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Transcript: Consume This podcast, Episode 1 - Flight or Fight (Part 2)

Part two sees Sophie visit insurance broker Alan Borthwick and track down Naomi Ballantyne, the managing director of Partners Life - one of New Zealand's largest insurers.

Jon Duffy: Hi, I'm Jon Duffy, co-host of Consume This. This is the second part of our story 'Flight or Fight'. If you haven't listened to part one, this is not going to make sense to you. So please go back and listen to part one, and then come back. Let's have a quick refresher.

Part one saw Sophie visit her doctor for help overcoming a mild fear of flying …

Sophie Richardson: I would be vigilantly watching the air hostesses’ reactions to see if the turbulence was really bad or just normal amounts of turbulence, or if they had any looks of concern on their face so I could know whether the plane was about to fall out of the sky.

Jon Duffy: This was a visit that later came back to haunt her, when she applied for income protection insurance at ASB, only to be offered a policy with a broad mental health exclusion.

Taimi Allan: If we treated exclusions in physical health the way we do in mental health, then if you have had a knee injury, then we just would never insure your legs.

Jon Duffy: After speaking to her doctor and battling with insurance companies that declined to speak with us, Sophie still doesn't have any insurance. And we haven't got any answers from the industry. In this episode, that all changes.

Sophie Richardson: Thanks Jon. At this point in the story, I'm feeling a little bit confused. After turning down ASB's frankly rubbish insurance policy, I decided that I needed some help. So I reached out to an insurance broker.

Alan Borthwick: My name's Alan Borthwick, I'm a principal advisor at DUX Financial Services. I'm a certified financial planner and financial advisor covering most aspects of personal financial advice.

Sophie Richardson: We'll get back to Alan soon. But first we need to understand, why are insurance companies so concerned about mental health?

Naomi Ballantyne: It's not so much that we have a massive incidence rate of mental health compared to knees and backs and all the other effects. It's that they last longer.

Sophie Richardson: This is Naomi Ballantyne.

She's a 40-year veteran of the industry and the managing director of Partners Life Insurance. Of all the insurance companies we reached out to she was the only one who would talk to us.

Naomi Ballantyne: Ten percent of all claims are for mental health initially. And some of them go back to work very quickly. Don't get me wrong. But for our long-term claims - that's anything over 12 months - you're probably looking at about 70% of them have a mental health component. And often they didn't start as a mental health claim. Somebody hurt their back or their neck, and then that absence from work and the way their life changes when they've been long-term ill can make work seem like the enemy, or a step too far. They lose their confidence.

They become a beneficiary in the sense that they rearrange their finances to suit the amount of money that they're getting paid on claim. And so you end up with very long-term claims. So even though it might be a small claim, it costs us a shitload of money if it goes to age 65.

Sophie Richardson: From a business perspective, I can totally see why they could be worried about mental health. Failing to exclude a pre-existing condition could end up being quite costly. But from a Sophie Richardson point-of-view, well, I just want the best insurance cover I can get. Plus, my fear of flying is long cured. I don't think it puts me at a higher risk of being unable to work. Unlike ASB. I mean, it's not like I'm the pilot.

So why did they exclude me? Is this a them issue or is it going to keep popping up on this journey? Is my mental health uninsurable?

Alan Borthwick: Well, I think the key thing here to know is it was an ASB product. And so the bank products generally are a lower form of cover. They're a simpler product.

Nothing tends to surprise me with bank insurance products. I've seen a lot of exclusions for things that the main insurers that we deal with in the market wouldn't have done. They're often priced a bit more competitively, but they'll be much more strict on exclusions. They have less things they pay out for.

They're designed for bank staff to be able to sell relatively quickly, so I wasn't surprised when you said it was a bank product. I would have been surprised if Sovereign, direct through their main products, had come back with a similar exclusion. That would have surprised me. But in general, the average person who walks into the branch and has done a mortgage or just wasn't moving fast enough to get away, and gets roped into a conversation about insurance, they'll be offered their basic line of products, which will be a simplified version of most of it.

