How insurers can damage your mental health

A history of conditions such as depression can affect your chances of cover. Chiara Cavaglieri reports

The Government may be making efforts to tackle mental-health problems with a new 10-year plan announced last week, but can the same be said for the insurance industry?

Mental-health charities have welcomed ministers' ambitious plans for a three-pronged attack covering early intervention from GPs, counselling services at schools, and co-ordinators working with Job Centres to help people get back into work. However, for the estimated one in four people in the UK who suffer from a mental-health condition at some point in their life, there are still many unresolved issues when it comes to insurance.



"We regularly receive calls from people who have been refused life insurance outright, because of their mental-health problems. We also hear from people who have tried to claim on their travel insurance but failed because of a clause that means insurers don't have to pay out for mental-health issues, including depression, stress and anxiety," says Sarah Murphy, financial inclusion officer at the mental health charity Rethink.



Consumers taking out life cover, critical illness, income protection and travel insurance are required to provide details of both their current state of health and their medical history. The insurance company uses this information to set the premium level and may refuse to cover certain conditions if related to a pre-existing health issue. This can be fairly straightforward in the case of a broken leg, for example, but when it comes to mental illness, there are many more complications and because of this insurers will often simply refuse to cover it.



"On income protection in particular mental illness is a regular exclusion. Mental-health issues are the second-highest cause of income protection claims, behind musculoskeletal conditions, such as bad backs," says Alan Lakey, from independent financial adviser (IFA) Highclere Financial Services.



"It also has an impact on critical illness applications where the degree of the condition may cause a premium loading or exclusion," he adds.



Under the Disability Discrimination Act, it is illegal for insurers to refuse to cover or charge higher premiums unless they can demonstrate statistically higher risks because of a specific mental-health condition. Therefore, when deciding whether to insure someone, they should carry out a risk assessment, complete with statistical analysis. After this assessment, the company can refuse cover, increase premiums or exclude a claim that results from mental illness, as long as they can prove that that person presents a higher-than-average risk. Exclusions are particularly common on critical illness and income-protection policies, and, even worse, only two insurers will offer lower premiums to balance the reduced cover.



"If mental-health related claims are excluded from an income-protection policy, both Fortis and Aviva offer premium reductions to compensate for the exclusion. No other insurers will do this," says Matt Morris, from protection broker LifeSearch.



Conditions such as pre-natal or post-natal depression should be looked at more favourably, because it is considered to be an isolated incident, and, when it comes to life cover, stress and anxiety, cases should also be accepted at ordinary rates. However, while there is a good chance that mild depression will be accepted without affecting premium levels, if there is a long history of severe depression or the policyholder has ever been suicidal, there may well be a premium hike or even a refusal to cover.



Many mortgage lenders insist that customers take out life insurance, so if people are being refused cover for severe mental illness, they may face real problems getting a mortgage.



Much of the difficulty lies in knowing what might be considered high risk by the insurer. There is no common policy among insurers as to how serious depression has to be, or how long someone has to suffer with it for an application to be rejected.



"You have to realise that life assurance is not a public utility. It is, in effect, a business deal. The underwriter makes a bet on how long he reckons you are going to live, based on the medical evidence and disclosure. If he doesn't fancy taking on the risk, that is his prerogative," says Harry Katz, from IFA Norwest Consultants.



He adds that being refused by several insurers can actually make the situation even worse. "It acts as a red flag to other insurers who take the easy route and say no thanks."



And those tempted to not declare previous mental-health problems when taking out insurance are best advised not to go down that route.



Non-disclosure of any condition can lead to an insurance being invalidated at claim time as insurers may ask to see a claimant's medical history. Under an agreement among members of the Association of British Insurers (ABI), only serious non-disclosure should lead to a claim being rejected outright. However, insurers are free to reduce payouts if they find that the policyholder has been less than honest, even if the non-disclosure doesn't relate to the claim.



Overall, though, until there is further clarification on how insurers assess policyholders with a history of mental illness it is well worth going to a broker and seeking some independent financial advice. An IFA can speak directly with underwriters and find the best provider to suit your needs. There are also several specialist brokers that may be useful for people with mental-health problems, including Pulse Insurance, The Insurance Surgery and Orbis Insurance, which are all geared towards people who have been refused cover because of a pre-existing medical condition.

