In Australia there are concerns that some insurers are not following the rules when it comes to mental health – placing blanket exclusions on clients despite industry obligations to assess applicants individually.
The Life Insurance Code Compliance Committee (LCCC) chair Jan McClelland said:“Insurers that still use blanket exclusions must improve to meet the code’s standards.”
Research undertaken by the LCCC found that most of the underwriting guidelines it reviewed relied solely on exclusions, rather than exploring alternative risk controls such as loadings, limits or caps.
The committee said this practice restricts access to cover, risks reinforcing stigma, and could undermine public trust in life insurance.
The committee also highlighted a lack of reliable data on mental health disclosures and their outcomes, limiting insurers’ ability to identify systemic issues and improve practices.
The LCCC suggests insurers systematically collect and analyse data on how mental health disclosures are handled during underwriting. This includes:
- The number of applicants who disclose a mental health condition
- Underwriting outcomes (standard terms, alternative terms, and declines)
- Risk measures they apply (exclusions, caps, limits, higher premiums)
- Referrals for expert advice
- Complaints and whether decisions were reviewed or overturned
“We understand that not everyone who discloses a mental health condition, past or present, will be eligible for cover,” McClelland said.
“The increasing prevalence of mental health conditions only makes it more important for insurers to get underwriting right with an approach that considers individual circumstances properly.”
Click here to download the full report.