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14 April 2022

'A systemic failure' – Consumer NZ mystery shop of insurance points to an outdated approach to mental health

A Consumer NZ mystery shop of 14 insurance companies has revealed customers who sought advice or help for their mental health could be regarded as ‘high-risk’ claimants. This could result in the addition of exclusion clauses to their policies that Consumer considers unfair, as they deny customers cover when they need it most.

The mystery shop involved three shoppers calling each insurance company to get cover for health, life and income protection insurance. The aim was to find out whether any of the shoppers would get cover for a declared pre-existing mental health condition, or whether a stand-down period or exclusion would apply.

The mystery shop found blanket exclusions for mental illness in all the health insurance policies it looked at, with some nominal benefits for counselling and psychiatric care.

Consumer found mental health exclusions could be added after speaking to a GP about stress, marriage counselling and bullying.

Although exclusions and stand-down periods are a standard and legal insurance practice, how they are applied to mental health needs to change.

“Many New Zealanders are unaware that what they disclose at the GP’s office could have ramifications for them when it comes to insurance cover,” said Consumer NZ lead investigative writer Cherie Lacey.

“This is problematic because people should be free to discuss mental health concerns without fear of repercussions.”

“Mental health is a widespread issue in Aotearoa, with one in five New Zealanders experiencing mental health challenges every year, while nearly half have a close friend who is experiencing mental distress. There’s a disconnect between how the public views mental health and how insurance companies factor that into their policies.”

All shoppers were offered insurance, but most were told they’d need to complete additional paperwork for the underwriter to decide whether any exclusion or stand-down period would apply to their policy.

“Medical insurance in New Zealand is primarily focused on physical health, not mental health, sadly,” said an independent financial adviser.

To make an assessment on a policy, insurers may obtain a customer’s full medical history to determine the risk level of a potential claim. Medical history extends beyond diagnosis and the prescription of medicine; it also includes consultation notes from a GP, so insurers can be privy to what is discussed in the doctor’s office.

Consumer takes issue with insurers making decisions based on medical notes without getting clarity on diagnosis or understanding the circumstances in which someone received mental health support.

Not all insurers are created equally

The mystery shop also highlighted the different approaches to covering mental health by insurers. While one may limit your cover or add exclusions, another can accept you as is, putting little to no caveats regarding mental health on your policy.

“Confusion reigned when talking to the insurance companies,” Dr Lacey said. “Upon follow-up, several told us that the initial advice the financial adviser gave was incorrect. Some provided mental health cover, while others couldn’t give a clear answer on whether there would be cover without a full underwriting assessment.”

“This investigation highlights the problems with the insurance industry and how they approach mental health. We believe mental health exclusions point to a systemic failure in the insurance market, which could amount to discrimination on the grounds of mental health.”

“We think the industry has a lot of catching up to do in terms of their definitions of mental health and consistency in their approach and communication of mental health exclusions.”


Consumer NZ is grateful for the support of the Mental Health Foundation and the Nōku te Ao: Like Minds programme in researching this article.

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