Mental health and insurance

Is the insurance industry missing the mark when it comes to mental health risks?
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03.Is it legal?

Australian anti-discrimination law allows insurance companies to deny cover to people with disabilities, including mental illness, if the discrimination is reasonable and based on actuarial or statistical data that shows a special degree of risk. But they can also discriminate on the basis of “other relevant factors”, including commercial judgement or an applicant’s particular circumstances. The MHCA and beyondblue argue that, even with this legal leeway, the insurance industry may still be breaching anti-discrimination laws because its behaviour reflects a fundamental misunderstanding of mental illness. 

Both organisations say their numerous requests to the industry for statistical and actuarial data relating to mental illness have gone unheeded, leading them to conclude that its discriminatory behaviour may not be based on reasonable assumptions. 


Can you complain?

According to its terms of reference, the FOS will consider complaints about companies that refuse to provide general insurance (which includes travel and income protection) or impose special restrictions on customers, but only after the customer has tried and failed to resolve the complaint through the company’s own dispute process. 

A FOS spokesperson explained that the service “has limited jurisdiction in relation to people not being able to get insurance cover, and we don’t capture data on people who have been refused coverage”. In any case, people who have experienced mental illness are increasingly turning to FOS to help them resolve financial services disputes. In 2011-12, there were 444 “special assistance” requests (which may have involved insurance as well as other financial services disputes), 26% of which were mental illness related. In 2012-13, there were 530 such requests, 49% of which had to do with mental illness. “We’ve had quite an increase across the board,” FOS told us. 

In cases where customers haven’t told an insurer about a pre-existing mental health condition, a FOS complaint is not likely to result in a win. Under the Insurance Contracts Act’s “duty to disclose”, applicants are required to reveal everything that may affect the insurer’s decision to accept the risk of providing cover. 

In a July 2013 decision, FOS ruled in favour of a travel insurance provider that denied a claim because the applicant failed to disclose a history of depression, even though the duty to disclose was buried in the fine print of the product disclosure statement (PDS). 

The MHCA and beyondblue are urging consumers who believe they’ve been discriminated against because of a mental health issue to obtain free legal advice through the Public InterestAdvocacy Centre (PIAC), as well as beyondblue and fill out a “tell us your story” form.


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