FSC reveals new mental health TPD claims data

The Financial Services Council (FSC) has released new data around mental health-related total and permanent disability (TPD) claims noting that they accounted for 24.1% of claims paid in 2018.

FSC chief executive, Sally Loane, has used a column to be published in an upcoming edition of Money Management to reveal the results of work undertaken by KPMG to identify the different types of mental illness giving rise to TPD claims and to provide an understanding of patterns.

The newly-released data showed:

  • 22.9% - reaction to severe stress (for example PTSD, acute stress reaction).
  • 16.8% - depressive episodes (for example single episodes of depressive symptoms such as lowering of mood, reduction of energy or decrease in activity).
  • 13.2% - recurrent depressive disorders (repeated episodes of depressive episodes).
  • 10.3% - other anxiety disorders (including panic or anxiety disorder).
  • 6.8% - bipolar affective disorder.
  • 6.6% - Schizophrenia.
  • 0.9% - use of alcohol.
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Loane said TPD claims were significantly more complex to assess than other life insurance claims.  Compounding this, KPMG found that in 2018 Australians took more than six months longer to report TPD claims for a mental illness than for any other cause.

“Despite this, of all TPD claims that are finalised, KPMG data shows that 88 per cent are paid in the first instance and higher at 91% for mental health TPD claims,” she said.

Loane said the data represented new statistics, based on data collected from life insurers for the first time, at a level unsurpassed in the world.

“We will continue to gather and analyse even more granular data which will help inform better products and services for life insurers, and also policy development, particularly when dealing with mental illness.

“We have made some solid gains. According to APRA data, in 2018 life insurers paid out more than $4.4 billion to 26,150 Australians who are not expected to be able to work ever again – providing an average lump sum of over $168,000.

“Not only that, since the introduction of the Life Insurance Code of Practice, data from the Life Code Compliance Committee (LCCC) shows 92% of all lump sum claims in the year to 30 June, 2018 were paid out promptly within the Code timeframes.”




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This is why TPD is dead as a product. With insurers being reputationally blackmailed into paying out massive amounts of TPD for dubious mental health claims, premiums will continue skyrocketing into unaffordable territory.

At least with IP there is some chance of limiting the scope of mental health claims through treatment or a change in the claimant's personal circumstances. But once a TPD claim is paid the horse has bolted.

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