Opinion — 06 November 2012

If you have been to your GP this year, there is a two in five chance that you have been diagnosed with a mental illness. You may have been prescribed an antidepressant, sedative or tranquilliser.

We hear that such things are no big deal in a world free of stigma about psychiatric disorders. This is true – until you apply for an income protection insurance policy.

Disability insurers find themselves in a bind. They want to insure people with mental illness but they are struggling to get their heads around how to cover an area of medicine that can’t be proven (or disproven) with tests.

Mental illnesses are a set of conditions that are opinion based, and doctors disagree in their opinions all the time. So when the time comes to deal with an insurance claim of mental illness, it becomes complex. This frightens insurers because they have limited means available to mitigate their losses.

When you decide you will be responsible for your own welfare and take out an insurance policy to ensure security for yourself and your dependents, the same two in five of you are going to either be denied a policy or, if you are lucky, find a progressive insurer that gives you reasonable policy terms.

Various mental health agreements between the Mental Health Council of Australia and the Financial Services Council have attempted to bring some reason to the issue and have enlisted the support of the insurance industry to implement reform. Progress has been made, but the problem has not gone away.

Almost a decade of negotiations between the interest groups has not resulted in a solution. Yet, if we look over the Tasman we can learn from a legislative approach that has worked well for the mentally ill and the insurance industry.

New Zealand’s Human Rights Act 1993 makes it unlawful to refuse services on the basis of discrimination, which prevents insurers from refusing policies because the applicant has a mental illness. There is no reason why this cannot be incorporated into anti-discrimination legislation here.

There are no losers with this approach.

Nervous insurers who may bristle at the thought of having to offer policies to all comers should realise that, as an industry, they can quantify the risk of mental illness just as they quantify other types of risk.

Insurers can load their policies as necessary, creating realistic terms and opening up new markets. Insuring the mentally ill is an opportunity for growth, with the potential to increase gross revenues by at least 30 per cent, with immediate access to what is essentially a new market.

Governments can benefit by seeing this change as an opportunity to encourage people to manage their own risk and to lighten the burden on existing welfare and medical schemes.

Consumer groups have long lobbied governments to end discrimination in the provision of policies. But, once the risks of insuring people with mental illness are calculated, the reality may be that premiums, exclusions and other terms make the policies expensive.

Consumer groups will need to understand that just as it would be unreasonable to deny cover, it would be unreasonable to expect insurers to offer policies on unviable commercial terms.

Two things are required. The first is a regulator. It would not be fair for insurers to game the system by offering outrageous terms that amount to a denial of policy. An industry funded ombudsman could receive appeal submissions and give binding decisions on insurers.

The second requires an acceptance that insurers are entitled to do appropriate due diligence at both ends of the insurance scale.

If we are asking them to take on more risk, then we must allow them the right to properly quantify the risk at the underwriting stage and again when a claim is made.

In this game of risk there can be no winners if we demand the risk takers both increase their exposure and simultaneously undermine their incentive to do so. This will only drive insurers out of the market, effectively removing the option of insurance for the rest of us.

It is long overdue that Australia breaks the negotiation impasse that has prolonged discriminatory practices, and both sides of politics should support this simple solution to an increasingly burdensome problem.

Dr Doron Samuell is a psychiatrist and medical director at SR2 Health, a medical risk-management service.

As first appeared in The Sydney Morning Herald, 5 November 2012


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