The sector’s approach to insuring people with experience of mental illness is under scrutiny. It was the lead story in one of the UK’s top newspapers last week. Other signs of scrutiny are evident too. So what are the ethical dimensions to this that insurers need to grasp? And looking forward, what are the market developments that could make this situation even more ethically charged?
Here’s how the most recent media report summed up the situation:
“Insurers are being accused of depriving access to life insurance and other kinds of cover to people with depression and anxiety, even for physical conditions unrelated to their mental health. People who have suffered even mild mental health conditions or one-off episodes say they have been refused life insurance altogether, aggravating their financial insecurity.”
Other reports talk about one-off episodes of mental illness from decades earlier still proving a barrier to life insurance. What makes such reports resonate are the problems that no access to life insurance can have for an individual’s life opportunities. That’s why this is a situation that is not going to go away.
First off, the sector needs to raise its engagement with this issue. The somewhat generic and bland responses that insurance spokespersons tend to fall back on do little to win public minds.
So what are the ethical dimensions to insuring people with experience of mental illness? They fall into three groups: fairness and quality, data and access, and mood monitoring. Let’s start with fairness and quality.
At the core of the sector’s thinking on mental illness sits pre-existing conditions. This is based upon cover being offered and priced according to fortuitous risk. And the argument goes that this is only fair on others in the same insurance pool. If people seen to be at higher risk of making a claim are priced at rates more suitable for lower risk policyholders, then insurers and actuaries cry foul and implement segmented price increases, or as with pre-existing conditions, exclude cover for such altogether.
Yet this is a somewhat narrow interpretation of fairness: the fairness of merit. The public sees it much wider, with fairness of need and fairness of access also playing a part. This creates a gap in perceptions: both insurers and the public use similar words to argue quite different cases. The result is a confused sense of mistrust that fogs further debate. That’s why insurance spokespeople need to raise their game.
In the middle of this argument over what is fair sits the regulator’s work on vulnerability. The FCA’s remit is to make sure markets function well, and part of what underpins a well functioning market is the public’s sense that it will be treated fairly when engaging with insurers. This means not only fairness of merit, but fairness of access and fairness of need as well.
The FCA’s research has pointed to certain categories of consumer (such as those with disabilities) finding it difficult to access the insurance they need. And while pre-existing conditions has certainly been a factor in this, so has been the quality of underwriting decisions. Insurers have been accused of not taking the time to ask more meaningful questions about the risk being presented. And this is the problem with the market’s approach to pre-existing conditions: it’s too broad brush, insensitive to the implications, too uninterested in finding out more.
Why is this the case? Surely it would be to insurers’ benefit to ask more reliable questions? One factor clearly at play is the market’s oft remarked tendency to chase what insiders refer to as the ‘clean lives’: those with no variations outside of the health or life norm. Their focus is on unencumbered risk, for it’s more predictable and cheaper to assess. Insurers have not spent the time learning more about mental illness (the understanding of which has advanced considerably in recent years), preferring instead to keep costs low and chase the easy and obvious.
On a pure business level, there’s a modicum of sense in this, but the problem is that everyone else in the market is doing pretty much the same thing. And so the result is very good deals for some, and poor to no deals for others. The market is becoming stratified. And Governments dislike markets that are stratified, in part for social justice reasons, but in larger part because it increases their exposure to acting like an insurer of last resort.
So the key question that the FCA needs to address in turning its vulnerable consumer research into market directives, is about when and fairness of merit is to accommodate fairness of access and fairness of need. Unless they address this, their research will count for little.
And the market does need to ask itself some serious questions about the quality of its underwriting when dealing with people who do not fit into a standard template. If they’re not making enough effort to understand an increasingly common thing like mental illness, is it right that they underwrite in this market in the first place? There are expectations in insurance legislation about reasonable enquiry.
Remember that one in four people will experience some form of mental illness in their lifetimes. That number matters, for it means that we will all be likely to have someone in our family or near family who will experience mental illness.
So the market’s approach to the underwriting of mental illness will no longer be something that happens to an abstract notion of a customer, but will happen to someone who the underwriter knows and loves. How will their future be affected by limited to no access to life insurance? If they’re one of your children, then the ‘bank of mum and dad’ suddenly becomes much more expensive. The family becomes the insurer of last resort, for a long time.
So what might an individual underwriter do in such circumstances? Would she advise her teenage son or daughter to avoid treatment for mental illness at all cost, knowing the consequences for their future access to life insurance? And what might the emotional cost of such advice be for that teenager, for his/her parents, for the family? Hiding mental illness is the last thing that people need to be told.
