Mental ill health is now the leading cause of life insurance claims not just at one insurer but across the Australian industry, and it has been for several years. TAL's Our Contribution 2025/26 report - covering the period from April 1, 2025 to March 31, 2026 - records almost $1.2 billion in mental health-related payouts during the year ended March 31, 2026, the fifth consecutive year the cause has topped the claims table. TAL's figures are consistent with what every other major carrier and the industry body have been reporting: this is a structural market problem, not a company-specific one.
AIA Australia reported that mental health-related disability claims grew from 15% of all claims in 2014 to 23% in 2024, with payments nearly doubling from $280 million to $557 million between 2023 and 2024 alone. In the first five months of 2025, 28% of AIA's total and permanent disability claims lodged were mental health related. Industry-wide, the Council of Australian Life Insurers reported that insurers paid more than $2.2 billion in mental health claims in 2024 - approximately double the amount paid five years earlier - with mental health now accounting for one in three TPD claims paid nationally. Among Australians in their 30s, the rate of mental health TPD claims has risen by more than 700% over the past decade.
The financial impact is accumulating. KPMG's Life Insurance Insights report, covering results to June 30, 2025, recorded the ratio of claims to premium in group lump sum risk deteriorating from 78% in 2023 to 81% in 2024 and 91% in 2025, with adverse TPD experience and rising mental health claims identified as key drivers. A claims-to-premium ratio approaching 100% before operating costs means the business of providing traditional lump sum TPD is structurally loss-making for the industry at current pricing.
The regulators' readout noted that while there is industry momentum towards new TPD product designs, take-up remains low, with existing products continuing to dominate the adviser-led market. The roundtable also noted that structural shifts in claims patterns are being managed through premium increases and reduction in cover rather than more fundamental product redesign, and raised questions about whether existing products are appropriately priced to reflect the latest TPD risk profile.
That finding creates a specific professional obligation for advisers. Where redesigned products exist but are rarely recommended, and where APRA has publicly characterised traditional lump sum TPD as structurally misaligned with its current claims profile, advisers face a documented question about whether continuing to recommend conventional products satisfies best interests duty under the Corporations Act. Separately, under the Financial Planners and Advisers Code of Ethics 2019, advisers are required to consider not only what is appropriate for a client at the time advice is provided, but what is likely to deliver the best outcome over time - a standard that ASIC applies in supervision and that is distinct from, but reinforcing of, the best interests duty obligation. Financial Newswire reported in July 2026 that advisers are actively reconsidering how these obligations apply as rising premiums add complexity to advice conversations.
The market is already repricing. Zurich confirmed in a March 2026 adviser communication that it was increasing premiums for TPD and legacy income protection policies, citing increased volume and complexity of claims especially those related to mental health, and reducing its personal TPD soft cap from $3 million to $2.5 million. AustralianSuper announced increases effective May 30, 2026, with TPD cover rising by an average of 40%, death cover by 20%, and income protection premiums by up to 38%.
TAL's product-level response is the TPD Support Option, launched in 2025, which replaces the single lump-sum structure with an annual partial payment of 20% of the sum insured, subject to yearly assessment, while retaining full protection. The design addresses APRA's concern that traditional lump sum benefits do not always deliver good outcomes for claimants with episodic conditions - including mental ill health, where recovery trajectories are non-linear and a single payment at the point of maximum disability may not align with the client's long-term needs.
TAL group CEO and managing director Fiona Macgregor (pictured right) said the insurer was evolving its approach beyond claims payments, leveraging partner expertise to ensure its work is grounded in evidence and developing products with a bias towards recovery.
Across the full claims book, TAL paid $4.7 billion to 57,011 customers in FY25, with 75% classified as living benefits. Cancer accounted for 17% of accepted claims, injuries and fractures 14%, musculoskeletal conditions 11%, and circulatory system conditions 9%. In the group segment, $2.9 billion was paid to 39,003 superannuation fund members across 20 fund partners. An 80% return-to-health-or-work rate was reported across TAL's support and recovery programmes, with 85% of claimants satisfied with how their claim was handled, up 3 percentage points on the prior year. TAL is wholly owned by Daiichi Life Group and has operated in Australia for more than 150 years.