It's still relatively fit for purpose. So they're not bad products. But they're not top of the line, there'll be major things that are missing from them potentially, and they're much more likely to have exclusions. Or a lower threshold for some exclusions anyway.

Sophie Richardson: Right. So were you then surprised that something like a fear of flying was put in as an exclusion?

Alan Borthwick: Yeah. That was an odd one. And I think that just goes back to them having a very simple matrix that says, ah, mental health episode. Which yeah, I know it's not from a standard perspective, but from an insurance perspective, it fits into the category of mental health event. There was some counselling involved, that sort of thing.

And so of course, you raised a flag of counselling, that leads to, oh my gosh, psychologist, or someone who's got depression, anxiety, and it's a quick tick box system. It was interesting that that particular item had- cause it's the first time it had come up for me. But knowing what I know about the way the bank matrix is on products it didn't surprise me that that would trigger it.

I've seen many random events like that. Different versions that have triggered exclusions. You know, someone having a bad time because someone just died in their family, or they had a rough period at a job.

My very first client got stalked coming home from university one night and their insurer tried to put an exclusion on for mental health. We used a very, very grumpy letter from the doctor to get out of that one - because that's what the matrix said. My job is to push back and have that conversation so that they're not just looking at you as a number.

Sophie Richardson: It's quite common when you take out a mortgage or a loan for the bank to upsell you on insurance, usually life or income protection. I've done a lot of research for this podcast and almost everyone I spoke to said the same thing: don't buy a policy through your bank. I put this to ASB, but they didn't reply to us prior to recording.

So will I - person not number - be able to get income protection insurance that covers my mental health? Alan seemed confident ...

Alan Borthwick: Yeah, because your situation seemed fairly cut and dry to me. I didn't think it was going to take a large amount of time. I went to what was my first choice of insurer based on the research we'd done of who – for the cover you needed – would be the best place to go, ran it past them. And they said, can't imagine there'd be a problem here.

So send it in. So it's very rare that you'll get a definitive "no, we don't care about that, or that's fine" from just a phone call. But they'll give you an idea. They'll tell you how much the bad news is, because that's easier to position. Uh, so that was enough, based on my experience of thousands of other clients, to feel confident that what we were going to do was likely to come back with what we call standard terms. So, no exclusions for mental health.

Sophie Richardson: You may have guessed... That first choice of insurer was Naomi's company - Partners Life.

Alan sent over my files, including my note from Dr Lesley, and we waited. Given my experience with ASB, at the bare minimum I expected a call. I imagined explaining myself on the phone. Trying to convince a faceless underwriter that yes, my fear of flying was fully cured, but the phone didn't ring. As it turns out, the information I'd already provided was enough.

Naomi Ballantyne: You were very kind to provide us with your GP comments around this is not a mental health condition, it's just a fear of flying. Like, it's sorted.

So we were able to go right down into the individual detail of you and go 'you don't represent any risk of disability from your job because of mental health'. And so therefore, why would you put an exclusion from our perspective? Because clearly, even if we excluded your fear of flying - which would be ridiculous because it's not going to affect your job - but even if we had done that and you then went on, for example, to develop depression, which you'd never had before, we would pay for that, because it's not the same thing. And you never had a pre-existing condition of that sort.

Sophie Richardson: My concern throughout this journey has been how broad the mental health exclusions applied to insurance products are. Had I accepted the ASB policy, a mild fear of flying would have excluded me from literally any other mental health condition. That includes workplace stress, depression, eating disorders, and a ton of other stuff.

In the end, the situation worked out well for me. I finally got my insurance, exclusion-free. But for lots of other people, this isn't the case. They're still subject to broad exclusions despite having narrow diagnoses.

Naomi Ballantyne: The diagnoses are not always right. GPs are not necessarily good at landing on the right mental health diagnosis.

So they'll lump everything under anxiety, or they'll lump it all under depression. And then you go to a specialist and they say, well, actually, you've got this other problem. Same problem in the sense of its manifestation, but we haven't excluded it if we've only excluded the thing the GP told you you had.

