Mental health and insurance

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Nearly half of the Australian population will experience a mental illness in their life.

Despite the prevalence of mental health conditions, discrimination by Australian insurers against people with past or current mental health conditions is widespread.

PIAC’s Mental Health and Insurance Project has been tackling systemic problems in the way insurers design, price and offer policies and assess claims for people with past or current mental health conditions. These problems arise in both life and general insurance for products such as income protection, total and permanent disability, death and travel insurance.

Our casework shows insurers frequently and routinely unreasonably deny cover and apply broad, blanket mental health exclusions that are not supported by evidence and do not reflect the risk posed by the applicant to the insurer.

Clients who have been diagnosed with a mental illness may find themselves subject to a blanket refusal of insurance rather than being able to take up a policy that covers risks that are not related to their mental illness. 

Many life insurers are overestimating the risks involved in insuring people who can demonstrate a high level of functioning despite their mental illness. Clients who have been diagnosed with anxiety or depression, or post-natal depression, are having broad mental health exclusion clauses placed on their cover which will apply for the life of their cover.

Such practices may be unlawful under state and federal anti-discrimination law.

In the case of Ella Ingram v QBE Insurance (2015) the Victorian Civil & Administrative Tribunal found QBE unlawfully discriminated against Ms Ingram when it issued her with a policy which included a mental health exclusion and when it relied on that exclusion to refuse to pay a claim.

QBE failed to meets it obligations under discrimination laws because it did not provide evidence it had considered statistics, actuarial data or expert medical information about the risks presented by different types of mental illnesses when it created the travel insurance policy.

Whilst a number of travel insurers have changed their policies as a result of the Ingram case, practices in the life insurance industry remain largely unchanged.

Banking Royal Commission

Building on our expertise, PIAC made submissions on mental health and insurance to the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

The Royal Commission’s final report released in 2019 is a step towards addressing the unfair treatment of people with mental health conditions or symptoms, and ensuring greater compliance with anti-discrimination law. PIAC’s media release on the Royal Commission Final Report can be found here.

The Commission made a number of important recommendations that will ultimately benefit and protect consumers, but there is still more work to be done to ensure insurers do not discriminate against current and prospective policy holders on the basis of mental health.

PIAC continues to work with the insurance industry, along with beyondblue, Mental Health Australia and SANE towards a fairer system where decisions relating to mental health are based on facts and evidence, rather than out-dated generalisations and unfair assessments of individual circumstances.

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