Getting a strong case of premium blues

Mothers suffering from postnatal depression can find themselves being charged higher premiums for life insurance or being refused cover altogether.

However, local insurers say their hands are tied. Policy is guided by giant international reinsurers whose pricing is based on international statistics on the risks of insuring someone suffering from "event-triggered" depression such as postnatal depression.

The Sunday Star-Times was asked to challenge insurers on their treatment of women who have suffered postnatal depression because one reader said loading the premium or refusing to provide cover makes it less likely sufferers will seek treatment.

Naomi Ballantyne, managing director of Partners Life, said a bout of postnatal depression was a possible indicator of future depression. A life insurer will often require a higher premium to compensate for the extra risk of offering insurance.

Refusing cover altogether, Ballantyne said, would usually only happen in severe cases where suicidal thoughts were involved, though on all new life insurance policies there is a 13-month suicide exclusion already in place. Sometimes an insurer might refuse cover temporarily, offering to reconsider after a period of time, should the sufferer choose to reapply.

David Drillien, general manager for marketing and product for Sovereign, the country's biggest life insurer, said it is unusual to not be able to offer any cover.

"If a person with a history of postnatal depression applied for life insurance a number of factors are taken into consideration such as: Was the diagnosis recent? Is there any previous history of mental health issues? Or is it the first time? What is the applicant's overall situation?"

"There is no black-and-white 'one answer fits all' approach when dealing with any kind of depression. Generally . . . if we were unable to accurately assess the risk, we may choose to defer the application and ask the person to come back again in a few months when the situation may be clearer."

Mark Ennis, AMP's general manager of wealth protection products paints a similar picture.

"The underwriting assessments reflect the severity of the depression," he said. "Where the symptoms are mild, cover would usually be available subject to a small loading if symptoms are recent, and on standard terms once the individual has been symptom free for a year."

Where symptoms are more severe, for example where there has been a history of recent in-patient treatment or suicide attempts, then the cover may be deferred for 12 months after which a more significant loading would generally be applied.

Drillien said suicide is not the only risk for a life insurer.

"Evidence shows that depressed people have lower overall general wellbeing than non-depressed people; for example, they may not sleep as well, they may drink or smoke more and exercise less, all factors that may contribute to a lower life expectancy."

Ennis said the impact of postnatal depression on mortality is similar to that for other forms of depression, however, there is a risk of recurrence, particularly with subsequent pregnancies.

"In some cases where postnatal depression is more serious it is related to a longer-term psychiatric condition," he said.

These longer-term conditions carry the likelihood of earlier death, for example, increased likelihood of a refusal to follow medical treatment, a less healthy lifestyle, and possible side effects of some medications.

Even if there is a heightened risk of suicide, an insurer may offer cover by permanently excluding suicide from any claim.

It's not something insurers like to do. It is not always easy to tell a suicide from an accident at claims time.

Ballantyne said that though increased premiums may seem tough, policyholders are not stuck with them for good, and they should either challenge their insurer to drop premiums when they are clear of the illness, or expect their insurance brokers to.

How good are brokers at making sure that happens?

"Some are," she said. "Some aren't."

There is no set time limit for an insurer dropping premiums back to a normal level.

"It all depends on each individual case. If it is a mild case it could be when the person is feeling better," Drillien said.

The Human Rights Act dictates that insurers are not allowed to discriminate between people with mental illnesses other than on the basis of actuarial statistics they can defend in court. However, as New Zealand is small, and our life insurers are all backed by giant international reinsurers, it is international insurance statistics that drive premium loadings and refusals here, though there can be a local overlay.

Drillien said reinsurers provide evidence-backed underwriting guidelines that help determine decisions. "We also take into account our own claims experience and opinions from medical professionals."

One way to avoid the loadings is simply to get life insurance before having a child. Once a person is covered, premiums are not increased when they are struck down by illness.

Insurance and mental illness

Are people who have suffered or are suffering from mental illness getting a fair deal from financial services providers? Many think not, according to a paper written for the Mental Health Foundation in late 2009. It reported:

In a British survey of 778 people with a mental illness diagnosis, 25 per cent of respondents had been turned down by insurance and financial companies.

In an Australian survey of people with a diagnosis of mental illness, 82 per cent reported being declined, particularly for income replacement insurance.

In a New Zealand survey of 785 respondents with mental illness in 2004, 20 per cent said they had been discriminated against by financial institutions, including being declined life insurance, income replacement insurance and mortgage insurance. Those who weren't declined faced exclusion clauses, higher premiums and long stand-down periods before they could make a claim.

Sunday Star Times