Mental illness has historically been painted with negative stigma by the community. Over time, as we understood more about mental health, greater recognition to accept mental illnesses as something to be managed, rather than shunned, grew. As more high profile people continue to open up about their personal challenges with mental health, there is a strong desire in the community to assist people with mental illness.
The focus on managing mental health permeates many parts of society. This has caused the insurance profession to become more proactive in addressing it, rather than having society and government impose regulation on insurance due to a failure to respond. In a recent Insights session, we spoke of these challenges for the insurance sector, focusing on the life and travel insurance markets. For numerous reasons, coverage for mental health conditions has been excluded from insurance policies. In travel insurance, such exclusions have led to many people:·
- finding themselves not covered for things they would expect to be included in their policy;·
- significantly out of pocket; and·
- under additional stress because of the claims process impacting their mental health further.
These problems bubbled away in the background for many years until the landmark Ingram case brought them to a head in 2015. This case was seized by consumer lobby groups and human rights bodies to highlight insurers as heartless and out of touch with society norms. This focus has led the industry to finally challenge its stance on mental health.
What does Travel Insurance Cover?
Travel insurance provides cover for:
- cancellation of your trip before travel, due to illness or injury;
- overseas medical treatment and hospital care should you injure yourself or become sick while travelling;
- repatriation of the injured, the sick and the dead; and
- luggage and flight delays
The health of the travellers or their relatives is the primary risk factor in travel insurance, with health-related claims making up 86% of claim costs. Hence, mental health is an important issue.
The Mental Health Problem
Until 2017, many customers with mental health issues looking for travel insurance encountered exclusions that resulted in:
- Lack of Coverage for the case where a mental health incident occurs for the first time either before travel or while on travel. (“First Onset”)
- Lack of Coverage for existing known mental health conditions (“Existing Condition”)
As a result people travelled uninsured, and in many cases unknowingly so.
Examples of Mental Health in Travel Insurance
Claims arise for a number of reasons. These three real life examples demonstrate the pressing customer need for better coverage of mental health issues.
Mental health incident happening overseas
A 24 year old on a five week holiday in beautiful Croatia. He experienced a psychotic episode. He thought he had superpowers. As his condition deteriorated he was hospitalised. He stayed in hospital for three weeks. The hospital costs come to over $17,000. How does the policy respond? Declined. The standard exclusion applies. As it is a claim as a result of a mental disorder.
Mental health of a relative not travelling with you
A couple in their 50’s book a cruise holiday in Europe. Just before they intend to leave their 16 year old son is diagnosed with depression and suicidal thoughts. The medical advice is they need to stay for the wellbeing of their son. They cancel their trip and lose $30,000 in prepaid travel costs. How does the policy respond? Declined. If this was for any other illness, injury or sickness this would be covered.
Cancellation before travel due to the mental health of the traveller (Landmark Ingram Case)
Ella Ingram planned a Year 12 trip to New York City. After booking she was diagnosed with severe depression. She was prescribed medication and subsequently admitted to hospital in a suicidal state. She was in hospital for two weeks. On the advice of her psychiatrist she cancelled her trip losing $4,300 in air tickets. How did the policy respond? Declined (at least initially).
The Insurance Problem?
A number of reasons have been given for not addressing the mental health coverage issue.
- Lack of relevant, classified and analysed data in the travel insurance context to price the benefit.
- Travel can exacerbate existing or undiagnosed mental health conditions. Factors such as navigating the unfamiliar, physical discomfort on planes or new time zones, can all trigger a mental health episode.
- Diagnosing mental health relies on self-reporting of symptoms. It is difficult to validate directly – the “invisible illness” problem. This is particularly relevant in the context of determining whether mental health or mere disinclination to travel is the cause. So, there was a potential exposure to a lot of claims for cancellation pre-trip which could not be sufficiently validated.
- Mental health claims can require long periods of high-level care or hospitalisation with difficulty in determining likely timing for recovery to allow transportation home. Overseas hospital costs are significant, resulting in expensive claims.
- An incorrect assumption that overseas data was irrelevant to understand the risk in Australia.
Movement in the Market
Not withstanding the challenges, a number of major players in the travel insurance market started to cover mental health conditions in 2017, leading to an acceptance in the market that mental health risks are acceptable.
Our own experience suggested that mental health was not as big an underwriting problem as the market thought. The number of claims were well below expected and those with existing mental health conditions were relatively low risk.
We believe that more needs to be done by the industry to continue removing barriers to mental health cover and care within insurance. We will continue to explore this in our presentation at the upcoming General Insurance Seminar in November where we will present some of our hypothesis around the low claim rates, including investigations into the correlations between travel, financial means, and social economic status of Australians dealing with mental health conditions.
Come join in the discussion at GIS, and help drive the role of actuaries to deliver change to the industry.
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