One approach to fairness that individual underwriters might adopt involves you weighing up a decision when you don’t know anything about the particular consequences of that decision for you yourself. So, using our life insurance example, you wouldn’t know anything about your own health, or your family’s history of health. You wouldn’t know whether you had sufficient financial resources to fall back on should you find life cover unavailable. And you wouldn’t know anything about the insurance market, nor about the wider economic and political issues surrounding life insurance and the availability of cover. You would make your decision about underwriting life insurance from behind a veil of ignorance.
The consequences of that decision for you could fall anywhere on the scale between no access to life insurance at all, and totally unaffected, with lots of insurers competing for your business. In taking that decision, you would weigh up whether you would personally be prepared to accept the consequences of your decision, not knowing how great or small they might be.
At a more corporate level, the firm could consider how it might engage with someone like the former Labour communications director, Alistair Campbell, who has been quite open about his experiences of depression. Or how it might engage with Antonio Horta-Osorio, the chief executive of Lloyds Banking Group, who sought treatment for mental health problems in 2011. That one in four number means some vocal and powerful people will be affected, and at some point, they will look to the insurance sector for a decent explanation. Which insurance CEO might like to step up to such a debate?
Let’s move on. To underwriter life insurance, insurers need data. And some of the ways in which life insurance have sought access to a proposer’s medical records have proved controversial. In 2015, the UK’s privacy regulator resorted to publicly rebuking the insurance sector for failing to heed previous warnings about their use of a patient’s rights to make a subject access request to their doctor in order for the insurer to obtain a copy of their full medical record. Stay within the law, they were told, twice.
Why did insurers go out on a limb in this way? It was primarily down to the ‘race for data’. The more you know about a risk relative to a competitor, the more likely it was that you could underwrite that risk at a healthy profit. The medical records would tell it all.
Yet what about being understood? The capability of a typical life underwriting function to accurately interpret the records of a medical professional is highly questionable. Ask a GP this – I did and got an unequivocal reply. So the quality of life underwriting is again open to question.
And how might an insurer’s ready access to one’s personal medical history affect your relationship with a doctor? It would certainly reduce the openness of that relationship, perhaps even scupper it. How then do you balance the cost to mental health outcomes against insurers’ interest in knowing all? More pertinently, how might a Government Select Committee weigh it up?
To answer that last question, let’s join together two things. One is the Government’s mental health strategy. Consider this recent quote from the UK Prime Minister:
“I want us to employ the power of government as a force for good to transform the way we deal with mental health problems right across society”
Then connect this with the words of the UK’s Information Commissioner, giving evidence to a UK Government Treasury Sub Committee last week. She said that the use of customer data by the financial services industry could be the next cause of large numbers of complaints after payment protection insurance dies down. That’s a warning the ramifications of which the sector needs to take seriously
What this represents is a UK Government more attuned to mental health than ever before, and data related complaints expected to soar. What it adds up to is the need for a new approach by insurers, at least in terms of access to data. And to be fair, it has found one, but at the same time, it’s one that is perhaps even more controversial.
Life insurers are building underwriting systems that draw on a much wider range of data. As medical records remain a difficult source to access, they are instead turning to alternative sources, such as the data from social media, wearable devices and shopping loyalty cards.
The message coming from the life insurance sector is clear. A leading reinsurer has said very clearly that it will not be long before “no wearable = no life insurance”. Devices rather than doctors will provide the core health data.
And on top of this device data will sit social media data. Your connections, likes, shares and tweets will be mined for information about your mood. This form of monitoring started out as a tool for targeted marketing, but it is now becoming a key tool in underwriting. This shift is significant, for while the former may have resulted in you getting some irrelevant adverts, the latter could well result in you finding life insurance is a thing of the past.
Take research being funded by insurance giant AXA. It’s looking at how certain indicators can be used to establish your mood: smiling for instance, as per this video. And not just any old smile, but the smiles they know really mean something.
Combine this with their trialling of machine learning for real time underwriting (more here) and together, it looks like they’re preparing for real time mood monitoring of our everyday social lives. This will allow them to pick up on anxiety and depression as such episodes emerge and develop, and should they choose, adjust their underwriting terms accordingly.
That’s why the ‘access to medical records’ debate of a few years ago is unlikely to be revisited. The market has turned to other sources: more accessible, more regular. But are they more accurate? And is it fair for insurers to put them to that use? There are a whole host of ethical questions there that I will address another time, as this post is already quite long.
Mental health problems are a feature of many lives, and in particularly, many young lives. Effectively red lining it for life insurance purposes would be a very harsh move by the insurance sector. It is time for the sector to take a fresh look at insuring people with experience of mental illness and bring some innovative thinking to it.
Duncan is the founder of the Ethics and Insurance blog and the author of its many posts. He's a Chartered Insurance Practitioner, having worked 18 years in the UK market. As an adviser to many firms on ethics issues, as well as a regular conference speaker, he is one of the leading voices on ethics and insurance.