19 July 2013

Depression and insurance cover

What does the increasing incidence of depression mean for someone who wants to buy life cover?

Depression is one of the most commonly diagnosed psychiatric disorders. According to Department of Health statistics, one in four South Africans has or is affected by mental illness, but only 10-15% get help. Research also shows that depression is expected to become the second leading cause of disability worldwide, and the leading cause in high-income nations.

What does the increasing incidence of depression mean for someone who wants to buy life cover?

Insurers are increasingly concerned about depression when underwriting a policy. Dalene Allen, co-founder and underwriting director at Altrisk says insuring someone who suffers from depression presents an increased risk to an insurer, but this doesn’t mean that you can’t get cover.

It is important when talking to your financial advisor that you disclose information if you are, or have been previously diagnosed with depression.     

“Discussing details about the condition with your financial advisor may be awkward, but attempting to hide depression can be damaging at claims stage,” Dalene says. “This is why it is essential to inform your advisor and provide full disclosure for the insurer to make an accurate assessment.”

If you have sought treatment and managed your condition for a number of years, a previous diagnosis may be less of a concern to an underwriter, particularly cases such as situational or reactive depression. The nature of the depression will affect underwriting. Your depression may have been brought on by bereavement, or it could have been post-natal depression.

“Altrisk does not load or exclude on the basis of reactive depression provided it has been successfully treated,” explains Dalene.

Types of depression

The South African Depression and Anxiety Group says that 20% of people will develop a depressive disorder during the course of their lives. Only one third of those will receive treatment, despite its 80% success rate in alleviating symptoms. This is, in part, due to the fact that many consider depression a simple case of the ‘blues’. But it is a serious illness that can interfere with daily functioning and adversely affect your lifestyle.

This is why Mental Health Awareness Month in July has an important task to address stigma associated with mental illness by raising awareness about mental health in South African communities.

The depressive mood disorders most often encountered in insurance are:

  • Reactive depression/adjustment disorder: a temporary situational depression caused by a specific event, such as having a baby (post-natal depression), or bereavement.
  • Major Mood Disorder (MDD): a psychiatric disorder characterised by a depressed mood or loss of energy and interest in activities; fatigue, difficulty concentrating, agitation, appetite changes and sleep disturbances. Also referred to as major depression, depression, dysthymia (a chronic state of depression), or affective disorder.
  • Bipolar affective disorder/manic depression: the presence of depressive moods or episodes, alternating with elevated, euphoric, or irritable moods classified as hypomania or mania.
How do underwriters approach depression?

If you have been diagnosed with a depressive disorder, or received treatment for depression, the underwriter will want to know the following:

  • Date of diagnosis
  • Method of treatment 
  • Past methods of treatment
  • Doctor’s details
  • Symptoms and dates of last symptoms
  • Details of any previous hospitalisations 
  • Details of any suicide attempts
  • Specifics of time taken off work as a result of the condition
Disclosure is vital

It is important to disclose a previous depression diagnosis – this is vital when underwriting a policy because insurers are concerned about the risk of fraudulent claims.

“Regardless of your age or health status, you will need to provide information on your mental health and whether you have been diagnosed with or treated for depression,” Dalene says.
Depression also has a direct impact on a sufferer’s risk of premature death or disability due to suicide or failed suicide attempts. There is also a greater risk of abuse of medication, drugs or alcohol, which increases the risk of a serious accident.

Clients have a legal duty to disclose complete and accurate information because it affects the risk assessment, the premiums charged and the terms and conditions of the final contract.  
How do insurers rate depression?
Based on the information provided, insurers may place a permanent suicide exclusion on life cover or apply a mortality loading.

Dalene says that brokers and clients often grapple with an insurer’s decision to exclude depression on disability and income benefits, as the exclusion clause often includes associated conditions such as chronic fatigue and fibromyalgia (a disorder that causes muscle pain and fatigue).

“These conditions are associated with depression and can render claimants unable to work for periods of time, with a significant impact on income benefit claims,” explains Dalene.

She adds that it is important to deal with an insurer that has a track record and reputation for dealing with challenging cases and finding solutions for clients with pre-existing conditions that may otherwise preclude them from getting cover.

Press release, Altrisk

(Picture: depressed woman from Shutterstock)


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