The Financial Services Council (FSC) is urging the Government to change legislation to enable insurers to give greater support to claimants with psychological conditions.
Speaking at the launch of the SuperFriend Taking Action: A best practice framework for the management of psychological claims, Financial Service Council chief executive, Sally Loane stressed the importance of helping people who have suffered a mental illness back to work.
Loane said the FSC was "interested in pursuing this as a reform" and had spoken to Treasury about adjusting legislation to give the industry greater opportunity to support psychological claimants.
"Current legislative arrangements prevent life insurers from offering targeted rehabilitation benefits in certain circumstances, even when they are considered by the insurer to be relevant, appropriate and necessary to rehabilitate the claimant," she said.
"This might include payment for medical treatment or therapy that could assist the client in returning to work, and more importantly increase their likelihood of rehabilitation relative to the status quo."
Loane said it was important that insurers adopt best practice in this area to help claimants' rehabilitation, "and for the long-term sustainability of income protection cover".
"Assisting people who have a psychological claim with their rehab increases return to work rates, which translates to lower claims costs for income protection on a new present value base," he said.
"Higher rates of rehab are of benefit for all insurer lives and equate to a more stable premium on products, and a more sustainable industry all round."
While Loane highlighted the benefits of an increased return to work rate for psychological claimants for the industry, she also noted that it was of benefit to the Government by cutting "the fiscal cost of disability support pensions and the NDIS [National Disability Insurance Scheme]".