The disability insurance industry is making progress on mental health support. But it faces challenges with diagnostic inconsistency and claims management that require standardised approaches and greater consumer input.
At the beginning of 2025, the IFoA Mental Health Working Party’s new disability workstream set out to review the insurance industry’s collective offerings on mental health. We aimed to compile a ‘best of the best’ guide to insightful, innovative, and practical resources for mental health as it relates to the insurance industry. Particularly disability insurance. We also looked to identify gaps and uncover any issues the working group could focus on in 2025.
Discussions around mental health in insurance are not new. But we found limited material specifically addressing income protection and disability insurance. To fill this gap, we had informal discussions with primary insurers, reinsurers and other industry working groups to better understand emerging challenges and key industry concerns.
In 2020 the ABI introduced mental health and insurance standards. Initially these were to improve access to insurance products for those with mental health concerns. It then extended to include training via RightSteps. Good progress was reported in its 2023 review. More recently, the ABI emphasised the ongoing need for all ABI members to fully integrate Consumer Duty requirements. These stress the fair treatment of vulnerable customers.
Beyond ABI standards, reinsurers have worked to promote consistency through mental health risk calculators for underwriting and claims. Many have developed training and tools to better equip frontline insurance professionals in handling mental health-related cases.
We’re seeing the emergence of:
These two developments add to the evidence of mental health requiring a somewhat unique approach and special attention.
2024 saw growing awareness of the relationship between mental health and workplace absenteeism. In the UK, AXA’s Mind Health Study highlighted the immense financial impact of poor workplace mental health. The study estimated a cost of £102 billion to the UK economy in 2023. Vitality’s survey on Gen Z employees found that mental health struggles lead to the equivalent of one lost workday per week per employee. That amounts to losing 54 productive days a year. This pattern is reflected globally and remains a pressing concern in regions where disability insurance is commonplace.
Although not targeted at the disability insurance sector, these findings are particularly relevant to such providers, given the direct link between mental health and work capacity.
Mental health is a leading cause of income protection claims. According to the ABI, musculoskeletal issues (for example neck and back pain) were the most common reason for individual income protection claims in the UK in 2023. But the ABI says mental illness claims accounted for the highest total payout at £37 million.
It’s well documented that individuals with mental health conditions often receive different diagnoses depending on the doctor or psychiatrist assessing them. Even when they use the same diagnostic manual. This diagnostic inconsistency, coupled with the subjective reporting of symptoms and limitations, presents significant challenges for both insurers and claimants. As a result, claims management strategies remain a key priority for mental health-related disability insurance claims. Early intervention and adaptation of the biopsychosocial model are common trends in conversations around best practices.
In terms of addressing underwriting practices, the IFoA Mental Health Working Party is soon publishing an underwriting survey . It gives a useful overview of how the market treats mental health histories when considering terms for disability insurance.
Encouragingly, the survey demonstrates that it’s possible for customers with a wide range of mental health conditions, of all levels of severity, to obtain disability insurance. But as expected, there are higher decline rates for more severe conditions.
The survey also demonstrates that there is inconsistency in terms of responding insurers’ approaches to which mental health conditions are specifically asked about on applications. For example, while all respondents ask about depression specifically, we plan to engage with insurers to understand in more detail how severe conditions, like schizophrenia or personality disorders, are identified at underwriting stage. (For example, to understand if some insurers rely on more overarching questions about hospital treatment for mental health conditions to capture these histories).
It is generally accepted in the underwriting space that not every condition of concern can be called out specifically on application forms without making them too unwieldy. But anecdotal feedback suggests that misrepresentation in terms of mental health and disability claims is an emerging issue. It remains to be seen whether this is due to customers withholding information or because of potential gaps in application forms. It’s something the workstream hopes to shed some light on in the course of its work.
A broader issue is the lack of standardised approaches. While some insurers have developed underwriting tools, there is no unified framework across the industry to ensure consistency and fairness in mental health-related claims payment.
There is a wealth of material and thought leadership available to address mental health and insurance in a general sense. But there is more limited insight from those most impacted, namely the applicants and the claimants.
If the industry aims to truly understand the consumer journey in accessing insurance or benefits at the claim stage in relation to mental health, we should be asking those directly impacted.
Recognising these gaps, the IFoA is committed to taking action in 2025 and beyond. Our disability workstream will focus on:
We invite industry stakeholders to work with us on these efforts. If you are working on solutions or have insights to share, let’s start the conversation. You can get in touch with us at policy@actuaries.org.uk.
