Mental Health, Travel Insurance, Discrimination and Actuaries

Member of the Anti-Discrimination Working Group, Geoff Atkins, discusses key findings from the recent report issued by the Victorian Equal Opportunity and Human Rights Commission. What are the challenges for actuaries in the insurance space and how will the profession tackle sensitivities around mental health and insurance?

The anti-discrimination report issued on 12 June by the Victorian Equal Opportunity and Human Rights Commission (VEOHRC) was called ‘Fair-minded cover’ and again brings together the four topics in the title of this note.

It raises challenges for all actuaries involved in product design and pricing, in every insurance sector. The idea behind this discussion is to draw out what we might expect in future and how we (individually and collectively) may need to respond.

Report Key Findings

  1. The use in travel insurance of a blanket exclusion for mental health conditions is, unequivocally, in breach of anti-discrimination laws.
  2. Three insurance groups – World Nomads (owned by nib holdings), Suncorp and Allianz were called out with specific adverse findings and recommendations.
  3. A fourth insurer – Cover-More/Zurich – fared better having removed the exclusion some time ago.

 

The insurers all sell travel insurance under a number of different brands, so it is not obvious who is who unless you are close to the business.

The blanket exclusion is discriminatory because it does not give cover for first-onset conditions, unlike all other medical conditions.  The ‘blanket’ exclusion is not the end of the story though – there are equally important issues with pre-existing mental health conditions, including distinguishing different types of condition and the availability, cost and conditions of cover.

Credit goes to actuaries Bill Konstantinidis and Michael Storozhev from Cover-More not only for the work they have done for their employer, but for sharing it at an excellent Insights Session in August 2018.  You can find the slides and audio here Mental Health – a Case Study with Lessons for Travel and Life Insurance.

The VEOHRC made specific comment on the actuarial role and recommendations for the Institute, noting that the volume of quality, accessible data will continue to increase, including data collected by insurers.  In anticipation, the Institute has acted positively and formed an Anti-Discrimination Working Group chaired by Chris Dolman to lead the work to implement the Commission’s relevant recommendations.

Where could it end?

‘Fair-minded cover’ is only about travel insurance and only about mental health conditions.  The question on the lips of many actuaries is “where could this go from here, and where could it end?”

Similar discriminatory circumstances, in addition to mental health conditions, potentially exist in other types of insurance. Many actuaries in life insurance, superannuation and general insurance are thinking about this question and aiming to make our profession as well prepared as we reasonably can be.

Education, particularly in the CPD sphere, is likely to be the first area of emphasis, with possibilities of extending to professional guidance and availability of data and other relevant information.

Attendees at the Actuaries Summit will have seen the LIWMPC presentation on Navigating Life Underwriting and Dimitri Semenovich and Chris Dolman’s presentation on Algorithmic Fairness as examples.

Our colleagues in the NZ Society of Actuaries have a Professional Standard 92 which may be a helpful read for interested members.

It is a difficult problem

The Actuaries Institute’s October 2017 Green Paper on Mental Health and Insurance canvassed some of the root causes of why this is a difficult problem. The Green Paper discussed travel insurance, but in the context of the full range of insurance products so it remains an excellent reference.

While legal compliance is a matter for the product issuers, actuarial professionals find themselves close to the heart of the problem, given that the laws specifically permit discrimination if it based on ‘actuarial or statistical data on which it is reasonable for the insurer to rely’, along with some other criteria.

Any of us needing to give an opinion on this question will have to exercise considerable skill and judgement, especially in the absence of any further criteria, guidance or known acceptable practices. The Australian Human Rights Commission Guidelines are useful but there is precious little precedent, at least in the public domain.

In spite of all the difficulties (or perhaps because of them?) this is incredibly fertile ground for actuarial progress.  The combination of science and professional judgement, the creation of workable and sustainable solutions and the balancing of competing priorities are all part of the actuarial skillset that are needed.

A visionary way of thinking about it

Parts of the VEOHRC report are very similar to the Hayne Royal Commission report where they draw out the underlying goals and what a future might look like.  The VEOHRC said that the lessons learned provided a strong foundation for change including:

  • The need to put consumers at the heart of insurance business.
  • The need for better use and analysis of data to inform business decisions.
  • The need for stronger regulation.
  • The need for better education and support.

 

Thinking of the issues in this context might give us the focus on the public good that has held the actuarial profession in high regard.

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