Mental health claims among millennials are surging across Australia and New Zealand, driven by social and economic stressors – from cost-of-living pressures to digitally driven disconnection. Insurers are responding with innovative product design, data-driven underwriting, and holistic, proactive claims management to better support a vulnerable generation.
Mental health claims among millennials (those born between 1981 and 1996) are rising at an unprecedented rate, transforming the life insurance sector across Australia and New Zealand (ANZ).
As the largest working-age cohort, millennials are central to the sustainability of the economy and the life insurance industry, yet they are increasingly impacted by a complex web of social and economic pressures. Factors such as cost-of-living stress, workplace psychological risks to digital culture, workforce disruption, and limited access to care may be contributing to a surge in income protection and total and permanent disability (TPD) claims.
RGA explored the drivers behind this trend, the implications for insurers, and the opportunities to better support millennial mental health through innovative product design, claims management, and proactive prevention strategies. It is critical for life insurers to understand these new layers of complexity and evolve to meet the needs of a generation under pressure.
Over the past 15 years, there has been a marked decline in mental wellbeing among Australians and New Zealanders, with the effects particularly pronounced in younger demographics. Rising rates of anxiety, depression, and psychological distress have become prevalent. In New Zealand, youth mental distress has almost doubled since 2016-17.1 Similar trends are evident in Australia, with the Australian Bureau of Statistics reporting a 47% increase in mental health disorders in young Australians.2
The life insurance sector has felt the impact of this surge, with Australian insurers paying out more than $2.2 billion in mental health-related claims, almost double the amount from five years prior.3 Recent data reported by the Council of Australian Life Insurers (CALI) shows that mental health is now the leading cause of TPD claims, accounting for almost one in three claims paid. CALI also reported TPD claims for mental health of people in their 30s having skyrocketed by an extraordinary 732% in the past decade. Mental health is also driving one in five income protection claims, with payouts reaching $887 million in 2024 alone.3 These figures underscore a systemic shift, with mental health no longer a peripheral concern for younger age groups but rather a key driver of the claims experience in the ANZ market.
Millennials across ANZ are facing mounting social and economic pressures significantly impacting their mental wellbeing. These include rising living costs, workplace stress, the digital culture, job insecurity, and challenges accessing care. Understanding these drivers is essential for the life insurance sector to effectively adapt and intervene in response to the rise in mental health claims, ensuring the long-term sustainability of the industry.
The cost-of-living crisis is emerging as one of the most significant contributors to declining mental health across ANZ. A 2025 Deloitte survey found 60% of New Zealand millennials cited this as their number one concern.4 Similarly, more than one in two Australians say rising living costs are having a major impact on their mental wellbeing, with the cost of accessing mental health support being a barrier for one in five.5
Millennials, often in the early to mid stages of their careers, are particularly vulnerable. Many are juggling student debt, rising rents or mortgages, and the financial pressures of raising young children, caring for aging parents, or both. They are also more likely to have insecure employment or gig economy roles, which offer little in the way of paid leave or mental health support. This “sandwich generation” effect amplifies stress and reduces the capacity to seek help or recover from mental health episodes.
Workplace psychological risks such as high job demands, low autonomy, poor support, and workplace bullying are often quoted as key contributors to mental health issues. However, it may be millennials’ unique expectations and values in the workplace that are driving some of these challenges.
This generation values purpose, flexibility, transparency, and recognition in their professional lives.6 According to Deloitte’s 2025 Gen Z and Millennial Survey, millennials are seeking a trifecta of money, meaning, and wellbeing above and beyond reaching senior leadership positions.7 When these elements are missing, psychological safety erodes, leading to disengagement and mental strain, with 66% of millennials reporting moderate to high workplace burnout.8
A KPMG report from 2024 conveyed an unprecedented number of people in their 30s and 40s leaving the workforce permanently, with more people in their 30s claiming permanent disability from mental illness than ever before.9 For life insurers, this brings not only an increase in mental health claims, but also increased durations, complexity, and potential recurrence when workplace expectations remain unmet.
