The number of Australians drawing income support this year because injury or illness stopped them working has blown up to 8.5 million people, an increase of two million in a decade. The total cost is now $78.9 billion, a sum the system was never designed to absorb.
For the first time, research commissioned by the Council of Australian Life Insurers (CALI) and released this week, maps the 11 distinct income support systems Australians lean on when they fall out of the workforce - from employer-funded sick leave and workers' compensation to life insurance, social security, motor accident schemes and early super withdrawals. The report has found that the entire architecture is buckling under a single, dominant pressure: mental ill-health.
For insurance brokers and advisers, this could rewrite the income protection and group risk playbook.
"Income support claims have surged over the past decade, and worryingly, mental health conditions are often the key driver, now accounting for an average of one in three claims across the income support ecosystem," said Christine Cupitt (pictured), CALI's CEO.
The numbers indicate this is a story about pricing, reserving and product design - not just public policy. Life insurers paid out $8.3 billion in income protection and total and permanent disability (TPD) benefits in 2023/24, supporting roughly 55,000 Australians and accounting for 11% of the nation's total income support spend. Mental ill-health drives about one in three TPD claims and one in five income protection claims.
Crucially, life insurance sits at the back end of the queue. By the time a claim reaches an insurer's desk, the claimant has typically cycled through sick leave, workers' compensation and other supports and the case is harder, longer and more expensive to manage.
"People often turn to life insurance when their condition is more serious, more complex and longer term, which often means they've lost their connection to work," Cupitt said.
That late-stage positioning is a strategic problem. "We know that the longer someone is out of work, the less likely they are to return," she said. This shifts income protection and group cover from a box to be ticked into a tool for keeping people healthy and getting them back on the job.
There is also an overlap with general insurance. Mental health claims are already reshaping premium dynamics in workers' compensation schemes and the SME and corporate clients walking into brokers' offices are wearing the cost in absenteeism, presenteeism and rising sick leave bills. The CALI report puts a national figure on what brokers have been fielding anecdotally: employers alone are carrying $43.2 billion of the income support load through sick leave, supporting some 7.5 million workers.
Cupitt argued the fragmentation of Australia's eleven income support systems is itself part of the problem - and that no single player can fix it.
"And critically, no single part of the safety net can tackle this challenge alone," she said. "We need a connected and coordinated approach, led by the Federal Government, to ensure the system works as one, not as separate parts."
But coordination at the policy level is a slow game. In the meantime, Cupitt is explicit about who is best placed to bridge the gaps in the field: brokers and advisers.
"That's where advisers and brokers have an important and unique role," she said. "They often have a relationship with the client, the employer and the insurer."
For commercial brokers in particular, that relationship trifecta is the commercial opportunity buried in the report. With workers' compensation premiums climbing, group risk pricing under pressure and HR leaders openly searching for answers on mental health, the adviser sitting across the table is one of the few players who can see the whole picture at once.
"For advisers who have a direct line to CFOs and HR leaders, you have the opportunity to share insights like these and help employers to shift their focus to earlier supports where the evidence shows the most success in helping get people well and receive financial support when they need it most," Cupitt said.
The economics of mental ill-health have caught up with the income support system and the conversations about prevention, early intervention and return-to-work strategy are no longer the soft side of a broker's sale. They are the sale.
