Mental health and insurance

Is the insurance industry missing the mark when it comes to mental health risks?
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05.Stats and shopping tips

The MHCA and beyondblue’s 2011 report, Mental Health, Discrimination and Insurance: A Survey of Consumer Experiences, makes a strong case that many people who have experienced mental illness have also experienced discrimination at the hands of the insurance industry. 

  • 35% of the 424 respondents strongly agreed it was difficult for them to obtain any type of insurance as they had experienced mental illness 
  • 67% agreed it was difficult to obtain life and income protection insurance 
  • 45% said their application for income protection insurance was declined due to mental illness 
  • 50% got insurance cover but either paid more or faced exclusions for mental illness claims 

Travel cover 

Mental illness is mostly a no-go zone for travel insurers. In a recent Financial Ombudsman Service (FOS) dispute involving a denied claim, one travel insurer claimed that mental illness is the third most common reason for trip cancellation or disruption. In our most recent travel insurance review only four of the 29 brands surveyed covered claims relating to mental illness (such as depression, anxiety, bipolar disorder and postnatal depression). These are: 

  • Cover-more* 
  • CGU 
  • BUPA 
  • NRMA (All but Cover-more are distributed by parent company CGU). 

Providing cover is one thing; paying claims is another. The MHCA and beyondblue say they’ve heard from many travel insurance customers who’ve seen their claims rejected because the insurer categorised symptoms such as stress, insomnia and fatigue as individual mental health conditions. 

*Cover-more requires documentation and approval of a mental health assessment and will then only waive a mental health exclusion at its discretion if a higher premium is paid. 

Insurance shopping tips

  • Read the PDS to find out how the insurer describes a mental health condition or illness and what exclusions, exemptions or extra premiums may apply. If the information isn’t clear, call the insurer and press for details.  
  • Avoid filling out online forms. Call the insurer or broker directly so you can explain your circumstances to a real person.
  • Ask the insurer how it defines a mental health condition or illness, since definitions can vary widely between companies. Some policies may categorise symptoms such as stress, insomnia and fatigue as mental health conditions. Do they assume you have a mental illness if you’ve seen a counsellor or psychologist? 
  • Ask about the data the insurer draws on for the underwriting process. 
  • Ask for a precise definition of phrases such as “mental health days/absence from work”. 
  • Check the fine print if you change your superannuation account due to a change of employment. The insurance cover in your new super account may not allow for mental health claims on any pre-existing health issues. Q-Super, for example, imposes a two-year exclusion for pre-existing conditions and will only pay a significantly reduced benefit for pre-existing conditions for the first seven years of cover. 
  • Ask the insurer to provide reasons if your application or claim is rejected. If you are not satisfied, you may be able to lodge a complaint with the FOS and the Australian Human Rights Commission and seek legal advice through the PIAC.


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