Fraser Ballantine, underwriting quality & risk manager at Zurich and member of the Institute and Faculty of Actuaries (IFoA) Mental Health Working Party, examines the considerations and developments in underwriting mental health conditions.
One in four people will experience a mental health challenge of some kind each year and one in six people report experiencing a common mental health issue, like anxiety and depression, in any given week in England1.
Mental health conditions span a large spectrum, from anxiety, stress or depression to bipolar disorder or schizophrenia. We know mild anxiety or stress is a typical, healthy response to everyday situations such as the uncertainty we've all experienced in the past two years with the pandemic; any increased mortality risk attributed to these mild mental health conditions will typically be covered by the insurer's standard life insurance price.
In more severe mental health conditions, underwriting ratings may be used to adjust in line with the individual's elevated mortality risk. An insurer can choose not to offer cover and the reasons for this will include recent suicidal thoughts or attempt(s) as well as co-existing drug or alcohol misuse.
The outcome could be a postponement until a period of stability is shown or until a prolonged period of abstinence has been proven. In some instances, the insurer will decline the application, and this is likely to be due to a long-standing pattern of the above circumstances.
When we compare the speed of change on the development of underwriting of physical health to mental health it is evident changes to mental health underwriting haven't been as significant. While the physical aspect has progressed with new data changing outcomes on an ongoing basis, there is lack of granular data available to inform additional mortality and morbidity attributable to mental health conditions.
Mental health is complex. It doesn't help that they are still under-reported by individuals due to the stigma attached to them.
Insurers are always looking to improve the online journey for customers, whether by offering more customers cover without the need for medical evidence or streamlining the questions asked. It is important the insurer only asks questions that are part of the decision-making process. These must be answerable without medical knowledge, so the words used must be easily understood.
We can expect to see an increased range of mental health conditions being assessed via the underwriting rules engine. This would work for mild-moderate conditions but given severe mental conditions are more complex, an underwriter will still require information from the GP or doctor to be able to offer the best terms possible.
Severe mental illness can be multi-faceted with existing or the potential to have comorbidities. As an example, the NHS Long Term Plan estimated people with severe mental illness have a 53% higher risk of developing cardiovascular disease2. It therefore requires data, knowledge and compassion to ensure they are underwritten correctly and fairly.
It's great to see more development in recent years on mental health and the ABI Mental Health Standards3 have certainly moved this along. There are propositional developments across the protection industry focus on supporting customers and their families. This takes many different approaches, ranging from support through the claims process to second medical opinions to mental health support.
As an industry, we're becoming increasingly aware of the need to understand and support our customers through stressful or worrying life events. We are seeing access to mental health services increase and this will help customers with existing conditions as well as those that develop a mental health condition during the lifetime of the policy.
I am also optimistic the work being carried out by the IFoA Mental Health Working Party will enhance this. The working party will be releasing a paper later this year which explores data analysis underpinning the underwriting of mental health conditions in life insurance products. It will also consider the possibilities that improved data availability can open up in terms of pricing granularity and underwriting design.
This could help to further improve access to insurance products for those with mental health conditions. Keep an eye out for it!
This article was published by COVER as part of the Mental Health in Life Insurance week.
- How common are mental health problems? | Mind, the mental health charity - help for mental health problems