Artificial Intelligence (AI) and workforce disruption introduce a new set of psychosocial risks. While millennials in NZ are optimistic about AI’s impact on productivity, efficiency, and innovation, 74% worry that it will eliminate jobs, and 71% say they will look for job opportunities they perceive as being safe from AI-driven disruption, including manual labor or skilled trades.4 Millennials appear particularly vulnerable, as they generally occupy mid-level positions that are heavily tied to AI, such as marketing, finance, and administrative functions. Tasks such as data analysis and project management are increasingly automated,10 bringing uncertainty that fuels job insecurity and makes return to work after injury or illness even more challenging for those less literate with AI.
Insurers may benefit from considering how they can achieve sustainable return-to-work outcomes where customers are likely to be impacted by AI workforce disruption. Providing opportunities for digital upskilling and soft-skill development as part of rehabilitation offering may be one option.
Despite growing awareness, access to timely and affordable mental healthcare remains a significant challenge for millennials in ANZ. Research from Monash Business School reveals that fewer than half of young adults experiencing mental illness seek professional medical advice.11 A new report published by System 2 using data released by the Australian Institute of Health and Welfare demonstrated how young people are impacted by the rising costs of accessing services and paying more in out-of-pocket expenses than those older than age 45.12 The 2023-24 New Zealand Health survey also reported that the highest unmet need for professional mental health support was amongst adults aged 24-34 years.13 In addition to financial barriers, the fear of judgment appears to be an ongoing factor, with 86% of 25–34-year-olds reportedly concealing their mental health challenges due to fears of stigma.14
Delayed or inadequate treatment can lead to an increased risk of long-term disability and poorer outcomes, with flow-on effects to income protection and TPD claims. This highlights the need for early identification, early intervention, and support strategies for mental health claims.
Mental health awareness initiatives and increased mental health literacy may be contributors to the increased prevalence of mental health disorders. On a positive note, younger generations are more likely to recognize mild to moderate mental health difficulties than older age groups, which can allow earlier management. Conversely, milder forms of distress from common and non-pathological life events may be interpreted as mental health issues, which can exacerbate symptoms.15 This social phenomenon, called the “prevalence inflation hypothesis”16 may account for some of the challenges in ANZ and the increasing incidence of mental health claims in younger age groups.
As society’s understanding of mental health evolves, it is important to critically assess how cultural shifts, particularly those tied to distress and disability, interact with public health messaging. While increased awareness empowers individuals to seek help, it may also lead to unintended consequences if interventions are too broad or not tailored to specific needs. Ensuring access to support is essential, but more targeted and evidence-based approaches to mental health education may be needed.
Millennials represent the first generation to experience social media and online connectivity as an integral component of daily life. Platforms such as Facebook, Instagram, TikTok, and Snapchat have influenced their modes of communication and their perceptions of self and society. While these platforms provide opportunities for connection, creativity, and community, evidence suggests they also pose notable psychological risks. A 2024 Mental Health Community Coalition survey of Australian Millennials and Gen Z found that 42% of Facebook users and 34% of Instagram users reported negative experiences, including online abuse, cyberbullying, and feelings of inadequacy.17
In response to growing concerns regarding the increase in mental illness among Australian youth, the Australian government passed the Online Safety Amendment (Social Media Minimum Age) Bill 2024, which bans individuals younger than 16 from creating accounts on major platforms, including TikTok, Instagram, Facebook, Snapchat, and YouTube. The legislation aims to protect children from cyberbullying, harmful content, body image pressures, and addictive algorithms, citing research that links excessive social media use to poor mental health outcomes.18 While the ban targets younger teens, it reflects a broader societal recognition of the mental health risks embedded in digital culture – risks millennials have been navigating for more than a decade.
In response to the surge in mental health TPD claims, largely driven by millennials, life insurers are actively redesigning products to ensure fair and affordable coverage for customers while safeguarding the long-term sustainability of insurance. TPD was traditionally designed to offer a lump sum amount in circumstances where a customer was never going to be able to return to work. Definitions were built for injury and sickness without mental illness in mind. Traditional definitions and benefit structures do not align with the fluctuating and complex nature of mental illness, and insurers have been forced to re-think traditional models and product offerings to keep TPD viable.
