Mental illness and suicide claims hitting superannuation funds and insurers

Superannuation funds and life insurers are being urged to focus on early intervention to curb the mounting cost of claims caused by mental illness, a trend that has caused insurance premiums within super to skyrocket.

New industry-backed research has found that 13 super funds covering more than a third of Australia's workforce incurred costs of $201.5 million from suicide claims over the five years to 2011, and $147.9 million in claims for total and permanent disablement linked to mental illness.

It comes as businesses face growing calls to take action on mental health in the workplace, an issue said to cost employers $10.9 billion a year.

With mental health accounting for 10 per cent of all insurance claims within super, the SuperMIND research is intended to help funds develop strategies to address the social and financial costs of mental illness.

The research is significant because it highlights the different demographic groups that are at highest risk of mental health problems, providing key information for funds seeking to respond to the issue and benchmark themselves against peers. 

Margo Lydon, the chief executive of SuperFriend, an association of industry super funds that backed the study, said it would provide funds with more information about where they target their response to mental health problems.


"It's the first time ever we've had 13 funds come together and provide us with their data, for us to be able to do some more granular detailed analysis of that data," she said.

For instance, the study showed claim rates for suicide were highest among men in their late 30s, while mental illness claims for total and permanent disablement peaked among men in their 50s.

Information such as this was crucial, she said, because mental health claims were the most "preventable" if they were detected early.

"The whole idea is to have the information first so we can then target initiatives appropriately," Ms Lydon said.

The research, to be released next week, comes after life insurers have experienced a sharp increase in payouts for mental illness, which can be linked to work-related stress.

Principal at consultancy IFS Insurance Solutions Shane Fielding, who helped analyse the data, said life insurance premiums had increased by anywhere between 30 and 150 per cent in the past 12 to 18 months. Increased mental health claims have contributed to this jump significantly.

"The insurers are already starting to have to think about the way that they price their insurance more effectively because they're seeing a surge in claims, but they're also seeing a surge in mental illness and suicide claims," he said.

As well as increasing premiums, funds and insurers were also looking more closely at how they could work with employers and insurers to better manage costs from mental illness, he said.

One form of early intervention was for employers to notify funds about staff absences, so that insurers and funds were involved earlier and could work with staff on rehabilitation.

The study showed claims for suicide peaked for men aged 35 to 39, with almost 0.2 claims for every thousand insured fund members. Claim rates for suicide were far lower for women across all age brackets.

"The male suicide rates are about five times the female suicide rates," Mr Fielding said.

Men in their 50s were most likely to make a claim for mental illness. Total and permanent disablement claims peaked for men aged 50 to 54, at more than 0.3 claims for every thousand insured members.

Beyond the cost of insurance claims, mental health costs employers $10.9 billion a year in lost productivity and compensation, PwC said in a May study commissioned by beyondblue.

SuperFriend is also developing guidelines for the industry on the management of psychological claims within super.