Mental health and insurance

Is the insurance industry missing the mark when it comes to mental health risks?
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02.Opposing views

People who work in the insurance industry and mental health advocates tell different stories about what happens during the application process. According to LifeShield insurance broker Carolyn Wright, applicants who mount a strong argument that the illness is under control stand a better chance of avoiding a mental health exclusion or higher premiums

“We had a client who was contemplating suicide 10 years ago and recently had a temporary relapse, but he still got full cover income protection with no mental health exclusion,” she says. And Wright maintains that income protection insurers take people’s circumstances into account when assessing risk. 


“One of the most critical things they look at is whether you’ve recently missed any days of work due to a mental health issue, or if you’re currently off work. They won’t cover you in these cases, because there’s too much risk for the insurer. You might also be denied cover if you’re at the start of treatment and showing signs of not being able to control the issue, such as changing medications frequently.” 

In Wright’s view, the underwriting and assessment process “is very fair and reasonable as long as the case is presented correctly and a true and complete picture is painted”. A spokesperson for the insurer TAL also told us applicants are assessed individually. “The factors considered in the underwriting process include the severity and nature of the illness, the number of episodes, the duration of those episodes, the amount of time off work, and how long it’s been since the episode occurred. The applicant’s rates may remain standard, they may be excluded for mental health conditions, or they may be declined an application.” 

Denying mental health cover

Whether or not the applicant presents a true picture, however, the industry is clearly concerned about controlling costs related to mental health claims. In a recent interview with a financial industry publication, TAL CEO Jim Minto said total and permanent disability (TPD) claims related to mental illness are a prime cause of rising insurance costs and that the industry “has loosened up the definitions and the coverage too much”. 

And according to what we’ve heard from mental health advocates – including a recent documentation of case studies provided by the MHCA – insurers regularly knock back applicants who haven’t missed any work due to mental illness but may have received mental health support at some time in their lives. 

In some cases, a single medical visit for common ailments including stress, insomnia, short-term depression or mild anxiety can be enough for insurers to deny cover or reject a claim, even if the incident occurred more than a decade ago or is ongoing but well managed. Both the MHCA and beyondblue point to a widespread lack of consistency in the way insurers – including different representatives of the same company – define mental illness. The organisations say they’ve been contacted by many consumers who say their individual circumstances were not taken into account and that terms such as mental illness “episode” are defined differently.


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