Instead of all-or-nothing payments, insurers continue to work on innovative new product designs that offer severity-based or partial benefits to allow access to meaningful and affordable protection.
An example of how this is being applied by life insurers is a recently launched TPD Severity option from Acenda19 that sits alongside the existing TPD option to offer customers more flexibility and choice. Claims under TPD Severity are assessed using objective medical benchmarks – specifically, the Psychiatric Impairment Rating Scale (PIRS) and Whole Person Impairment (WPI). A claim is paid if the claimant reaches a threshold of 30% or more WPI or greater than 30% PIRS rating, once maximum medical improvement has been reached.
Zurich Australia has launched the Continuous Care Option as part of its TPD offering. The product is designed to provide tailored cover for individuals who require ongoing care due to severe accident or illness, including mental health conditions. Unlike traditional TPD, which pays a lump sum, Continuous Care focuses on cases where long-term support from a caregiver (professional or family member) is needed and/or modifications to the home or vehicle are required.20
The move toward severity-based options and flexible coverage is gaining momentum. These innovative options seek to improve sustainability by keeping premiums affordable, providing more objective claims assessment and supporting modern recovery and work patterns that acknowledge that recovery from mental illness is possible.
In the underwriting space, external influences such as regulatory intervention, economic pressures, medical trends, and industry shifts have resulted in underwriting risk assessment becoming more inclusive and individualized. Historically, applicants disclosing mental health issues at the time of application often encountered a one-size-fits-all approach with an automatic mental health exclusion or decline.
In Australia, the Life Insurance Code of Practice (LICOP) explicitly requires insurers to assess every case on its own merits and consider alternative avenues,22 e.g. premium loadings or narrower exclusions rather than not providing cover at all. In New Zealand, the Financial Markets Authority (FMA) implemented the Conduct of Financial Institutions (CoFI) regime as of March 31, 2025,23 and while not as descriptive as LICOP, it does underscore the need for fair treatment of policyholders.
As a potential ‘future-state’ solution, insurers are exploring data-driven underwriting, which may use advanced analytics, AI, and large datasets to assess risk accurately and efficiently. Rather than relying solely on traditional questionnaires or medical reports, insurers are investigating ways to leverage anonymized historical data, behavioral insights, and predictive models to make underwriting decisions, especially for complex conditions such as mental illness.
Zurich pioneered the use of AI in underwriting life insurance applications for mental health disclosures. In collaboration with the University of Technology Sydney (UTS), Zurich developed AI models that allow for immediate underwriting decisions, eliminating the need for lengthy doctor’s reports that previously could take up to 22 days. The AI models analyze data from seven years of applications to identify risk factors correlating with a mental health exclusion being placed on a policy.24
Industry bodies, including the Life Insurance Code Compliance Committee (Life CCC), are encouraging the use of data-driven, evidence-based underwriting standards.25 The intended result is faster, fairer, and more consistent decisions for applicants with mental health disclosures.
The use of data analytics, AI, and automation is growing, with more insurers expected to adopt these technologies for mental health underwriting in the coming years. These changes mean millennials with a history of mental illness are less likely to be excluded from coverage. By reducing the stigma, more mental health conditions are likely to be disclosed, and deeper, more meaningful data will allow underwriting practices to continue to be refined.
While product designs are evolving and underwriting processes re-defined, claim consultants in Australia and New Zealand are striving to achieve better outcomes for their customers and a healthier workforce for society at large.
CALI recently announced it will develop a new assessment framework for mental health claims over the next 12 months in conjunction with medical professionals, legal specialists, workplace experts, industry stakeholders, and people with lived experience. The work is part of an industry-wide effort to better align disability insurance coverage with contemporary medical evidence and return-to-work practices.26 Meanwhile, insurers are prioritizing early intervention, holistic rehabilitation, better use of specialized resources, and employer collaboration.
