Can smarter product design lead to better mental health outcomes?
The $2.8 trillion superannuation sector certainly has power to effect large-scale change. Take the sector’s efforts to address underinsurance; the past decade has seen default cover improvements and better outcomes particularly for members on claim.
Further, we know more than 90% of claims are paid, equating to around $7 billion in benefits paid each year. Many receiving these benefits would have been in financial distress if this cover was not linked to their super.
However, cover does come at a cost. Not only through the premiums paid (roughly $9 billion per annum) but also the opportunity cost that comes through the reduction in a member’s retirement savings. Understandably, questions have been raised about whether the cover offered—particularly default cover provided on an opt-out basis—is appropriate and aligned with community expectations?
Many aspects of insurance within super have been scrutinised, from policy terms and conditions to premium rates, claims and underwriting practices. Public interest has been increasingly intense, fuelled by a parliamentary joint commission, a royal commission and new regulations and reforms.
When designing insurance products in conjunction with fund trustees, the role of the insurer is not easy or simple. The balance between affordability and accessibility of benefits is difficult and will largely depend on the appetite of the trustee and their membership demographics.
Policies with high barriers of entry and strong benefit accessibility restrictions mean lower premiums, but the consequence is lower claims payable and member complaints and criticisms. Policies with easily accessible benefits pay more claims but come with higher premiums which risk eroding super account balances.
We need to improve the foundations for there to be sustainable change. This includes product design and policy terms and conditions that more effectively accommodate psychological conditions.
THE SLEEPING GIANT
How do our current policies respond to mental health claims? And in an ideal world, where we take premiums out of the equation, could we do more as an industry to support our members?
There’s a great opportunity to realise both economic benefits for insurers, and health benefits for members through taking an early intervention approach to claims related to mental ill-health.
There have been recent discussions within the industry about an insurer’s ability to take a more proactive role in recovery by paying for treatment through the private medical sector. Until now, insurers have been prohibited from doing so, but considering a relaxation in this legislation, when all parties stand to benefit, could be a positive move.
There is a sound argument that insurers would be acting in the member’s best interests by paying for treatment and helping them return to work earlier, rather than sit on a public waiting list. Long-term periods on claim often mean people lose the connectedness that comes from working, increasing the risk of secondary psychological conditions.
INCOME PROTECTION
Income protection is often overlooked by members. Despite the importance of having salary continuance in place, few funds offer this cover automatically on an opt-out basis. Where it is offered under a default arrangement, it generally comes with a 90-day waiting period, being more cost-effective than 30 or 60-day waiting period. For the person on claim, it seems counter-productive to provide cover with inbuilt delays, which is not ideal from a mental health and wellbeing perspective.
While many insurers have invested heavily in rehabilitation resources and can provide genuine support even before members are eligible to receive a benefit (i.e. during the waiting period) there’s a reliance on members being aware of how to access this support, including being aware that claims can be lodged within that waiting period.
To achieve the best possible outcomes, it is important that employers, super funds and their insurers are proactively communicating and working together.
Imagine the difference it would make to the mental health and wellbeing of a member who checks their email a few days after a serious accident and sees a message from their employer stating that sick leave entitlements have commenced and, further to that, their super fund and insurer have been engaged and have conditionally approved income protection benefits which will commence in a few weeks’ time.
Much of this has more to do with communication rather than product design, but there are ways in which early notification can be incentivised which may help facilitate this exchange of information.
Insurers could offer a reduced waiting period where a claim has been lodged immediately after the disability commences. In some instances, a claim may be avoided completely by being able to implement rehabilitation strategies from an earlier date.
TPD
Total and permanent disablement (TPD) pays a lump sum benefit to a member who is unlikely or unable to ever work again. Insurers can assess a member’s eligibility in a range of ways, but most common is the member’s capacity to work based on their education, training and experience (ETE).
In many instances, only members employed immediately prior to disablement can access this definition. In other instances, benefits will only be paid if the member satisfies an alternative definition contained within the policy such as specific loss (loss of limb and/or eyesight), activities of daily living (ADL) or activities of daily work (ADW). This is where members with a mental illness can fall through the cracks.
A member with severe depression may have days where they are unable to get out of bed and get dressed, but they may be deemed physically ‘capable’ of doing so and therefore would not be considered under the ADL definition. If the member’s primary reason for being totally disabled is mental illness and the unlikely ETE definition does not explicitly cater for their presentation, then it is highly unlikely they will be deemed eligible for a TPD benefit.
Even when the ETE definition is applicable, TPD can be somewhat problematic in respect to mental illness claims. Psychologists and other treating practitioners will rarely want to acknowledge the member is languishing to the point where there is no hope returning to the workforce, especially for younger members. And yet, we are often asking medical professionals to do just this. The choice may come down to what is more detrimental to their patients’ health – lacking financial support or the removal of hope.
With this in mind, TPD instalment products designed to introduce rehabilitation opportunities and return members to work when previously they may have been considered totally and permanently disabled, provide positive flow on effects to members’ mental health and wellbeing.
Hybrid disability policies, which pay a benefit to members regardless of the severity of the condition, are also worth exploring. One of the main benefits they offer is that the trustee can elect to remove the provision of lump sum benefits altogether and allow for continued access to rehabilitation services offered by the insurer in the hope of returning to gainful employment.
While the member and trustee benefits are hard to dispute with this type of product, they would be difficult to roll this out in the current climate with the focus on premium. Carefully phased pilot programs is one way to begin making steps toward better outcomes.
DEATH
Death cover is often a difficult conversation when we’re talking mental health, but it’s one we must have. For most policies, members can access death cover automatically with no restrictions. Only when cover is increased, is a suicide exclusion applied and generally only for 12 months.
While there is no direct evidence to suggest that being able to access a death benefit incentivises suicide in any way, we do know how important any reason for pause is within a suicidal crisis moment. A suicide exclusion period could be just that reason. At the same time, supporting the families of people who lose loved ones by suicide, at a time when they are already experiencing significant grief and trauma is at the core of what insurance is all about. In other words, when people need insurance the most, they are there.
Regardless of whether policies should be reviewed in relation to suicide, there should be a focus on building awareness and empathy within our homes, workplaces and claims departments, regarding risk factors for mental ill-health and suicide, and how to respond appropriately to reduce risk and save lives. In Australia, 3,200 families are impacted by suicide each year. These families need our support – financial and otherwise – and everyone has a part to play.
The responsibility for a mentally-healthy Australia lies with us all. As family members, friends and colleagues we can have a huge impact by simply recognising when someone may be languishing and having the courage to ask whether that person is OK.
As employers and managers, we hold the responsibility of ensuring we provide our employees with a psychologically safe workplace. When we achieve this, when individuals feel supported, when they are aware and can access support in the early stages, then they are less likely to reach a point where insurance cover needs to respond.
This is why SuperFriend’s vision, together with our partner insurers and funds, is for an Australia where all workplaces are mentally healthy.
There’s comfort in knowing the insurance cover through our super is there to provide financial support when it’s needed most. We must acknowledge however that there are limitations. Group insurance cannot be all things to all people.
But it can play an important part in the 20% of all disability claims that are related to mental health, and it’s time for insurance product designers to explore proactive solutions or look more to income protection to provide support.
Sandy MacLeod is general manager of insurance solutions at SuperFriend.
The author would like to acknowledge the input of Philip Bracken in the drafting of this content. Phil has extensive product experience and expertise within group insurance and is currently the head of group product for MLC Life.
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