Mental health: disrupting the vicious circle
Compared with other features of insurance underwriting, mental health is inadequately understood. It is a multifaceted and emotive topic that will require the combination of understanding, experience, and open collaboration to help millions of people. In this blog, Jon Loach sheds a little light on the work of the IFoA’s Mental Health Working Party.
The pandemic has shone a light on the importance of mental health and its impact on society. Additionally, employee well-being is an increasing feature of recruitment discussions and employee motivations. Although society’s understanding of mental health is improving, the insurance industry is lagging behind. For many individual products, underwriting processes – down to the way we ask questions – can seem to penalise people who disclose even mild or long-distant instances of mental health conditions. This is counterproductive as it:
- encourages customers to shield their experience (and data) which would help actuaries improve their pricing models and perhaps initiate pre-emptive action; and
- reinforces the stigma that people, in general, should suppress discussing and disclosing the state of their mental health.
The statistics above show that this is significant issue and as actuaries design and price products that impact many people’s lives, we need to better understand them and their journeys to do this well.
Obvious associations with mental health and insurance might be self-harm, suicide or individual protection claims, but mental health has much wider actuarial implications. For example, in group income protection, work-related stress is a key driver of claims. Insurers have adopted strategies to proactively manage claims, including through the provision of cognitive behavioral therapy (CBT). Even for a product such as travel insurance, people with mental health conditions can find it hard to get coverage due to the potential costs of seeking support overseas.
Overall, the current approach is a vicious circle: it disincentivizes sharing information which would enrich the overall system.
Disrupting the vicious circle
The problem is multi-faceted but at the heart of the solution there are three key features:
- Understanding – If we understand how a wide range of mental health conditions could impact customers’ experience (and interactions with our products and services) we can disrupt the vicious circle and debunk the stigma about talking about this. By embedding a better understanding of mental health throughout our industry (through working party reports, conference presentations, content in educational and CPD material) would like to pave the way for increased actuarial rigour in relation to mental health.
- Experience –the Institute’s motto "E Peritia Ratio" broadly means "reason from experience"; by building the ‘data infrastructure’ needed to bring mental health into mainstream actuarial work we would like to see more data being collected and made available, to allow stronger actuarial science to be applied and to align with the ABI’s stance in its code of conduct.
- Open collaboration: we would like to see more creative ways of aligning the interests of the insurer and the insured. How can we encourage people to disclose their mental health, rather than hide it from us? Beyond CBT for group income protection customers, what can we do to incentivize customers to look after their own mental health? The life and health insurance industry in Australia has been looking at mental health issues closely in recent years (bit.ly/AI_MentalHealth), and in France there is an approach akin to a ‘statute of limitations’, whereby some prior mental health conditions do not need to be disclosed for underwriting purposes.
In the next few months, we intend to share several blogs starting to address some of the many facets of this: e.g. the range of mental health conditions, the actual human experiences, results from the data analysis, the road map of the process in getting to insurance and a toolkit that draws on the experience gleaned from other industries. Every journey of a thousand miles…
Further information on this can be found in the Actuary’s August article by Lisa Balboa and Chris Knight – Encouraging openness on mental health | The Actuary