Mental Health Claims Likely to Go Up; Are Insurance Firms Ready?

  • Aug 03, 2020 AEST
  • Team Kalkine
Mental Health Claims Likely to Go Up; Are Insurance Firms Ready?

Summary

  • While we have monetary reforms taking care of economic conditions and hospitals servicing physical ailments, mental distress is emerging as major challenge with Australians experiencing anxiety, worry, or fear.
  • According to a Financial Services Council led report, life insurers paid $1.24 billion to over 9,500 Australians in 2019 for mental health claims with mental illness being the highest cause of claims.
  • Financial Services Council Chief Executive Sally Loane has stated that despite monetary reforms from the government such as JobSeeker or JobKeeper programs, a rise in mental illness is expected to deepen in the future months.
  • According to industry professionals, the industry needs to plan to tackle the anticipated surge in mental health-related claims.

The current pandemic environment is having a profound effect on people - economically, physically and mentally. While we have monetary reforms taking care of economic conditions and hospitals servicing physical ailments, mental distress is emerging as major challenge with Australians experiencing anxiety, worry, or fear due to the infection or the uncertain future.

Almost 20% of Australians aged 16-85 suffer a mental illness in a year, making it a lot more common than expected, according to Black Dog Institute. Anxiety, depression, and substance use disorders are the three types of mental illnesses that occur most often in combination. The COVID-19 situation has only aggravated the same.

According to data released by the Australian Bureau of Statistics (ABS) on 27 July 2020, based on a survey asking people to assess their general mental health, around 14% or one in seven people admitted their mental health as fair or poor. Moreover, 14% of respondents acknowledged using mental health or support services since March, with 19% of women using mental health and support services as compared to 10% of men.  

Also Read: Coronavirus Pandemic could hit Women the hardest

As the pandemic impact deepens, cases related to mental illnesses have also gone up and so are the expenses related. To meet the expenses, many are relying on their insurance, leading to a surge in mental health claims in the life insurance industry.

Casting an Eye on Mental Health Claims Industry

A 50% surge has been observed in mental health disability claims in the last five years, according to a Financial Services Council led report.

At the Financial Services Council summit on life insurance, head of life insurance, MLC, Sean McCormack reportedly stated that the insurance sector is experiencing a surge in the number of claims related to psychological health, highlighting mental health as one of the most significant issues. Mr McCormack expects to see an uptick in claims related to income protection and total permanent disability (TPD) claims, as chronic mental conditions such as depression seeps in the community because of COVID-19.

Mr McCormack further stated that customers with existing mental health-related claims may experience secondary mental illness conditions as lockdown progresses. People, who have claimed mental illness insurance and have resumed working, also run the risk of catching the virus and pose a commercial risk to insurers.

According to life insurance claims data for 2019 released in July 2020 by the Financial Services Council (FSC):

  • For Total and Permanent Disability (TPD), there were 11.1 million covers in force, 90% of lodged claims were paid and the highest cause of claim was mental health at 24% in men and 27% in women
  • Under income protection claims, for mental health, 22% claims were made by women and 10% claims by men

Increase in TPD claims has been identified as one of the “looming crises” that the life insurance industry is experiencing, as per Victoria Senator Hume.

Meanwhile, Financial Services Council Chief Executive Sally Loane has reportedly stated that despite monetary reforms from the government such as JobSeeker or JobKeeper programs, a rise in mental illness is expected to deepen in the future months.

Interesting Read: Australia’s COVID-19 Battle Continues- Melbourne Lockdown Takes A Toll On Residents

Are Insurance Firms Ready?

The FSC commissioned study released in late-July 2020 revealed that life insurance claims data from 2019 showcased mental illness as the highest cause of claim for total permanent disability (TPD) and the third highest for income protection. According to FSC, life insurers paid $1.24 billion to over 9,500 Australians in 2019 for mental health claims.

The leading five types of the conditions accounted for nearly 50% of the total claims, included

  • 5% of the claims covered depression, including single and recurrent episodes,
  • 4% of claims payment covered unspecified anxiety disorders
  • 3% payment covered reaction to severe stress,
  • 6% covered Alzheimer’s disease
  • 1% covered claims related to schizophrenia

FSC Chief Executive Sally Loane has stated the data project is designed to help steer the local life insurance industry towards sustainable and affordable disability income insurance.

How ‘Secure’ are Insurers Amid COVID-19, PPP a Savior? Must Read

As the pressure is increasing on the industry, several market experts and leading players are suggesting measures to be modified in the insurance sector, ensuring that premiums remain affordable. Moreover, benefits should be designed or customised as per mental health conditions. Acknowledging rising mental claims, Sue Houghton, general manager of insurance for Westpac's BT Financial Group, has highlighted that the industry needs to plan to tackle the anticipated surge in mental health-related claims.

Good Read: Rising Mental Distress During Pandemic Driving Virtual Consultation Service

 


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