Australia's superannuation funds are absorbing a wave of complex disability claims that originated in another part of the income support ecoystem and new modelling suggests the pressure has barely begun. As workers' compensation schemes in Victoria and New South Wales tighten eligibility for psychological injury and cap long-term wage replacement, the claims that once sat in those schemes are increasingly landing on income protection and total and permanent disability (TPD) cover held inside super. Modelling conducted by the University of Melbourne for specialist claims manager EML Group (EML) estimates that if workers' compensation settings move the same way nationally, income protection claim lodgements in super could rise by about 19% over ten years. For brokers advising corporate clients and trustees, this growing trend is a major challenge.
"When workers' compensation schemes deny access earlier or exit claimants sooner, the income replacement obligation doesn't disappear - it migrates," said Dan Walton (pictured), EML's group executive, strategy and growth based in Sydney.
Walton's point reframes a problem many funds still treat as demographic. For example, when major super funds announced TPD premium increases of up to 40% from June 2026, they cited rising mental health and disability claims among younger members. This is only part of the story. EML's white paper, The Complexity Premium: the cross-scheme pressures impacting claims in super, argues the pressure is structural: claims that historically resolved within workers' compensation are now presenting earlier and sicker to insurers inside super.
Australia does not run a single income-support system. It runs 11 including workers' compensation, life insurance both in and outside of super, social security, motor-accident and veterans' schemes. Each one was built independently, with its own rules, timeframes and evidence tests. People move between them but their records and support often do not move with them and the handover is where recovery tends to stall.
"The superannuation industry hasn't had to deal with this complexity or volume of claims before and those are two material changes combined," Walton said.
The data behind that shift is stark. Mental illness is now the single largest cause of TPD claims, accounting for roughly one in three payouts, and around 20% of income protection claims, according to the Council of Australian Life Insurers (CALI). Life insurers paid more than $2.2 billion in mental-health-related claims in 2024 - nearly double the figure five years earlier. Among Australians in their 30s, TPD claims for mental health have surged more than 700% over the past decade. This forms part of a national mental-health burden the Productivity Commission's landmark 2020 inquiry estimated costs up to $220 billion a year in healthcare, lost productivity and reduced wellbeing.
These are also the hardest claims to run. Psychological-injury claims carry longer durations and higher costs with median time lost now exceeding 34 weeks, more than four times a physical injury and up by about 50% in the five years to 2020 (Safe Work Australia data). They are also more likely to be disputed: the Australian Securities and Investments Commission (ASIC) found in its 2019 review that 77% of mental-health TPD claims assessed under restrictive "activities of daily living" tests were rejected, against just 15% under the standard TPD definition, a structural mismatch between product design and the nature of the illness.
The precedent for what tightening produces already exists. A Monash University analysis of workers whose New South Wales benefits ceased under earlier reforms found that around 60% had moved onto social security within 12 months, roughly two-thirds to JobSeeker and one-third to the Disability Support Pension. When one scheme closes a door, the claimant does not recover on cue; the need simply relocates.
That creates concrete review points for brokers with corporate and trustee clients. Group insurance arrangements priced before this migration began may be carrying a claims mix they were never costed for, and the Australian Prudential Regulation Authority (APRA) has cautioned that rising mental-health claims could undermine the viability of group cover in super, a trend visible in APRA's published life insurance claims and disputes statistics and unpacked in the latest APRA and ASIC life claims and disputes data. Default cover terms, premium sustainability and the handover between an employer's workers' compensation response and a member's income protection claim are now live broking questions rather than back-office detail.
With other states flagging reviews of their own psychological-injury settings, Walton's strongest concern is about the potential scale of this growing problem.
"If Queensland goes down a similar path [to NSW], the pressures already being felt in super and life insurance are a very small proportion of what is coming over the next five to ten years," he said.
EML argues the answer is not to brace for volume but to manage the transitions with earlier intervention, warm handovers between schemes and measuring success by return to work rather than claim closure. Its own early-intervention pilot, independently evaluated by actuarial firm Taylor Fry, returned 38% of participants to work within six months against just 12% of those without equivalent support.
For brokers, awareness that this crisis did not start inside super and then educating clients about the best ways to manage it is exactly where their advice earns its value.
