The impact of the Covid-19 pandemic has landed differently for group insurers, according to Nick Kirwan, life insurance senior policy manager at the Financial Services Council.
Suspension of elective surgeries has reduced health insurance claims and fewer cars on the road has prompted falls in accident claims for car insurers, but life insurers have seen claims rise, he said.
“There’s potential for more claims in mental health but the main impact in the short term is people taking claims for income protection, possibly for completely other reasons, but find it’s harder go get back to work when there’s no work to get back to,’’ Kirwan said.
“The important thing is that people are being supported.’’
Kirwan will speak on changes to insurance provisions in superannuation such as Protect Your Super laws and new ASIC guidelines on Total and Permanent Disability in a panel discussion at Investment Magazine’s Group Insurance Summit on August 18, get your digital access here.
Kirwin noted that legislation and the pandemic were “one-offs” which had pushed premiums higher for life insurers.
The Putting Members Interest First laws which saw under 25s move out of the risk pool, was a one-off event and would not have an ongoing impact on people’s premiums, he said.
But data from the Financial Services Council project with KPMG showed a trend in rising mental health claims with life insurers paying out $750 million in mental health claims to almost 7000 Australians in calendar 2019. This was the highest number of claims in the TPD area with 24 per cent of men and 27 per cent of women making a claim.
It follows a 53 per cent rise in mental health-related disability income payouts worth $4.9 billion in the five years to 2018.
“I think the industry’s expectation is there will be claims coming [on mental health as a result of the pandemic] through we don’t expect to see them now,’’ he said.
“Mental health claims take longer for people to report than other claims.”
Kirwan was heartened by Superannuation, Financial Services and Financial Technology Assistant Minister Jane Hume’s support for reforms at a meeting of life insurers in late July which could allow life insurers to pay for mental health treatment as part of claim settlements.
“We’ve been campaigning for that for quite some time it’s something where everybody wins,’’ Kirwan said.
He said the move would require changes to law but could see life insurers footing the bill for mental health treatment once the limit of allowable treatments was reached by health insurance.
If it cost $5000 in treatments and allowed the claimant to get back to work sooner, it’s better than paying an income protection claim for longer, he said.
“There’s very little doubt that the person would win; the life insurer wins; everybody else in the risk pool wins; the taxpayer wins as people don’t rely on welfare assistance. It’s difficult to think of anybody who loses out,’’ Kirwan said.
“I know, from my experiences of working in the UK market, all insurers do that.(UK insurer) Aviva puts their private medical insurance and IP claims teams together.
“What insurers would look to do is have an option for people falling through the gaps and everybody accepts is a good outcome to get back to work.”
While reform might be slow, it was worth considering, he said.