If you read the headlines, you can be forgiven for thinking that insurers don’t understand mental health. Certainly not the nuances between a ‘tough patch’ as a response to a normal life and a debilitating condition. With 1 in 5 Australians experiencing mental ill health, it’s a topic that’s not going away, so we spoke to our Chief Underwriter and industry veteran, Scott Hodgson, for his perspective on why insurers struggle to support and understand mental health. 

Let’s jump right in, Scott. Why do you think underwriters (and insurers) have such a tough time grappling with how to handle mental health?

Scott Hodgson: At a company level, mental health conditions are a major cause of claims, and so life insurers want to understand the risk to manage it over time (so they can get the pricing right). It’s a very sensitive topic at a personal level and so advisers and underwriters find it hard to discuss with some applicants. Plus, it is difficult to properly classify the risk when assessing it, as individuals all have different responses to life events – and different diagnoses can often be made for what might be similar triggers for a mental health issue.

Additionally, there are no universal clinical indicators, for example blood tests, for mental health conditions, so diagnosis and treatment requires skilled practitioners, and even the medical profession finds treating mental health patients complex.

What is your view on exclusions related to mental health?

Scott Hodgson: I’ve seen a worrying trend of automatic exclusions without really understanding the situation. If for example, you have a major life event (loss of a loved one for example) and you see a psychologist, perhaps you’re even on medication temporarily, but you didn’t take a heap of time off work and this was years ago, I don’t see why this would mean an exclusion. But because the risk cannot always be quantified it is necessary to exclude in some cases. This is preferable to not offering cover at all, and of course over time the exclusion can be reviewed. Once sufficient time has passed and the condition is managed well (or has receded) then the exclusion may be removed.

Is there any good news on this front in terms of changing attitudes, policy and research?

Scott Hodgson: Fortunately we now have good public policy around mental health, much more openness and de-stigmatising in general as well as better training of general practitioners in respect to mental health, plus access to Medicare supported sessions with psychologists. So while it might seem like mental health conditions are at epidemic levels, it is simply that these conditions are now being discussed and disclosed. Hopefully this leads to much better management than in the past. In time gone by you may remember a neighbor or relative who had a “nervous breakdown” that was discussed in hushed tones? These days anxiety and depression related to life events should be considered manageable conditions, that need empathy from the community.

It’s been said that life insurance is ‘sold, not bought’. Partly this is due to the complexity of products but also because human nature is to believe ‘it won’t happen to me’. The key to advisers being able to have meaningful conversations with clients is the mutual understanding that comes from a simple product that is grounded in the real world. The conversation should be about the lived experience not detangling complexity. To better understand how we have approached this challenge, we spoke to Head of Retail Product, William Rogers.

So, Will, could you talk us through how you approached the product design? Where did you start?

Will: When we started to design products, we took the time to undertake detailed customer research to understand what advisers and their clients wanted and where the opportunities were to improve life insurance in Australia.

To bring the product to life, we approached the design with ‘simplicity’ as the key focus. Simplicity leads to greater understanding of the value of a policy and allows advisers to have better, more meaningful conversations with their clients about the life they want to live and not get bogged down in the complexity that is endemic in the life insurance industry.

The modular design of our product is simple to look at (pictured below), so while most people would be familiar with the cover types, could you talk us though what you mean by ‘shared product features’?

Will: Good question! The simplicity in product design allowed us to focus on 3 key elements within the product being, Shared product features, 4 core covers and our unique Care Support Package. This focus on the 3 elements delivers a fully featured but simplified retail product.

The shared product features are those elements of an insurance policy that are available on or apply to all core covers.

A few that are worth calling out are features like ‘guaranteed renewable’ and ‘guarantee of upgrade’. This guarantee of upgrade provides policy holders with the certainty that when an enhancement is made to a benefit or medical definition within their policy, we will upgrade their cover to the new standard. Should they claim, we will assess their claim based on the terms at the time of their claim as well as any period of time from when they took out the policy.

We don’t have any policy fees or minimum premium. One of our guiding principles that goes hand-in-hand with simplicity is transparency. The price is the price. We don’t believe in adding fees and service charges on top of the premium.

Cover increases in line with CPI, that is the actual CPI not 5%. This means that for our policies, the actual increase applied for CPI for 2018/19 was 1.6%. This means cover increases at a pace that aligns to what our policy holders are seeing in their life and reduces the risk of over insurance.

Premium relief options. This includes the ability to freeze the annual premium amount which caters for policy owners who see the value of their cover however may be facing financial pressures to retain their cover.

We believe in these brilliant basics that should apply to all our core cover types. By making them standard and grouping them together it keeps our PDS simple and easy to understand.

What is the ‘Care Support Package’ and why is this separate?

Will: The Care Support Package groups 9 benefits which are generally seen as ancillary benefits within IP and lump sum covers into a single package or option that can be linked to a single cover – whether that be income insurance or a lump sum cover. Once you add this to our covers, we believe it becomes superior overall cover while maintaining the simplicity.

Benefits that are included in the Care Support Package include Accommodation Care, Home Care, Grief Counselling and Professional Services benefits.

It also includes a Terminal Illness benefit – which provides a benefit to a life insured in the form of a reimbursement where they have less than 30 days to live. This benefit can be used in the way that they need. This could be to have their family support network around them, in a tent in the middle of Bondi Beach to watch the sun rise or spend these final days in their own home, with their support network of doctors, family and friends close at hand.

It should also be noted that the Care Support Package fee is waived when you take out three covers or more.