Consumer NZ’s recent investigation tested 14 insurance companies and found the insurance sector wanting, saying results revealed “systematic issues” and a “disconnect” between the prevalence of mental health concerns in New Zealand and the way insurers factored – or failed to factor – mental health into their policies.
Consumer NZ had three shoppers call each of the 14 companies for cover for health, life, and income insurance. It found that shoppers who sought help for their mental health were regarded as high-risk and resulted in cover being excluded – a move the group deemed unfair.
"Many New Zealanders are unaware that what they disclose at the GP's office could have ramifications for them when it comes to insurance cover,” said lead investigative writer Cherie Lacey. "This is problematic because people should be free to discuss mental health concerns without fear of repercussions."
Most of Consumer NZ’s shoppers were offered insurance and told they would need to complete extra paperwork for an underwriter to assess whether any exclusion applied.
Making an assessment allows an insurer to obtain a customer's full medical history, including consultation notes from a GP, to determine the risk level of a potential claim.
Consumer NZ took issue with insurers making decisions based on medical notes without understanding the circumstances in which someone received mental health support or clarifying their diagnosis. It also found inconsistency in the approach taken by insurers, with some adding exclusions or limiting cover while others accepted the customer as is.
"Confusion reigned when talking to the insurance companies," Lacey said. "Upon follow-up, several told us that the initial advice the financial adviser gave was incorrect. Some provided mental health cover, while others couldn't give a clear answer on whether there would be cover without a full underwriting assessment."
Consumer NZ recognized that exclusions were standard industry practices but believed how these applied to mental health needed to change.
"There's a disconnect between how the public views mental health and how insurance companies factor that into their policies,” Lacey said. “We believe that mental health exclusions point to a systemic failure in the insurance market…. We think the industry has a lot of catching up to do in terms of their definitions of mental health and consistency in their approach and communication of mental health exclusions."
In New Zealand, one in five people experience challenges with mental health every year, the NZ Herald reported.
But the Financial Services Council has hit back at the criticism. In a statement to the NZ Herald, the FSC said it did not believe the investigation fairly represented the industry's approach to mental health or considered the progress and wellness initiatives made by the sector in recent years.
"The investigation placed a large emphasis on a 'mystery' shop of financial advisers and did not actually test the providers' products and go through their underwriting process,” the FSC said in a statement. "The role of underwriting in New Zealand is that you end up with the right product for your circumstances. Insurance is a highly individualised product and it appears that assumptions were made about products and the underwriting process.”
The FSC said underwriting was vital to the insurance application process and aimed to understand different mental health–related risks and manage customers with different risk profiles fairly.
It pointed out that in response to improved awareness of mental health issues, many insurers had made changes to their underwriting process in recent years “to discern between mental ill health or distress at varying degrees of severity, management, and recurrence”.
"Underwriting questions and guidelines have generally become more granular to enable insurers to better understand what type of mental health issue the customer is/has experienced and its relative severity,” the FSC said.
