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Disclosure of mental illness is often met with ignorance, unfounded fear, unfair stereotyping and prejudice, which explains why many people who suffer from disorders such as depression try to keep them hidden. However, when it comes to life insurance policies, full disclosure is vital because non-disclosure and misrepresentation lead to rejected claims.
According to the South African Journal of Psychiatry (SAJP), psychiatric disorders have overtaken musculoskeletal conditions, particularly lower back pain, as the leading cause of disability. Thus, insuring a client who suffers from depression represents an increased risk to an insurer, particularly with regard to disability benefit claims.
Peter Strasheim, attorney and disability specialist at DLM Labour & HR Management Consulting, says that disability insurance is the most complex area of insurance law. The related aspects of underwriting, claims admin, claim assessment, product design and broker education are equally complex.
He continues: "The key issues in individual life and mental health are probably disclosure, benefit parity, exclusions, claim assessment conflicts of interest and correctness of the psychiatric guideline. Brokers need to ensure that they are able to explain these things to their clients who may suffer mental health issues."
For brokers, the major issue in 2014 will soon become the Financial Services Board's Treating Customers Fairly (TCF) regime, cautions Strasheim. "Brokers will increasingly be at risk, and must look to the product provider to ensure that the full set of guidelines is given to them to reduce their risk exposure."
According to law, one does not have to disclose a mental illness to an employer; however, there is a legal obligation to disclose complete and accurate information when it comes to a life insurance policy. This is because it affects the risk assessment, the premiums charged and the terms and conditions of the final contract.
Disclosure of depression does not mean that the client will not get cover. In fact, there is a very good chance they will be able to get cover,
but this may be loaded or have an exclusion explains Grant Hanafay, head of underwriting N at Altrisk. 4.; "It is vital, as with any other medical condition,V, to fully disclose this to the insurer and give 1,0 as much detail as possible. In this way, once \the case has been underwriifen and accepted by the insurer the client will have total peace of mind that they are fully covered and won't have to worry when making a claim. The type of psychiatric disorder, the degree of control and type of treatments as well as the dates of first and last symptoms play a major part in the decision the underwriter makes on the risk," adds Hanafay.
The imOactance of full disclosure is constantly reiterated. While depressed clients may shy away from discussing mental illness becquse of the stigma, they should be made aware that limited disclosure could mean claims being rejected at a later stage. Equally, brokers and advisers must be aware of the product providers' specificities.
Needs-matched insurer BrightRock explains that if an applicant has been symptom-free and off treatment for more than two years with no history of hospitalisation, it's unlikely that a loading or exclusion will be applied. If it's been less than two years, mental health conditions may be excluded from the client's cover for their income protection needs. Depending on the severity, an application might be declined, but the reports from the doctor will assist in giving the best terms possible. If the client recovers and asks BrightRock to reconsider the exclusion, it will be considered once 12 months have elapsed since the last date of treatment.
Jaco Gouws, risk marketing actuary at Old Mutual, notes that based on adequately disclosed information, the company can accurately assess whether there is a need to increase the premium to accommodate the additional health risk. The increase will vary depending on the severity of the condition and few cases may be declined, he adds.
It is unlikely that someone applying for cover who is currently suffering from a depressive disorder will be offered standard cover for a lump sum or income disability product. The majority of these cases will be offered cover but with an exclusion for psychiatric conditions. The reason for this is the high expectation of a claim from this group of disorders, explains Gouws.
Beyond the concern regarding disability related to depression, in some instances clients who suffer from depression also represent an increased risk on life cover, especially with regard to accidental deaths such as motor vehicle accidents, notes Altrisk.
Case study 1
Insurers are concerned about the number of fraudulent claims, which is why they will request as much information as possible on previous depression diagnosis because this is vital when underwriting.
Altrisk indicates that research and experience shows that people suffering from depression are a far higher risk with regard to suicide and misuse of drugs (both prescription and recreational), alcohol abuse and accidents. Unfortunately this is the underwriting aspect which is not an exact science, and where the risk is difficult to assess. Once again, underwriters can assess a case only from the information presented to them as they do not have first-hand knowledge of the client. Providing accurate and complete information is therefore essential to avoid subsequent difficulties at claims stage.
Case studies are a clear way to show the risks of non-disclosure. Old Mutual shared two examples with RISKSA to highlight where claims related to depression might be rejected.
One in three South Africans will develop or have a mental illness. The World Health Organisation predicts that depression will be the second leading cause of disability in the world by 2030. Anxiety disorders, mood disorders and substance use disorders are common among all race groups and across all the provinces in South Africa, while treatment rates are low (about 15.4 per cent) across all disorders. Cases of bipolar disorder have increased dramatically (228.6 per cent between 2006 and 2011). It is now the sixth most prevalent chronic condition across medical schemes. A possible contributing factor could be changes in scheme funding structures — where bipolar is covered as a prescribed minimum benefit, covering treatment in full — whereas depression is not.
