The sudden surge of complaints about delayed claims has sparked controversies in the insurance sector. While the authorities are already diving into this matter, scrutiny still goes hand in hand. As the delays continue to rise, one contributing factor identified by industry stakeholders is the growing volume and complexity of mental health claims.
The Australian insurance industry is already facing a major crisis due to rising complaints over delayed claims. As the demand for mental health claims continues to increase, insurers are facing additional challenges in claims processing.
In recent years, there has been a sudden surge in claims related to mental health. According to WorkSafe Victoria (n.d.), mental health injury claims have skyrocketed in 2026. From 2% in 1985, they have risen to 16% today. It also stated a more alarming fact: they are projected to increase by another 5.5% by 2030.
Meanwhile, according to Jane Magill at the 2026 All Actuaries Summit, data from the Council of Australian Life Insurers and SuperFriend (CALI) show that the rate of Total and Permanent Disability (TPD) claims linked to mental health has risen by more than 700% over the past decade.
The numbers are also supported by CALI-SuperFriend (2026), which states that the average serious mental injury claim is more than three times the overall average across all claims. This amounts to approximately AU$65,000.
While these data are already extensive, processing them remains a significant challenge for the insurance sector. This entails a substantial workforce to process backlogs, communicate with clients, and ensure regulatory compliance.
Mental health claims are now on the front-page news not just because of their unforeseen increase but also because they tend to cost more than physical claims.
According to Safe Work Australia, as cited in the Insurance Council of Australia (2026), the median compensation for mental health claims sits at approximately AU$55,270, which is nearly four times higher than that of physical claims, which only amount to AU$13,883. The data illustrate the growing financial burden on insurers; the sector is now facing even greater financial hardship and economic strain. The reason behind this is obvious—mental health claims are more costly because they require an alternative strategy; distinct methods must be explored.
This issue alarmed the key regulators. In April 2026, the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC) conducted a CEO-level roundtable discussion to assess the nature of the ongoing crisis and chart a path toward resolution. They concluded that TPD insurance is not designed to fit the modern mental health environment. This view was echoed by Jane Magill, who noted that claims handling is getting out of control because the original product design was never intended to handle the heavy volume of claims.
On the other hand, both regulators argued that the issues in insurance will continue to escalate and affect the industry if they are not addressed. They acknowledged that legislative intervention is essential but emphasized that addressing the problem must be a shared responsibility, with insurers independently improving claims handling, resourcing, and product thinking.
The effects of delays do not only affect the insurance sector—they also take a very real toll on the claimants themselves. Issues related to mental health require immediate action. Claimants need financial assistance from insurance to better address their mental well-being issues.
Delays in the process and the lack of proper communication cause additional mental distress to the people involved. This highlights the need for improved regulatory processes. The challenges in mental health claims extend beyond the insurance sector. Claimants are also navigating a system under significant pressure, making this a shared experience that calls for a shared solution.
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References
APRA & ASIC (April 2026). APRA and ASIC host life insurance CEO roundtable — April 2026. Joint regulatory communique. apra.gov.au/apra-and-asic-host-life-insurance-ceo-roundtable
APRA (May 2026). APRA publishes Jane Magill's remarks to the 2026 All Actuaries Summit. Australian Prudential Regulation Authority. apra.gov.au/news-and-publications/...2026-all-actuaries-summit
CALI & SuperFriend (May 2026). Income support system mapping research. Commissioned by the Council of Australian Life Insurers. Council of Australian Life Insurers — internal research report
Insurance Business Mag (25 May 2026). APRA and ASIC warn TPD insurance pressures may persist without action. insurancebusinessmag.com/au/news/breaking-news/...576347
Safe Work Australia (2021–22 data, cited May 2026). National workers' compensation statistics — median time lost and compensation by injury type. safeworkaustralia.gov.au
WorkSafe Victoria (2024). Mental injury claims projections and premium data. worksafe.vic.gov.au