Early intervention, rehabilitation screening, and management have gained traction among insurers for mental health claims. Rehabilitation consultants are used from the claim outset to establish “wellness needs” with the aim to optimize recovery and reduce claim durations. Identifying issues such as access to appropriate medical care, opportunities to improve daily structure or routine, and increasing employer engagement in the return-to-work process provides early and meaningful support to address key issues and reduce further escalation.
Holistic rehabilitation strategies often form part of the management plan. These programs are tailored to individual needs and designed to support customers in regaining confidence, rebuilding work capacity, and improving overall wellbeing. Wellness coaching, dietary education, mindfulness, sleep support, job-seeking support and return-to-work coaching services are administered by professionals with a person-centered focus. Insurers are partnering with various digital technology providers to deliver some of these services online to appeal to the younger generations. Individualized plans, collaborative goal setting and modern services such as soft-skills training and digital upskilling aim to better engage the customer and provide the comprehensive support required for a sustainable return to work. In New Zealand, some insurers’ claim consultants visit claimants at home to gain a better understanding of any complex issues and arrange additional support.
Insurers are also turning to their Chief Medical Officer (CMO) for guidance in managing mental health claims, not only for a medical opinion but to engage the treater in a doctor-to-doctor conversation about treatment, recovery, and progress. The calls have demonstrated value in gathering information regarding treatment compliance, ongoing barriers, long-term goals, and prognosis. These conversations allow the treater to see the insurer as an informed expert and align on common goals. The conversations also place some level of accountability on the treater, which may prove to be a key factor in returning the customer to work.
Insurers have a unique opportunity to move beyond traditional risk management and become proactive partners in supporting millennials’ mental wellbeing. Some of the greatest opportunities may lie in preventive health solutions that use digital and data capability, as well as proactive claims models that go beyond current early-intervention models.
Lifestyle factors such as physical activity, nutrition, sleep hygiene, mindfulness practices, and social connection are strongly linked to overall mental wellbeing. Insurers are tapping into these by offering preventative health solutions, with programs built around rewards and premium discounts for engaging in healthier lifestyles.
AIA’s Vitality Program incentivizes exercise, healthy eating, and regular health checks through its rewards program and discounts on premiums. Customers can track their activity and points on a mobile app and earn extra points by linking the app to sleep tracking and mindfulness.28 MLC’s Vivo program supports wellness, health, and recovery with fitness and nutrition consultations, confidential expert medical opinions, coaching to support mental wellbeing, and connections to specialist care.29
Life insurers have an opportunity to build upon these solutions with advanced digital and data technologies for an even more sophisticated model of preventive and predictive healthcare. With real-time data integration, predictive analytics, personalized digital engagement, dynamic rewards, and data-sharing platforms, insurers can move toward a proactive model of healthcare by engaging millennials with tailored support and incentivized prevention.30
Social connectivity is perhaps the most impactful lifestyle factor for mental health, yet it currently has the biggest gap in insurer-led preventative health solutions. Loneliness and emotional disconnection remains widespread despite increased digital connection. Studies have reported that up to 30% of Australians are experiencing moderate loneliness, with younger and middle-aged Australians being the loneliest in the country.32 Loneliness has been linked to poor mental health, greater psychological distress, and general dissatisfaction with life.33 Research has shown that social support is a predictor of physical and mental health that bolsters functioning and buffers individuals from negative life outcomes. Studies have also demonstrated associations between perceived social support from co-workers and less burn out, better job satisfaction, and better job performance.34 In ANZ, insurers use group-based interventions and social support as part of their claims strategies, but there appears to be less use as a preventative health solution.
Recognizing lack of social connectivity as an upstream risk factor for mental illness may provide the opportunity for insurers to intervene early with programs targeting at-risk individuals. The challenge for insurers is to identify loneliness and effectively direct customers to effective resources before it becomes chronic and escalates into other issues. AIA has partnered with the Ending Loneliness Together initiative, which seeks to bring individuals, the community, and government together to make connection and belonging a priority and to build solutions to combat loneliness.35 Together, they launched a corporate awareness program to better equip workplaces to tackle the issue.