So it's fraught. So, it's not not wanting to pay for mental health. It's wanting to remove the risk that there is a definite claim coming. If someone is still in the middle of being treated, or it's relatively recent, or they've actually had significant time off work with mental health, then the risk of that impacting on their work going forward is quite high. So we remove it until such time that we can see that it isn't any longer a risk, if that makes sense to you?

Sophie Richardson: Yeah, but I mean, thinking about lots of mental health conditions that are sort of quite long running, particularly if we're thinking, you know, depression or anxiety and they could be medicated and treated and, you know, contained.

Does that mean they'd always have an exclusion? Are you forever banned?

Naomi Ballantyne: Yeah. It's an interesting one. It depends on the type of benefit that you're applying for and the type of job that you’re in. And whether there's ever been any suggestion of workplace stress, because workplaces can exacerbate that.

And because we're insuring people's ability to work, it's that combination risk that is the concern. So it's not a yes or a no one. But generally, if someone's still requiring treatment, if they're stable and it was nothing to do with work, then probably, or possibly they wouldn't have that exclusion or it would be removed.

But as you will possibly know, mental health is never really one thing for a lot of people. It's a combination of things, and work stress can be a significant driver of that. But obviously, if they change jobs and the stress is gone, that's a different ball game again. We try to also look at if the reason for the anxiety or the stress is something logical that would cause everyone to go through a period of anxiety and stress.

In our business, we see people who lose children and stuff like that. Then it's logical. It’s sensible. And it's a natural reaction. And as long as you can see that they've got through that, then that's almost a lesser issue than someone who just developed situational depression over time and lives with it and goes up and down, you know, and has periods of time where they can't cope forever.

Sophie Richardson: Do you think that undercuts the point of insurance though? Like, by being specific, you know, saying you’re less risk or you’re more risk, does it undermine the collective pool sort of mentality of paying into it?

Naomi Ballantyne: That's a really interesting question. If everyone had to buy insurance, there would be no need to assess anybody because there's no selection risk, right?

All healthy people and all unhealthy people would be buying at the same time. But because it's voluntary, people can choose to buy insurance and when they choose to buy it. So if you don't actually start to understand the health issues of someone, why would anyone buy insurance until they were sick?

They wouldn't pay for it while they were healthy if they knew they could just buy it when they needed it, and then immediately go on to claim. You would never gather enough premiums from anyone to cover the substantial claims that are required when people get seriously ill. The idea of all in together only works if it's not voluntary, but as soon as it's ‘you can be in just when you choose to be’. There's a consequence to waiting to buy insurance. There should be, right. And so it's an encouragement for people to buy insurance while they're healthy, so there is a big enough pool to pay for claims for everybody. If we just had sick people who are immediately going to claim, there would be no insurance.

Sophie Richardson: Do you think there's a risk though, with the sort of broad mental health exclusions that lots of policies have there, you know, that can be used against you for things like, if you did have a heart attack while you're working and then they suggest it was stress-related?

Naomi Ballantyne: No. That could never happen.

And similarly to you having high cholesterol and having high cholesterol excluded under your medical policy, and then you have a heart attack, you couldn't go, oh, the high cholesterol caused that, because you would never know. There’s no guarantee that caused that heart attack. Therefore, the insurance company can't rely on that exclusion to say it caused the heart attack. We can't decide that. That's not up to us to decide.

Sophie Richardson: Right.

Naomi Ballantyne: Similarly, if they have a heart attack it could be stress-related. But that doesn't mean that we could rely on ‘therefore, it was stress that caused the heart attack.’ There's a million other things that could cause a heart attack, right? So I hear those things and I go, that's just not my world. I've never seen that in 40 years. And I don't think I ever will. And if I ever did, I would be screaming from the rooftops about ‘you can't do that.’ Because it's what brings our industry into disrepute if that were to happen. Insurance companies doing exactly the opposite of what they should be doing and what we want to be doing, which is paying claims.

Sophie Richardson: In contrast to the companies that declined to speak with us, Naomi was open to explaining why things work the way they do, but there was also an understanding that the current system is far from perfect.