Gender: Female Age: 39 Occupation: Admin supervisor Application: 2009
Applied for life cover, lump sum disability benefit and income disability benefit.
Disclosure of medical history: Smoker. High blood pressure since 2008 but taking medication daily. Depression episode in 2005 due to a death in the family. No problems since then other medical requirements were within the normal limits.
Due to the length of time since the indicated recovery from the depression episode, the benefits were issued at standard rates with no exclusions.
Claim Submitted November 2012 under the disability benefits. Reason: Client boarded due to bipolar mood disorder type 2. Medical information received with the claim: Date of diagnosis for bipolar mood disorder type 2 was in 2006. Client has been on chronic medication for bipolar mood disorder since 2006. Client attempted suicide in 2008 after stopping medication. She was hospitalised for four weeks to recover.
Claim decision The client's claim was declined and the contract was cancelled due to non-disclosure of the bipolar mood disorder and misrepresentation of the severity of the condition. Questions on the application form clearly give the clients the opportunity to fully disclose the extent and treatment of a condition. The impression given by the client on the initial application was that the diagnosis was depression for a one-off traumatic event that was fully resolved.
Case Gender: Male Age: 45 Occupation: Franchise manager Application: 2010
Applied for life cover and temporary disability income benefit.
Disclosure of medical history: Non-smoker. Asthma but uses medication daily. Fractured spine due to a fall as a teenager but no problems experienced since then.Stress experienced during early 20s at university due to pressure. All other medical requirements were within the normal limits.
The benefits were issued at standard rates with no exclusions.
Claim Submitted 2012 under the temporary income disability benefit. Reason: Booked off work for three months due to major depression.
Medical information received with the claim: Between 2003 and 2010, the client was treated for depressive episodes with no hospitalisation or suicide attempts.
Claim decision The client's claim was declined because had there been disclosure of the depression on the initial application, a psychiatric exclusion would have been applied to the disability benefit.
Material non-disclosure could result in the cancellation of the disability benefits; however, in some instances, the insurance company can make a counter offer to rather review the terms of the benefits and include a psychiatric exclusion.
Gouws gives his top tips for brokers, which will assist underwriters to make fair and accurate decisions: Get and give as much detail about the condition as possible, especially when applying for disability cover. Always give full details of the client's history, diagnosis and all medication being used currently or in the past if it has changed significantly in the recent past. From an underwriting perspective, the diagnosis of depression is much more serious than an adjustment disorder or dysthymia, both of which are often mistakenly referred to as depression. Be specific about the client's condition as you don't want to experience problems at claims stage due to nondisclosure. Confirm that the condition is depression and ask the client to get this confirmed by their treating doctor. If in doubt about whether to include certain information, rather give as much information as possible. Stating that the client has depression when in fact they are being treated for another mental illness could lead to problems at claim stage due to non-disclosure. Depression can be part of many psychiatric illnesses, or something that happens independently of other conditions. The better the client's condition is controlled, the better the underwriting outcome is likely to be.
Suicide in South Africa
There are 23 completed suicides in S.. every day. There are 230 attempted suicides -v. 24 hours in SA. Males are five times more Ii commit suicide than wo,orr because they use morita ' methods of taking tiff i's'. A standard suicide' exclusion of two years applies to all life cover products across the industry in South Africa. Source: Professor Schlebusch, University of KwoZulu-blofol
Understanding the differences Altrisk outlines that the depressive mood disorders most often encountered in insurance are: Reactive depression/adjustment disorder: a temporary situational depression caused by a specific event, such as having a baby (post-natal depression) or bereavement. Major mood disorder (MDD): a psychiatric disorder characterised by a depressed mood or loss of energy and interest in activities, fatigue, difficulty concentrating, agitation, appetite changes and sleep disturbances. Also referred to as major depression, depression, dysthymia (a chronic state of depression), dysthymia or affective disorder. Bipolar affective disorder/manic depression: the presence of depressive moods or episodes, alternating with elevated, euphoric or irritable moods classified as hypomania or mania.
Fortner assisting your clients
In addition to ensuring that a client gets the best cover possible, there are also other ways that brokers an help clients who may be battling depression.
Cassey Chambers, operations director the South African Depression and Anxiety Group (SADAG), suggests that if a client with depression is not well and is struggling to cope, advisers are welcome to refer them to SADAG for further support and help.
"Ideally, we would recommend that if a patient discloses that they have depression, the broker sends them an information pack with our details and a wealth of useful advice and knowledge.
Keeping a patient well with therapy, medication and support is the best treatment model for anyone living with a mental illness." This could also help to reduce the risks of compounded effects of depression.
SADAG has 15 helplines for different disorders, and takes over 400 calls a day. The 100 volunteer counsellors ensure that the helplines are open 365 days a year, and the phones are manned from 08h00 to 20h00.