Productivity Commission flags 'expanded' role for life insurers

The Productivity Commission says there may be an “expanded” role for life insurers and workers’ compensation schemes as the country grapples with worsening mental health.

“The rising salience of mental illness has challenged the traditional roles and definitions of aspects of our public and private social insurance arrangements,” the commission says in a report.

“In particular, the cost of mental illness in workers’ compensation schemes has risen, just as the risk of physical injury at work has diminished over time.

“Mental illness is one area where the role of health and life insurance, as well as workers’ compensation, could be expanded and/or clarified.”

The commission says the burden of disease has shifted towards non-communicable disease and chronic physical and mental health conditions.

As such the health system as a whole is needing to put greater emphasis on the avoidance of hospital admissions through prevention and supported self-management.

“This includes, where possible, helping people to remain active in the community and workplaces,” the Productivity Commission says.

But the present setup in Australia means there are “silos” between health and life insurance.

“As with private health insurance, life insurers play a key, but restricted, role in Australia’s health care system,” the Productivity Commission says.

“Life insurers, via their income protection policies, have a strong incentive to maintain the health and wellbeing of their members, particularly with emphasis on facilitating a return to work.”

Life insurers can provide rehabilitation focused on return to work but cannot provide benefits that might otherwise be insured by a private health insurer or that would be eligible for Medicare rebates.

“It is an open question whether the silo between life insurance and private health insurance, created by

regulation, stands in the way of more innovative and efficient options to improve outcomes at low cost,” the Productivity Commission says.

Click here for the report.