What a difference a decade makes

More than a decade ago, the life insurance industry realised it needed to change and better understand mental illness in order to combat discrimination.

By Megan Garvan, acting national manager, retail claims, TAL Retail

After cancer and cardiovascular disease, mental illness has Australia’s third highest ‘burden of disease’ (a Government measure which looks at financial cost, mortality and morbidity of a health condition). In addition, mental health issues are the fourth most common reason for visiting a GP. Clearly, very few people are untouched by mental illness, be it their own or that of a family member, friend or colleague.

Until recently, many people who have suffered mental illness have found their life insurance and income protection options to be very limited, or even non-existent. This is worrying news when one considers the chronic underinsurance problem in Australia. Research conducted by NATSEM and Lifewise in 2010 estimated that around 95 per cent of Australians do not have enough life insurance, while actuaries Rice Warner report that only 22 per cent of Australians have adequate TPD insurance and only 24 per cent have adequate income protection cover.

More than a decade ago, the life insurance industry realised it needed to change and better understand mental illness in order to combat discrimination. This effort was kick started in 2002 when beyondblue, a Government initiative to address issues affecting those with mental illness, joined forces with the Mental Health Council of Australia (MHCA) and the peak body for the life and income protection insurance sector, the Financial Services Council (then known as the Investment and Financial Services Association, IFSA).

The formation of this alliance resulted in some profound changes within the life insurance industry. These include the development of industry-wide guidelines for both underwriting and claims management; new processes to help insurers provide modified policies; and a clearer complaints monitoring process. As a result, there has been a decline in the rate of refusal of insurance for those with a mental illness. Claims statistics also show that the life insurance industry now takes these illnesses seriously. Last year, 12 per cent of TAL’s income protection payouts in the adviser business were for mental illness claims.

More recently, the Insurance Reform Advisory Working Group was established by the Minister for Financial Services, Bill Shorten, and it is hoped that this will enable insurers to make even greater progress. The group will look at mental health problems and discrimination as part of broader insurance reforms, and will investigate working more closely with the medical profession so that a consistent scale is used to assess mental health issues. It is hoped that more reliable databases can help insurers to more accurately price risk.

Elsewhere in the financial services industry, initiatives are also underway to help ensure people with mental health issues are given appropriate support. One example is the SuperFriend project, a nationwide health promotion foundation aimed at promoting and facilitating the best possible mental health and wellbeing of members of industry superannuation funds.

Industry and community are working together to help financial advisers understand that there is an increased likelihood they can get insurance for their clients. Support for beyondblue has been widespread; however, the nature of insurance is such that applications are evaluated according to a company’s own underwriting practices so it is vital that advisers look for alternatives if they find they are unable to obtain insurance through one provider. It is, of course, imperative that all past medical history is detailed in the application process.

Clearly, change is afoot, but the life insurance industry is not a small and nimble creature so the issue will not be solved overnight. If we can change the way the medical profession communicates to insurers – specifically, the way that the severity of mental illnesses is reported – this will go a long way to building greater understanding. In turn, the insurance industry needs to help financial advisers understand that a great deal of progress has been made in dealing with the issue and that as a result, there is a greater chance their clients will be able to obtain cover.

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