Naomi Ballantyne: So there's a degree – and the industry will be quite open about – a degree of almost discrimination on the basis that we don't know yet.

Once the client's gone long enough that they haven't required treatment and they haven't had another episode and it hasn't impacted their work, you can back away from that, right. And you can start to get comfort that this is not going to be someone who is at higher risk than anyone else of a mental health issue in the future.

But until you've kind of got that length of time, there's almost a one size fits all, in the sense of we need to exclude mental health until we can get that degree of comfort. So as an industry, we just actually, we don't know that you're not going to be the person that every two years is taking six months off.

That's the real challenge. We haven't got enough research to say which people will go on and have repeated cycles, and which won't. As you quite rightly point out, we use an exclusion because it protects us and the rest of our customers, but it might be inherently unfair because the degree of those customers we’re excluding were never going to be any different than people who've never had the problem before.

Sophie Richardson: So what does the future look like? Insurance companies are built on data. As they gather ever more information, information about who's claiming what and why, exclusion should become increasingly narrow. As more of us disclose mental health conditions or mental health events, and then go on not to claim, we should be seen as less of a risk.

Naomi Ballantyne: This is very complex. There's no such thing as a ‘mental health problem’. There is a number of things that we label mental health under the ICD10 code, if that makes sense. So we need to have data that is much more prescriptive about, specifically, what was it that caused them not to work.

For example, was it the depression? Was it anxiety? Was it neither of those things? It was the fact that they hurt their knee. And so we're a modern company, so we've got much more access to much more modern data because we're only 10 years old and we've got modern systems. But we need to get old enough to have enough data to really start to analyze that kind of stuff, and overlay it over re-insurance data and go, "well, if X percentage looks like this, then we apply that percentage to the bigger piece of data and say then it looks like that.” Then we're starting to get somewhere.

Sophie Richardson: So moving more away from like, “this is specifically what the diagnosis said”, to more like, “this is what's happening day-to-day. This is how they function. This is the...”

Naomi Ballantyne: Actually, it's much more to about motivation. I'm leaping into somewhere here, but I don't think we do a very good job of asking the right questions to understand the effect of mental health on the ability to work, for example.

So, motivation to work we don't ask any questions about an application form, but it's probably quite a large driver. To people who love their jobs, who see themselves and their world as “my job is a large part of who I am, I love the people I work with.” That's not a negative to mental health and you're not going to stay home from work for nothing.

People who really just it's a job because it's a job, they really don't like it, “I've bounced jobs four times cause I never really found what I liked. And oh, now I've got a sore back,” can end up as a mental health claimant to age 65.

And so that motivation to work, the part it plays in your life is much more of a predictor of people's likelihood to stay on claim long-term than whether they've had a previous mental health issue or not.

That's the kind of thing we're thinking about. Have we looked at it as an industry the wrong way? Because if we're worried about people's engagement in work, then that's where we should be focusing.

I like to think we are getting closer, but I think we can do much better. That is we as Partners Life.

Sophie Richardson: So that's where Naomi sees the industry heading: away from generalized diagnoses and risk models and towards a tailored individual approach. And I have to say that does sound like a move in the right direction. But it's still a way off.

Naomi Ballantyne: I actually think for new business - that's customers that applying now - asking more specific questions, to make those exclusions much more specific to the customer is a good idea. There can be no harm that comes from that.

Sophie Richardson: And this is already happening. The government has recently launched an exposure draft for a new insurance contracts bill, that amongst other things puts the emphasis back on insurers to ask specific questions.

You can read more about that in the Consumer NZ article Are insurance policy exclusions for mental health unfair?

Naomi Ballantyne: For existing customers that already have mental health exclusions on there, the ability for them to have that reviewed based on the specifics of their case need to also be introduced at the same time.

There should never be an exclusion that can never be reviewed. Actually for anything. There are some things that probably don't get better as you age, but even then you should still be able to ask for it to be reviewed, right?

Sophie Richardson: Would you then encourage people to go back to their insurers and say like, "Hey, I've had like a stable period I want you to review this"?

