Call for Fairer Mental Health Assessment in Life Insurance Underwriting

According to the Life CCC, while certain insurers are meeting the Life Insurance Code of Practice by considering individual situations, others rely heavily on blanket exclusions. This practice not only limits access to life insurance for many Australians but also perpetuates stigma surrounding mental health conditions.

Jan McClelland, Chair of the Life CCC, emphasised the importance of adhering to the Code's requirements, stating that insurers must assess each customer fairly, based on their own circumstances. She noted that mental health conditions affect millions of Australians, and it's crucial for insurers to move away from one-size-fits-all exclusions.

The report also highlights that mental health claims have become a leading cause of life insurance payouts, accounting for nearly one-third of all total and permanent disability claims paid in 2024. This underscores the need for insurers to balance fair underwriting practices with the sustainability of their products.

In response to the findings, the Life CCC plans to monitor insurer compliance closely and may take further action if non-compliance persists. Insurers are encouraged to review and update their underwriting guidelines to ensure they align with the Code's standards and promote equitable treatment of applicants with mental health histories.

For consumers, this development serves as a reminder to be transparent about their mental health when applying for life insurance and to seek policies from insurers committed to fair and individualised assessments.