Mental health diagnosis & insurance cover

There is considerable confusion around insurance in the UK, with many people not understanding their policies, cover, and costs.

But for people with mental health problems, sorting insurance can be particularly challenging. In fact, research by Mental Health UK has found that 45% of people with mental health problems felt distressed after applying for insurance. For context on the scale of this issue, mental health problems are believed to affect around one in four people in the UK.

The same research found other issues, including that, for those with mental health problems:

  • 42% were not satisfied with the insurance terms offered to them.
  • 39% did not think that the application asked questions sensitively.
  • 68% felt that they had been unfairly discriminated against.

Increased or refused cover

Many people with mental health problems report being refused insurance cover, or being charged dramatically increased premiums for insurance. This can happen even if someone had a mental health problem in the past but is now recovered.

One of the consequences of the confusion around insurance and worries about refused cover or increased costs is that some people who are struggling with their mental health may delay or avoid seeking a diagnosis or appropriate support.

This is why it’s vital for insurance providers to be transparent with consumers. It’s vital to have clear terms and conditions that explain the thresholds for when an individual needs to inform the provider about poor mental health, and details around cover and costs.

Informing providers & legal protections

It’s important for people to be honest with insurers. Failure to be truthful in applications, or to notify about any changes in circumstances in accordance with the policy, could lead to insurers avoiding a claim or taking other action, like cancelling your policy.

Some insurance companies have previously been known to use subject access requests (SARs) to access all of a consumer’s medical records. However, the Information Commissioner’s Office (ICO, the data protection regulator) has made it clear that it views this as an abuse of data protection rights.

Insurers can increase costs or refuse cover based on a mental health problem, but only if both the following are true:

  1. The insurance provider acts on the basis of information that is both relevant and reliable.
  2. What they’re doing is reasonable.

Addressing the problem

This topic is undoubtedly an issue that the insurance sector needs to address.

Insurers have recently promised to make it easier for people with mental health problems. In September 2020, The Association of British Insurers, Mental Health UK, and the Royal College of Psychiatrists, launched a set of standards designed to improve the insurance process for those with mental health problems. They include:

  • Improving accessibility
  • Explaining the process and rationale behind questions
  • Standardising and simplifying communication
  • Increasing transparency around decision making

Ultimately, it’s about ensuring that the process is as transparent, clear, and simple as possible. Consumers should feel confident that they will be treated fairly in regards to their mental health and should feel comfortable being able, to be honest with their insurance providers.

Professional Opinion 

We asked Ed Watling, Employee Benefits Consultant (Healthcare) at Mattioli Woods his opinion on the matter.

The key to the problem is how underwriters assess the risk. The general stigma and poor understanding around mental health issues, when compared to physical health problems, has often resulted in underwriters using “shortcuts” or blanket exclusions and/or premium loadings.

This has been especially true of automated underwriting.

It is to be hoped that since the conversation around mental health in the UK widens and deepens, underwriters will be willing to be much more discerning in their approach; as with any health issue in relation to insurance their decisions need to reflect the risk presented but they should be more able to base their decisions on accurate data and true reflections on prognosis and risk.

In reality, the fact that a person has sought help for a mental health issue should be viewed as potentially seeking to address the problem and thereby helping to reduce the risk rather than simply a “red flag”. It’s encouraging to note that a number of insurers are now taking a more enlightened stance and are willing to spend more time tailoring their terms to an individual’s specific situation.