A leading reinsurer is calling on Australia’s life insurance providers to consider taking a forensic approach to assessing and managing mental health disability claims in order to ensure the sustainability of the industry.
RGA Australia said the proportion of mental health claims as a percentage of all disability claims had increased considerably amongst their insurance clients; in some cases almost double that seen in prior periods. According to the reinsurer, new approaches and changes need to be considered to ensure that a level of coverage remains in place for mental health conditions, as the industry and policyholders continue to grapple with regular increases in disability insurance premiums.
One of the approaches currently under review is an evidence-based approach for psychological evaluation. Psychological testing provides a scientific means for supporting or refuting a doctor’s clinical impressions, which can be of particular importance for mental health claims because it offers a better determination of the level of disability suffered by the claimant.
Depression is an illness like any other and requires scientific treatment in much the same way
Dr Kelly Wilson, President and Director of Forensic Services at PsyBar, which provides psychiatric and psychological examination services to insurers in the United States, explained that many US lawyers and judges have come to expect psychological testing from mental health experts. She added that judges and juries often afford more weight to experts who utilised psychological testing to develop and support their opinions.
“To ensure a fair outcome to both insurer and policyholder, we have found that our scientific, independent involvement in assessing disability claims of a psychological nature has changed the way all stakeholders view such claims. Depression is an illness like any other and requires scientific treatment in much the same way. Whilst clinicians focus on diagnosis and symptoms, a forensic approach makes it easier to assess functional impairment for disability insurance purposes,” Dr Wilson said.
According to Dr Wilson, the incidence of mental illness claims in the insured population appears to be greater than the prevalence of mental illness amongst the general population, leading to concerns about the future sustainability of the insurance industry.
RGA Australia’s Claims Manager, Roy Johnson, said: “Disability claims have been under the microscope for the last few years as insurers struggled to manage the influx of new claims and lower terminations of income style products. Considering a different approach such as suggested by Dr Wilson is opportune, since effective, unbiased and scientific evidence is crucial to ensure a sustainable claims model for mental health claims.”
When it comes to the long term viability of the Life Insurance Industry and having quality products that are sustainable and profitable, there reaches a point where hard decisions need to be made.
If mental health claims are dragging the Industry down, then introduce provisions in the pricing models, to offer existing clients the choice of keeping full cover for mental illness and price it accordingly and for policy holders who do not want cover for mental illness, the premiums will be cheaper. This way, all the other conditions that impact peoples lives like cancer, stroke etc, will still be available at affordable pricing and enable clients to keep their policies.
Long term claims for mental illness are difficult and expensive to monitor and assess and if this is a major reason for losses, then have a user pay system and provisions to allow clients the option of opting in and out to this type of cover in their policies.
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