Financial stress behind mental health insurance claim spikes

on November 13, 2017 / by Financial Mindfulness

Financial stress behind mental health insurance claim spikes.

New research reveals that financial stress is a hidden mental health trigger for Australians to submit insurance claims, part of a trend alarming the life insurance industry.

The financial stress burden faced by Australians is, according to analysis by Rice Warner, a major factor in the escalating numbers of mental health-related claims that insurers are wrestling with.

In a report commissioned by an Australian start-up, Financial Mindfulness, to examine the viability of a program to reduce personal financial stress, it was estimated that well over half of mental health-related insurance claims are due to financial stress.

“It is not unreasonable to assume that 60 % of mental health claims have financial stress as a primary or secondary contributor,” Rice Warner consultant Heather Brown wrote.

Other research also commissioned by Financial Mindfulness in July 2017 found that Australians under financial stress suffered severe impacts on their mental and physical health and relationships.

While musculoskeletal conditions are the biggest category of claims for both IP and TPD claims, it is widely acknowledged that mental health is the fastest growing cause of insurance claims. Many agree because decades of stigma is lifting.

Rice Warner’s Group Insurance Claims Experience Study, a huge research project into 140,000 claims across 16 superannuation funds from 2011 to 2014, revealed another stunning finding, about the leading causes of IP claims in particular.

Mental health issues were the leading cause of IP claims during most Australian prime child rearing and career-building years (25 to 45 years). IP insurance premiums are worth an estimated $4.1 billion in annual premiums.

The types of insurance most affected by mental health claims are Total and Permanent Disability and Income Protection. 20% of all IP claims are due to mental health issues or suicide, while the figure was 15% for TPD.

According to Financial Mindfulness Founder and CEO, Andrew Fleming: “The trend of mental health insurance claims lead us to believe that this is the number one issue facing the life insurance industry.

What is the major reason behind mental health claims? Financial stress.

“Financial stress is having a major impact on Australians mental health.

Recently we announced our results from a detailed survey on Financial stress which highlighted the severity of the problem.”

More than one in three Australian’s surveyed (38%) worried about money “all the time”.

Those who identified as being financially stressed, said anxiety (66%), depression (64%) and social isolation (55%) were the consequences of financial stress.