Are mental health insurance products about to change?

Published 31 Jan 2018

Life insurance products often contain coverage for policyholders who develop mental health conditions.

For example, many total and permanent disability policies make lump sum payments for people who have debilitating depression, anxiety or post-traumatic stress disorder. These disorders and other psychological diagnoses are also often covered under income protection and critical illness products.

However, new Actuaries Institute research into how the insurance industry handles mental health claims could have implications on future superannuation payouts.

"Significant work" needed

Around 20 per cent of people in the country have a mental health disorder in any given year, according to the Australian Bureau of Statistics. Nearly half (45 per cent) of individuals will suffer from a mental illness at some point in their life.

Despite this, the Actuaries Institute Mental Health and Insurance Green Paper found "significant work" was required to enhance outcomes for policyholders who wish to claim for these disorders.

The report highlighted several areas of concern, including:

• Systemic difficulties with handling mental health claims;
• Insufficient data and objective criteria for approving claims;
• Adversarial processes that can lead to further mental health pressures on the claimant; and
• Issues with the sustainability of policies.

Claimants typically face adversity at three touch points with an insurance product: Understanding policy design and features, buying and entering an agreement and making a claim.

Nevertheless, the research revealed that many insurers are making efforts to improve their claims processing to prevent people from experiencing further stress.

Striking the right balance

Geoff Atkins, principal at Finity Consulting and co-author of the green paper, said improvements are challenging but necessary.

"Insurance products need to strike a balance between meeting the needs of people who suffer the loss covered, and being affordable to those who are at risk of such losses," he explained.

Lucy Brogden, co-chair of the Federal government's National Mental Health Commission, launched the paper. She said it would prove a valuable resource for the commission as it plans to reform private health insurance with regards to mental health access.

The paper made several recommendations, including the need for:

• Clear and up-to-date product descriptions that focus on wellness and recovery;
• Re-evaluation of whether lump sum payments are appropriate;
• A review of mental health insurance legislation;
• Investment into specialised claims-management skills for mental health products; and
• Continued education and collaboration for product development.

Would you like to make a claim against your insurance or superannuation policy regarding a mental health issue? Please contact Gerard Malouf & Partners Superannuation Lawyers.