Episodes of disordered mental health often pose a challenge for the life insurance industry, both at the time of application and at the time of claim. How to appropriately classify and rate a mental health history disclosed at application can be difficult for a number of reasons, including the limited information given. At the time of claim, getting agreement on the diagnosis and ensuring appropriate and compliant treatment that results in a timely return to work can all be difficult to achieve. In 2013, it seems the industry is about to face new challenges.
In January 2013, beyondblue, one of the organisations leading the campaign to lessen the stigma of mental health and provide support for sufferers and their families, issued a media release announcing that it would ‘take a stand against the insurance industry’s discriminatory policies from today in a fight for the rights of millions of Australians with a mental illness’. The group alleges that insurance companies routinely discriminate against people with a mental illness by either refusing to offer them a range of products including life insurance, travel insurance and income protection, or rejecting their claims if they have cover.
Under Section 46 of Australia’s Disability Discrimination Act 1992, originally created to protect the rights of the disabled in housing, education, and provision of goods and services, insurers can lawfully discriminate on the grounds of disability, provided it is reasonable and that actuarial or statistical data or other relevant factors can demonstrate as much.
beyondblue has expressed doubt that the industry has the necessary data to enable a lawful exemption. A 2010 survey conducted by beyondblue in partnership with the Mental Health Council of Australia found that people with mental health conditions do experience significant difficulty and discrimination when applying for insurance products and making claims against their policies. It asserts that insurance companies have provided no evidence that people who have experienced or who are being treated for depression or anxiety disorders pose higher risk for insurers, and has sounded an ominous warning that the group is ‘…looking at various legal options, including a class action’.
This tough stance sits in stark contrast with the harmonious relationship that has existed between the life insurance industry and mental health support groups for almost a decade. Consultation and collaboration among a wide range of stakeholders produced, in 2003, a world-first Memorandum of Understanding (MoU) for the underwriting of applications and the management of claims. The MoU was re-signed in October 2008, but lapsed in 2010.
The Financial Services Council, which represents the interests of life insurance companies, currently has a working group looking further into the issue, with a view to preparing a response.
Assertions that the insurance industry is overstating the risk of mental illness claims or is being too conservative in offering cover do not align with the industry’s claims experience, where around 25% of all income protection benefits are paid in relation to mental health problems. The claims also sit somewhat paradoxically alongside lobbying by mental health groups to the Commonwealth Government for greater health funding amid dire forecasts about the increasing burden of mental illness.
A lawful exemption under disability discrimination legislation is fundamental for the life insurance industry to be able to classify and rate according to the risk each individual poses. The threat of litigation or at the very least a concerted debate fought in the public domain, may see the right to underwrite put to the test.