How Insurers Discriminate Against People With Mental Health Conditions

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The way people with mental health conditions are covered by insurers has been described as nothing short of discrimination. 

Australia has seen a rise in insurance claims, particularly during the pandemic. 

But a lot of insurance policies have really complicated exemptions that mean that people with poor mental health have very little financial security. 

How are these discriminatory policies still legal? And what can be done about them? 

Mental Health And Insurance 

People’s mental health and wellbeing have really suffered during the pandemic 

One third of young Australians reported high levels of psychological distress last year. And calls to the mental health organisation SANE rose by 78 per cent.

All of this has put enormous pressure on insurance companies. They were already seeing an increase in the number of claims relating to mental health, which has doubled in the last five years.  

Mental health conditions arnow the third most common disability and income protection claim 

Why Should We Care About Insurance Companies?  

Insurance helps provide a bit of financial relief for the future.  

Income insurance for examplewould help if someone was to have an accident and couldn’t continue to work properly, and life insurance helps family members or partners deal with the deceased’s existing debt or other expenses. 

But insurance policies get way more complicated the minute someone declares that they have an existing mental health condition 

How do Insurers Cover Mental Conditions? 

Dr. Michelle Blanchard (Deputy CEO, SANE Australia)One of the issues that’s been identified in recent years by a number of organisations – including our colleagues at Beyond Blue and Mental Health Australia – is that people who experience mental health problems often find themselves excluded from receiving insurance coverage, or subject to much higher than usual premiums. 

This happens because insurance companies flag people who they think are more likely to make a claim. For example, somebody who regularly sees a psychologist and has to take time off work for their mental health. 

These companies are essentially just trying to minimise their risk of incurring costs from insurance payouts.  

Here’s Why These Insurance Policies Are So Dangerous 

But how much does this system understand the complexities of mental health issues, and their different impacts on individual people?  

MBWe might assume that somebody is unable to work. We might assume that they might need to rely on income support for an extended period of time. Those things are absolutely true for some people, but they’re not true for everybody. There are people who are leaders in corporate Australia and in public life who manage really complex mental health conditions on a day to day basisand it hasn’t impacted their ability to work or to earn an income. 

Dr. Blanchard told me that there have even been cases of people who have seen a mental health professional for only one session and still been excluded from basic insurance coverage 

When the government looked into this, it found that only 8 per cent of mental health consumers who applied for income insurance received cover without exclusions or any added premiums.   

Which is really alarming.  

The Insurance And Mental Health Sectors Need To Work Together

The Financial Services Royal Commission that ended in 2019, really brought the treatment of mental health by insurers into the spotlight.  

Some insurance companies have stopped discriminatory practices since, but not all of themDr. Blanchard thinks that the standardised exclusions or extra premiums should be totally removed and banned from the game.  

She suggested that they could be replaced by financial support programs that would ensure people who are affected by mental health problems could get the right cover for them, and not be anxious about their financial future.  

The Takeaway 

Mental health is one of the most significant issues facing the world today, and the insurance sector is as much an industry that needs to be addressed as any other.  

But the ramifications of poor mental health are really serious and placing the added burden of financial insecurity on people who experience mental ill health shouldn’t be standard insurance practice. 


If you or anyone you know needs help:

Lifeline on 13 11 14

Kids Helpline on 1800 551 800

MensLine Australia on 1300 789 978

Suicide Call Back Service on 1300 659 467

SANE Australia on 1800 18 7263

Beyond Blue on 1300 224 636

ReachOut at

Headspace on 1800 650 890

QLife on 1800 184 527

Care Leavers Australasia Network (CLAN) on 1800 008 774