/SuperFriend and Allianz findings describe an environment in which mental health-related conditions are a growing contributor to income support use, claim volumes, and claims costs across multiple schemes. For life insurers, general insurers, and workers’ compensation agents, this suggests continued pressure on pricing, benefit design, and resourcing in claims and rehabilitation functions.
The research also identifies several factors that may influence claim incidence and duration, including earlier and more coordinated intervention across the income support ecosystem, clearer guidance for individuals seeking financial assistance, and workplace changes that address identified stressors. The material outlines interconnected systems in which developments in workplace practice, mental health support, and government policy may shape disability, income protection, and workers’ compensation experience over the medium term.
