Round 6 of the Royal Commission into the Financial Services Industry opened this week, with the spotlight turning to insurers. Among the cache of reprehensible conduct laid out in the opening statement of Rowena Orr QC, was how life insurers treat people with mental illness, and often refuse to provide cover for mental health conditions.
The life insurers were prepared. Before the hearings commenced, TAL admitted to the Commission that their blanket mental health exclusions on direct products fall below community expectations. QBE failed to concede any conduct falling below community standards, though acknowledged that being found in breach of anti-discrimination laws for selling a travel insurance product with a general mental health exclusion clause was an ‘issue’.
Many consumers, on the other hand, will be surprised. They will have assumed their insurance policies provide cover for mental health conditions in the same way they cover physical health conditions. Did they realise their life insurance provides no cover for mental health related events, even though they have no mental health history? Did they know a couple of prudent visits to a counsellor, to manage work stress or pre-wedding nerves could result in a full mental health exclusion clause on their total and permanent disability policy, preventing any future mental health related claims?
These are just some of the ways insurers discriminate against people with a mental health condition, symptoms or history. And with 45% of Australians experiencing a mental health condition at some time in their life, it’s a matter of significant public interest that insurers act fairly and don’t discriminate.
PIAC’s casework has revealed systemic problems and widespread discrimination in the way insurers design, price and offer policies, and assess claims relating to mental health. The 2018 Parliamentary Inquiry into the Life Insurance Industry has revealed systemic problems in the industry, and recommended that a mandatory and enforceable Code of Practice be implemented specifically for mental health life insurance claims.
It isn’t just a case of insurers failing to act in the best interest of consumers. It represents a failure to adhere to the law.
State and Federal anti-discrimination law requires insurers to make genuine assessments of the risk posed by all applicants for insurance based on actuarial or statistical data. If such data isn’t available, insurers must base their decisions on other relevant factors. In short, underwriting decisions must be based on fact and not on outdated thinking or assumptions about mental illness.
The practice of offering policies with a broad, blanket mental health exclusion that lumps all mental illness together is example of the generalisation of mental health conditions at play. It is common for applicants who disclose they have experienced anxiety or depression sometime in the past, to have blanket mental health exclusion placed on their policy, regardless of the risk posed by the applicant’s individual medical history. Even disclosing a visit to a counselor to discuss work related stress, without evidence of a diagnosis, could be enough to attract one of these broad-brush clauses.
In the same vein, a number of PIAC’s clients have been declined insurance all together, in the course of making a ‘tick the box’ application over the phone or online, which discloses a mental health history. There is no consideration of what the actual increased risk is to the insurer, if any, or whether any additional risk could be ameliorated by an appropriately proportionate exclusion clause.
The Royal Commission will put life insurance giant TAL on the stand to examine what changes to the existing, largely self-regulatory, framework are necessary to improve the experience of people with mental illness dealing with life insurance.
But there is mounting doubt about whether the insurers have actuarial and statistical data to support decisions on insurance applications and claims for people who disclose a mental health condition. Insurers have long hidden behind the veil of ‘commercial in confidence’ to avoid releasing this information. QBE lost the landmark Ella Ingram case because it failed to prove the clause in its travel policy, baring all claims relating to mental health, was based on actuarial or statistical data.
The Royal Commission will scrutinise systemic misdemeanours in the manner in which insurers handle claims, but it likely won’t go as far as to interrogate the data which supports their underwriting guidelines relating to mental health conditions.
Insurers need to be aware that improving the way they handle claims, an essential reform, will not in itself remedy unlawful discrimination in relation to mental health conditions. Until insurers are ready to properly scrutinise their underwriting guidelines, and be more transparent about how they make decisions in relation to mental health, we are all at risk of having costly insurance cover that could, in the end, amount to nothing.
Michelle Cohen is the Senior Solicitor in charge of the Public Interest Advocacy Centre’s Mental Health and Insurance Project.