ASIC urged that life insurers’ use of blanket exclusions be reviewed
The Australian Securities and Investments Commission (ASIC) has been asked to investigate those life insurers who use blanket exclusions based on people’s mental health.
A Public Interest Advocacy Center (PIAC) report entitled “Mental Discrimination in Insurance “ found that the use of blanket mental health exclusions is inconsistent with insurers’ obligations and therefore may be illegal.
Reported issues with policies, including denials of insurance, offers with extensive mental health exclusion, or insurance without mental health exclusion but with unreasonably high premiums.
Other issues included the automatic rejection of claims by insurers after disclosure of a mental condition, the assessment of claims without sufficient information, the failure to consider the mental history and the attribution of a mental condition without medical evidence.
“In PIAC’s experience, these problems are most evident in the life insurance market. Routine denials of coverage or the application of extremely broad mental health exclusions are particularly common when it comes to income protection and TPD [total and permanent disability] Insurance, ”says the report.
“This occurs in people who reveal a history of diagnosed mental illness, as well as in people who reveal symptoms of mental illness but have never been diagnosed.
“Simply disclosing that an individual has or has a history of mental illness generally results in an insurer limiting or denying coverage without considering specific factors related to the individual’s condition, including severity the illness, the treatment a person is receiving for the illness (in fact, insurers often assume a person is receiving treatment to mean the illness is serious) and whether or how the illness affects the person’s ability to function.
The policies of Virgin Money, Medibank and HCF were named by the agency as standard terms of the policy excluding benefits for mental illness or mental illness, while AAMI, ANZ, Suncorp, Insuranceline and RACQ changed their policies to remove the exclusion. Several others had it removed for new customers, but it could still apply to existing customers.
The results suggest that people could be discouraged from seeking early intervention for their mental illness if they fear it could affect their insurance policies. This was particularly critical because in the four weeks up to and including the 25th
“PIAC is concerned that these practices have an approach that penalizes and discourages people from seeking preventive, early medical assistance to proactively manage their mental health,” the report said.
“This also undermines government-funded campaigns and programs that encourage people to take active steps to stay mentally healthy and seek support in doing so.”
It found that ASIC had “played no active role” in enforcing discrimination laws against insurers and asked it to conduct a review.
“The ASIC should do a review to see if life insurance policies continue to use blanket exclusions for mental illness. The life insurance code of conduct should include an obligation not to develop and sell products that include a blanket mental health exclusion in the general terms of the policy, ”it says.
“ASIC, as recommended by the Productivity Commission, should investigate the life insurance industry’s practices in relation to the provision of services to people with mental illness. The investigation should take into account mental health discrimination in insurance policies and use a similar investigation model to that of VEOHRC [the Victorian Equal Opportunity and Human Rights Commission] in his investigation into travel insurance. “