The blowout in mental health claims landing on the books of life insurers and in super fund claim processes is a downstream consequence of a public system that has been “not fit for purpose” for decades. But the industry shouldn’t respond by making it harder to claim, according to one of the architects of Australia’s youth mental health system.

“You can raise the bar so you exclude more people,” Pat McGorry, Professor of Youth Mental Health at the University of Melbourne, told the Investment Magazine Insurance in Super Summit. “That’s probably the cheapest, the simplest, and most inhumane option.

“The other option is to try to do something… to get these people better, more quickly, and intervening early.”

Mental health conditions are now the fastest-growing driver of TPD and income protection claims through group insurance. But McGorry – the 2010 Australian of the Year and executive director of youth mental health research institute Orygen – said that the system for dealing with mental health was chronically underfunded.

“If you have a small breast lump, in Australia, you’ll have a fast track into the best care in the world. If you have an emerging psychotic illness, you’ll experience all these barriers and you will not get treatment properly until it’s actually become entrenched and disabling.”

McGorry told summit that the cost pressure landing on insurers’ books is the downstream consequence of a public system “not fit for purpose” and that the fix lies mostly outside the industry’s control.

“It’s the government’s responsibility to fix this,” McGorry said, pointing to what he called a “massive fail” in public policy: federal spending of $4.8 billion a year on mental health care against $52 billion on the NDIS for a condition set he said affects five to six million Australians a year versus a few hundred thousand.

“Mental illness is the biggest source of loss of GDP out of all the NCDs [non-communicable diseases], more than cancer, more than cardiovascular… 15 to 20 per cent of the burden of disease, and only 7 per cent of the health expenditure.”

National survey data shows the proportion of teenagers and young adults meeting criteria for a mental disorder rose from 26 per cent in 2007 to 39 per cent in 2021 – a 50 per cent increase concentrated in the exact cohort entering the workforce and default group cover.

But around the edges sits a “mixed picture” of overdiagnosis, particularly of ADHD and autism in affluent communities, which he said clinicians were “milking” by charging thousands of dollars for what he called a diagnostic “barcode”. But the answer for claims teams worried about soft criteria is rigour, not exclusion.

“The criteria can be made very objective… we have to do it properly and not allow this TikTok diagnosis to be sufficient,” he said.

McGorry said that a non-clinical, vocational interventions like individual placement support could take people recovering from serious mental illness back into education and work.

“We went from 50 per cent of people with the first episode of schizophrenia recovering socially and vocationally to 90 per cent with this intervention,” he said.

“This is partly the solution to all your problems in terms of getting people off welfare, off support. But it’s not supported by government policies… it would save heaps of money from you guys and also from the government.”

Demand ratchets up

Lifeline Australia chief executive Graham Strong said that traumatic incidents like the Bondi Beach mass shooting and the mass stabbing attack at Bondi Junction cause a significant increase in calls and that volumes do not quickly revert back to baseline.

“When those national incidences happen, we see a new plateau, a new high, and we don’t go down. We just continue to build off of that,” he said.

The day after the Bondi Junction attack was Lifeline’s highest contact day on record – calls came from around Bondi itself, but also from across the country, and volunteers “showed up in huge numbers for about two weeks” in response.

That pattern repeats for events with no obvious connection to personal crisis at all: Strong told delegates that grand finals produce their own contact peaks across every football code, driven by gambling and alcohol.

“It’s not for insurance to solve that problem, it’s not for Lifeline to solve the problem of the increased calls. It is a connected care model that we need to be looking at,” he said. “If we continue to operate in a very fragmented way, or within our own lanes, the solutions won’t come.”