Mental health and insurance

The issue of mental health has come out of the shadows in recent times and is gaining more recognition. It used to be swept under the carpet, but these days mental health is finally starting to gain the kind of recognition it deserves as a major health issue in the community.

Topics such as depression, suicide prevention and Alzheimer’s disease now regularly gain coverage in the media and mental illness is now being regarded as a medical condition on par with more obvious physical ailments.

Mental health has a major cost impact, both in treatment and in lost income. The scale of the problem is perhaps best exemplified in the facts that on average one in five women and one in eight men will suffer from depression and that around 45 per cent of people will experience a mental health condition in their lifetime1. This cost impact means it is essential that people are able to obtain insurance protection against such conditions to help protect their livelihood.

While many parts of society have come on board with the importance of mental health, there will always be some institutions that move more slowly than others in giving due recognition.

The life insurance industry is one area that is not always known for the speed of its reaction to change, but thankfully in this case they do seem to have made strides in the way they regard mental health in their claims and assessments attitudes.

A revolution in attitude
The life insurance industry plays an important role in all medical issues because it is an integral part of the safety net against misfortune, in terms of income protection and disability insurances.

Sadly, the approach taken in the past in terms of mental illness was to put it in the too hard basket. The industry regarded it as too difficult to quantify and gauge the impacts on health, lifestyle and income and too often their reaction was to simply refuse cover so that they did not have to deal with what they felt were unknown consequences and liabilities.

The turnaround from this attitude in recent times has been considerable. These days there is a much greater willingness to engage with the issue and to give mental illness the same due regard as any other form of illness.

In practical terms this means that life insurers are more open to assessing potential customers who have had mental illness in the past, instead of just dismissing them out of hand.

Of course this doesn’t mean that coverage is always offered to all who apply, but at least it is a much more level playing field and mental health is now being treated more reasonably in their assessment process.

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The stigma surrounding discussing mental health issues is starting to disappear

Understanding the assessment process
It is useful to look at things from the perspective of the insurer in order to fully appreciate the assessment process and how a history of mental illness is taken into account in their underwriting.

From a purely legal standpoint, insurers are obligated to comply with the Disability Discrimination Act, which requires them to consider all life and disability insurance applications without any bias against those who have had mental illnesses.

Of course they may still choose to refrain from accepting any person for insurance cover, but in doing so they must be able to show that they have given fair and reasonable consideration of the medical evidence, rather than just refusing cover based on generalisations about mental conditions.

Specifically, the insurance company’s process in underwriting an application for insurance must take into account the facts on how the person’s mental health condition has affected their lifestyle, what treatment they have received and the outcomes of that treatment.

Of course it is essential that the applicant provides full and frank information in their application so that the insurer can assess it fairly. A failure to give all details may undermine the legitimacy of the cover in the event of a future claim.

The information provided by the applicant will also need to include the status of current symptoms and treatment being undertaken. Once the insurer has considered all the evidence they may elect to offer cover and once in place the insurer is bound to maintain the cover, regardless of any deterioration in the applicant’s condition (as long as the cover is a ‘guaranteed renewable’ style of policy and premiums are kept up to date).

Thankfully, the change in attitude by insurers now means that many applicants who have suffered mental illness in the past can now potentially obtain cover at standard rates.

Those who do not qualify for standard rates may still be offered insurance protection with an extra premium to cover the higher risk that the insurer is taking on.

In other cases cover may be offered with specific medical conditions being excluded from claims – not ideal, but still a lot better than having no cover at all.

Seek help if you are unsure
Those with a history of mental illness who want to obtain insurance cover may benefit from the services of a financial adviser. They can assist with their knowledge of various insurers and can act as an advocate in the assessment process. There are no guarantees about who can obtain cover, but it can be reassuring to have an independent financial adviser to guide you through the process.

If you are suffering from symptoms of mental illness please contact your local GP for a Mental Health Assessment Plan or call Lifeline Australia on 13 11 14.

1Australian Bureau of Statistics. (2008). National Survey of Mental Health and Wellbeing: Summary of Results, 2007.

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