Start your day with The Independent, sign up for daily news emails
Voices
There will be a chance to bid for a rare example of the SAS Diary, collated by a former member of the regiment in the aftermath of World War II but only published – in a limited run of just 5,000 – in 2011
charity appealTime is running out to secure your favourite lot as our auction closes at 2pm tomorrow
News
people
Arts and Entertainment
Caroline Flack became the tenth winner of Strictly Come Dancing
tvReview: 'Absolutely phenomenal' Xtra Factor presenter wins Strictly Come Dancing final
Life and Style
A still from the 1939 film version of Margaret Mitchell's 'Gone with the Wind'
life
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
Arts and Entertainment
J Jefferson Farjeon at home in 1953
booksBooksellers say readers are turning away from modern thrillers and back to golden age of crime writing
Sport
Amir Khan is engaged in a broader battle than attempting to win a fight with Floyd Mayweather
boxing Exclusive: Amir Khan reveals plans to travel to Pakistan
News
Stacey Dooley was the only woman to be nominated in last month’s Grierson awards
mediaClare Balding and Davina McCall among those overlooked for Grierson awards
Voices
Joseph Kynaston Reeves arguing with Russell Brand outside the RBS’s London offices on Friday
voicesDJ Taylor: The great tradition of St Paul and Zola reached its nadir with a worker's rant to Russell Brand
News
Twitchers see things differently, depending on their gender
scienceNew study shows that birdwatching men have a lot in common with their feathered friends...
News
i100
News
Xander van der Burgt, at the Royal Botanic Gardens, Kew
scienceA Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
Finacial products from our partners
Property search
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Carlton Senior Appointments: Private Banking Manager - Intl Bank - Los Angeles

    $200 - $350 per annum: Carlton Senior Appointments: Managing Producer – Office...

    Carlton Senior Appointments: San Fran - Investment Advisor – Ind Advisory Firm

    $125 - $225 per annum: Carlton Senior Appointments: San Fran - Investment Advi...

    Sheridan Maine: Commercial Finance Manager

    Up to £70,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Sheridan Maine: Regulatory Reporting Accountant

    Up to £65,000 per annum + benefits: Sheridan Maine: Are you a qualified accoun...

    Day In a Page

    The week Hollywood got scared and had to grow up a bit

    The week Hollywood got scared and had to grow up a bit

    Sony suffered a chorus of disapproval after it withdrew 'The Interview', but it's not too late for it to take a stand, says Joan Smith
    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?

    Panto dames: before and after

    From Widow Twankey to Mother Goose, how do the men who play panto dames get themselves ready for the performance of a lifetime?
    Thirties murder mystery novel is surprise runaway Christmas hit

    Thirties murder mystery novel is surprise runaway Christmas hit

    Booksellers say readers are turning away from dark modern thrillers and back to the golden age of crime writing
    Anne-Marie Huby: 'Charities deserve the best,' says founder of JustGiving

    Anne-Marie Huby: 'Charities deserve the best'

    Ten million of us have used the JustGiving website to donate to good causes. Its co-founder says that being dynamic is as important as being kind
    The botanist who hunts for giant trees at Kew Gardens

    The man who hunts giants

    A Kew Gardens botanist has found 25 new large tree species - and he's sure there are more out there
    The 12 ways of Christmas: Spare a thought for those who will be working to keep others safe during the festive season

    The 12 ways of Christmas

    We speak to a dozen people who will be working to keep others safe, happy and healthy over the holidays
    Birdwatching men have a lot in common with their feathered friends, new study shows

    The male exhibits strange behaviour

    A new study shows that birdwatching men have a lot in common with their feathered friends...
    Diaries of Evelyn Waugh, Virginia Woolf and Noël Coward reveal how they coped with the December blues

    Famous diaries: Christmas week in history

    Noël Coward parties into the night, Alan Clark bemoans the cost of servants, Evelyn Waugh ponders his drinking…
    From noble to narky, the fall of the open letter

    From noble to narky, the fall of the open letter

    The great tradition of St Paul and Zola reached its nadir with a hungry worker's rant to Russell Brand, says DJ Taylor
    A Christmas ghost story by Alison Moore: A prodigal daughter has a breakthrough

    A Christmas ghost story by Alison Moore

    The story was published earlier this month in 'Poor Souls' Light: Seven Curious Tales'
    Marian Keyes: The author on her pre-approved Christmas, true love's parking implications and living in the moment

    Marian Keyes

    The author on her pre-approved Christmas, true love's parking implications and living in the moment
    Bill Granger recipes: Our chef creates an Italian-inspired fish feast for Christmas Eve

    Bill Granger's Christmas Eve fish feast

    Bill's Italian friends introduced him to the Roman Catholic custom of a lavish fish supper on Christmas Eve. Here, he gives the tradition his own spin…
    Liverpool vs Arsenal: Brendan Rodgers is fighting for his reputation

    Rodgers fights for his reputation

    Liverpool manager tries to stay on his feet despite waves of criticism
    Amir Khan: 'The Taliban can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'

    Amir Khan attacks the Taliban

    'They can threaten me but I must speak out... innocent kids, killed over nothing. It’s sick in the mind'
    Michael Calvin: Sepp Blatter is my man of the year in sport. Bring on 2015, quick

    Michael Calvin's Last Word

    Sepp Blatter is my man of the year in sport. Bring on 2015, quick