Naomi Ballantyne: Hundred percent. And actually, your experience with an advisor shows you it's much easier to do that if you have an advisor, because they do the legwork and they also go into argue with the insurance company. They negotiate with underwriters, they give flavour on your behalf to the underwriters because they know you individually. Different than us just dealing with a piece of paper that's come in from someone.

I would 100% encourage customers who think that their risk is lessened compared to when they bought it, or it never was a risk, to go and talk to an advisor to understand the process of going about getting that reviewed. Or moving to another company, if actually on balance their health means they get a better deal by going to another company. Exactly like you did.

Sophie Richardson: Exactly. Like I did. And for me, it worked. The policy I got from Partners Life was more comprehensive than the one from ASB, but the industry still has a long way to go. There are plenty of people trying to make strides in this area, but on the whole, it feels like they haven't caught up with the shift in conversation around mental health. Naomi thinks more and better quality data will change that. This remains to be seen, but for now, we'd like to see fewer blanket exclusions and more personalized decision making.

So what are the takeaways from this story? What can you do to get the best cover?

Well, first up, as we've already talked about, you probably want to avoid your bank products.

Be aware that a no questions asked or relatively quick to get insurance policy is likely to result in poor outcomes at claims time. Find a company that takes your specific circumstances into account.

Naomi Ballantyne: Not all insurers do individualised underwriting. So if they don't assess you specifically, then they apply a blanket exclusion, which really reflects the risk of the worst person who might have one of those conditions.

While it's fast and it's easy to obtain those covers, the downside of it is not individualised to your risk. It's everyone who potentially has a mental health risk and their risk as a population.

Sophie Richardson: Disclose your situation and answer all the questions truthfully. You might think it's worth holding back and keeping a prior mental health issue to yourself. It's not.

The likelihood is it will be discovered at claims time and excluded anyway. And then you've paid your premiums for nothing.

Alan Borthwick: It is a double-edged sword. If the person who's never admitted to having had periods of depression and doesn't disclose it, and if there's nothing on their social media about how depressed they are, then they go have a claim for it, they could get a claim they probably shouldn't have had.

But of course, the doctor's records are where people get caught out. We've had people come back and say, "oh, you couldn't get me cover. I got cover here." And you go, “yeah, they're going to underwrite you at claim time and you'll have paid your premiums for nothing, because there's no way they're offering to cover.”

Sophie Richardson: Get advice and shop around. Brokers can be helpful to consider a broad range of providers and look for the best insurance for your situation.

Naomi Ballantyne: So, you all know with the broker it was more intense, but what you got was exactly the right answer for you.

Sophie Richardson: But be aware that some brokers receive payment from the insurance companies. If they do, they are required to tell you.

Alan Borthwick: The FMA and the government has decided that the payment of commission is on its own a conflict of interest.

It's really important as an advisor to be upfront. While we have to disclose it in the first place, they all tend to pay within range of each other anyway. I mean, one thing that has changed though, is that what they call soft dollar bonuses, the extra backhand bonuses or the free holidays. That stuff is all gone.

Sophie Richardson: And finally, if you have an exclusion for mental health, ask to get it reviewed, or shop around until another provider will offer you that review. Particularly if the issue was a one-off or happened a long time ago.

Naomi Ballantyne: And there's no harm in finding out. You don't have to cancel what you've already got till you know for sure whether you can get something better, but there's no harm in doing that.

Sophie Richardson: You've been listening to Consume This. Thanks for joining us.

This episode was hosted by me, Sophie Richardson, produced by Tom Riste-Smith, and executive produced by Gemma Rasmussen.

We're grateful to the Mental Health Foundation for their support of Consumer's work on insurance and mental health.

Our thanks also go to our Consumer NZ colleague, investigative writer Rebecca Styles, on whose great work parts of this episode were based.

Consume This is brought to you by Consumer NZ. We're proud of our independence, which we can only achieve because we're a non-profit supported by our members. For more information on consumer and becoming a member follow the link in our show notes.

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