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Superannuation: Insurers mindful of trends

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Cite as: September 2015 89 (9) LIJ, p.78

Increases in mental illness claims are driving change in the superannuation and insurance industries.

Snapshot
  • The impact of mental illness claims on super funds and insurers was highlighted in the SuperMIND Project research (www.superfriend. com.au/supporters/ research/ supermind)
  • legalsuper and SANE Australia are collaborating with employers to combat mental illness in the workplace
  • Substantial increases in mental health related insurance claims have raised questions about the basis on which superannuation funds and their insurers can legally discriminate against people with a mental health condition.

    The answer in Victoria can be found in the Equal Opportunity Act 2010 (Vic) and the Disability Discrimination Act 1992 (Cth). Based on this legislation, superannuation funds and their insurers are required to assess all requests for insurance (and related types of cover such as income protection) and claims (including, for example, early access to superannuation) in exactly the same way, irrespective of whether the person has or develops a physical or psychological condition.

    Such requests can be either rejected, accepted, accepted with exclusions, or accepted with increased premiums.

    Where people who have or develop a mental health condition feel their requests for insurance and related types of cover or their claims have been treated unfairly, they have the same recourse as people with a physical condition. These include making a complaint to the superannuation fund or insurer, the Financial Ombudsman Service or the Superannuation Complaints Tribunal.

    Despite legislation and complaints avenues, there have been concerns that insurers and/or super funds have unfairly discriminated against people with mental illness.

    In 2013, beyondblue and the Mental Health Council of Australia reported that they “regularly hear stories from people that suggest insurance companies are not using the right data or considering the full range of relevant factors in dealing with people who disclose an experience with mental illness.”1

    The impact of mental illness claims on superannuation funds and insurers was highlighted in the SuperMIND Project research (www.superfriend.com.au/supporters/research/supermind) released last year by SuperFriend, an association supported by some industry super funds.

    The research collected data from 13 “all profit to member” super funds and six group insurers from 2007 to 2011, covering 4.1 million members. It showed that over that period claims related to suicide cost the super funds’ insurers more than $200 million, with an average cost per claim of $120,410. Mental illness-related total and permanent disability (TPD) claims cost $147.9 million at an average cost per claim of $82,960.

    SuperMIND also found that claims attributed to mental illness and suicide represented approximately 10 per cent of all insured claims within superannuation. In some age groups this was even higher, with suicide accounting for nearly 26 per cent of all male death claims in the 25-34 age group and mental illness accounting for 25 per cent of all female TPD claims in the same age group.

    While the research will lead to insurers changing the way they price insurance and other policies to offset the surge in claims, it is also resulting in superannuation funds and insurers seeking to work collaboratively with employers to combat mental illness in the workplace.

    An example of this is the recent partnership forged between legalsuper and national mental health charity SANE Australia.

    Under the partnership, announced in March this year, legalsuper and SANE Australia will develop a series of workplace programs offering support, education, training and online resources aimed at creating a better understanding of mental illness and breaking down the stigma surrounding mental illness in the workplace.

    Recent research commissioned by legalsuper found that 90 per cent of its members saw moderate, high or very high value from mental health initiatives being delivered by SANE Australia on behalf of legalsuper.

    This focus on education and support follows the release by the Financial Services Council (FSC) in May 2014 of its FSC Standard No 21 – Mental Health Education Program and Training (http://tinyurl.com/qya49xf), which emphasises the need for all staff of insurance companies to receive appropriate training in mental health awareness.

    Andrew Proebstl is chief executive of legalsuper, Australia’s industry super fund for the legal community. He can be contacted on ph 03 9602 0101 or via aproebstl@legalsuper.com.au. Speak up and take action to reduce discrimination in insurance (August 2013) http://tinyurl.com/o5p6rgq.

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