A potential key to success may be recognizing how social connectivity is critical to wellbeing for all, not just at-risk individuals. Incorporating social connection as part of all insurer-led preventative health and wellbeing initiatives may be part of the solution.
While early-intervention models have gained traction with rehabilitation referrals and screenings, RGA’s experience suggests that workplace causation factors dominate mental health claims. Yet employer engagement is minimal.
Employer disengagement is a significant risk factor influencing the overall claim duration and path to recovery. RGA reviews indicate no employer contact from a rehabilitative lens had occurred for 43% of those with mental health conditions. Without employer buy-in, return-to-work opportunities are limited. Structured employer liaison and accountability processes that incorporate the workplace as part of the recovery plan are likely to yield better outcomes for customers and claims teams. A full 98% of claims RGA reviewed were employer-attached. This presents an area of opportunity for claims teams to implement a model that standardizes employer engagement with automated emails to the fund and employer-engagement scripts with non-medical questions, informing the rehabilitation review. Such a model promotes communication, collaboration, and opportunity for common goal setting. With millennials’ unique expectations of the workplace and focus on meaning and wellbeing, these engagements may address workplace issues that are potentially contributing to mental illness.
Many studies have noted connection as a cornerstone in the return-to-work process. A positive step in a successful return to work often includes effective and regular communication from a supervisor with comprehensive knowledge of internal work policies and the ability to validate an individual’s experiences and the time needed to recover.36
With many individuals being job-attached at time of initial claim, early collaboration between the employer and the individual helps maintain a connection and encourages the individual’s involvement, which provides a sense of control. Education opportunities with the employer around the importance of this intervention, particularly in a group insurance setting, will allow rehabilitation teams to work closely with employers, perhaps even prior to a claim. This promotes workplace adjustments, suitable duties, and a graduated return to work plan to be put in place earlier. Success might be demonstrated by a reduction in claim durations. This could, under the right circumstances, translate into reduced premiums or other incentives to invest in such strategies.
Biopsychosocial (BPS) influences were identified on 45% of claims reviews by RGA in 2025, 67% of which were aged 25-44 years old. Despite evidence that BPS factors play a crucial role in recovery, claims management remained heavily medicalized. Identifying modifiable and non-modifiable BPS factors may be key to understanding and managing mental health claims and improving outcomes for millennials. Modifiable BPS factors are those that can be changed or influenced through intervention, such as lifestyle habits, coping skills, workplace stressors, or engagement with treatment. Non-modifiable BPS factors are those that cannot be influenced, such as age, genetic predisposition, or race.
In relation to the BPS model, psychosocial and social factors are generally the modifiable variables that contribute to an individual’s mental health and overall state of wellbeing. These psychosocial factors have the potential to interact and compound mental illness. The perception of work demands, low job satisfaction, lack of social support by co-workers and employers, attribution of health condition to work, and low expectations about return to work are psychological factors found to have an adverse influence on that return to work. Optimism around return-to-work expectations, strong resilience, consistent and early contact from the employer, work-oriented values, and adaptive coping strategies are associated with positive return-to-work outcomes.37
By systematically identifying these factors, claims and rehabilitation teams can target interventions that specifically address them in an effective and repeatable manner across relevant claims. The challenge for claims and rehabilitation teams at present appears to be in the identification of such BPS factors. Structured intake forms, assessment templates and prompts that incorporate a subset of questions regarding BPS factors, and AI assessment tools may be part of the solution. Automated analysis and recommendations for intervention could result in a more consistent approach to managing BPS factors and improved outcomes.
Mental health claims among millennials are significantly influencing life insurance in Australia and New Zealand. The industry must position itself to strategically lead in managing mental health with empathy and data-driven insights to balance affordability, fairness, and long-term sustainability.
RGA ANZ has invested in the development of mental health tools and resources to support clients in meeting customer needs. The journey ahead requires collective action. By investing in prevention, redesigning products, and embracing holistic claims management, the industry can be better positioned to address the needs of a generation facing unique challenges.
Contact RGA today to learn more about how we can help your business better manage disability claims.
