Thanks to concerted public campaigns, the awareness of mental health in our society has increased greatly in the last decade or so. This change is also being reflected in the way life insurers are dealing with the assessment of applicants who have a history of mental health issues.
The personal and financial cost of mental illness in our community is staggering, but fortunately it is now receiving the recognition it deserves. The statistics paint a sobering picture:
- on average, 1 in 5 women and 1 in 8 men will experience some level of depression*
- an estimated 45 per cent of people will experience a mental health condition in their lifetime*
Greater awareness and acceptance also means that sufferers are more likely to seek treatment for their condition and the stigma surrounding mental health is gradually dissipating.
Changes in the insurance industry
The positive developments in mental health awareness over the last decade or so have also extended to the way mental illness is treated in the life insurance industry. In days gone by, anyone disclosing a mental health condition on their personal statement was given a wide berth by insurers. The difficulties in assessing and quantifying the risks meant that insurers generally opted to play it safe and decline cover.
These days, there is a much more open attitude toward mental illness and insurers are seeking to underwrite mental illness in the same way as they would for other health conditions. Rather than taking a blanket approach of declining cover based on a history of mental health issues, there is a willingness to treat each case on its merits and insurers are now far more likely to offer cover at standard rates.
Insurers have a responsibility to both their policyholders and shareholders to ensure that they are careful in what risks they take on. This is essential for the viability of their business. Having said that, it is equally important that they honour the Disability Discrimination Act, which compels them to assess risk without prejudice. This means that if they do decline to take on risk it must be justified by a reasonable and relevant assessment of all information and based on statistical and actuarial data.
Insurers will, therefore, take several factors into consideration, including the seriousness of a person’s mental health condition, its impact on their lifestyle, the success of any treatment, management strategies and any ongoing symptoms. The terms offered by different insurers may still vary depending on each company’s premium rates, product features and underwriting philosophy, but acceptance at standard rates is now quite common. If standard rates cannot be offered, then cover may still be available with increased premiums or with certain medical conditions excluded from cover.
Full disclosure helps ensures reliable cover
The law requires an applicant to disclose all the information that may affect their application for life insurance. It is essential that this is done to avoid issues down the track with claims. If the applicant has complied with full disclosure and the insurer decides to accept the application, the insurer is then bound to honour the insurance regardless of any change in health that may subsequently occur.
Growing mental health awareness
The change in attitude within the insurance industry is one part of the continuing effort to give mental health the attention that it deserves. Thanks to the advocacy of organisations such as Beyond Blue and Mental Health Australia, attitudes and perceptions on mental health are changing for the better. Mental Health Week, which runs from 8th to 15th October this year, also plays a major role in raising the profile of mental health, promoting awareness and equipping people with helpful assistance. For more information visit the National Mental Health Commission.
* Australian Bureau of Statistics. (2008). National Survey of Mental Health and Wellbeing: Summary of Results, 2007.