Travel Insurance and Mental Illness

Picture source: http://www.telegraph.co.uk/finance/personalfinance/insurance/travel/10244959/Travel-insurance-Quirky-features-to-watch-out-for.html

BACKGROUND

Travelling overseas is now a standard part of the Australian lifestyle. One study reports that in 2012, 8.2 million residents travelled beyond the Australian borders. [1] This is a dramatic increase from 3.5 million residents travelling abroad in 2002. [2] With the rise of such international travel, obtaining travel insurance policies are seen as a necessary task to complete before departing Australia. The risk of a traveller suffering financially as a result of an unexpected episode while travelling overseas, is very real. One case study reports that a Queensland mother was made out of pocket between $15,000 to $20,000 in airfares, travel and medical costs after her son who was accompanying her in the travel to the Eastern Europe, suffered a psychosis. [3]

INSURANCE INDUSTRY’S RESPONSE

Despite insurers frequently advertising their travel insurance policies as providing a ‘peace of mind’, [4] the Australian population with mental illness has been fighting uphill battles in successfully purchasing and lodging successful claims under their travel insurance policy. Australians with mental illness are having difficulty getting an insurance policy altogether, or their policy expressly excludes any claims relating to mental illness or the insurer denies the claim on the grounds that the policyholder did not disclose a pre-existing mental health condition. One study surveyed 35 travel insurance policies. The result was staggering: only two insurers covered any claims arising due to mental illness. [5] Even these two insurers imposed strict conditions. If mental health conditions were known to the policy applicants, these insurers required them to be disclosed. The result was higher premiums that these policyholders needed to pay. If the mental illness was unknown at the time the policy applicant purchased the policy, then these insurers insisted that they would cover the claim as long as it was supported by medical documents.

Such practice of insurers is somewhat alarming when we consider the prevalence of mental illnesses amongst the wider Australia population. The Bureau of Statistics found that in 2007, 48.1% of males and 43.0% of females surveyed that were aged between 16-85 years reported that they suffered some form of mental disorder during their lifetime. [6]

JUSTIFIED DIFFERENTIAL TREATMENT OR ACT OF DISCRIMINATION?

Such practice by the insurance industry raises the ultimate question: can this be justified as commercial decisions that an insurer makes, or are the insurers discriminating against the mentally ill unlawfully?

Sections 5 and 6 of Disability Discrimination Act 1992 (Cth) (“DDA”) provides that it is unlawful for a provider of services or goods to discriminate on the basis of disability when providing goods or services. Under section 4 of DDA, disability encompasses mental illness. The states have similar legislative provisions put in place that prohibit discriminatory conduct. For instance, under s 49M of Anti-Discrimination Act 1977 (NSW) (“ADA NSW”) it is unlawful for a person who provides goods or services to discriminate against a person on the ground of disability. Section 4 of ADA NSW also includes mental illness as a form of disability.

However, insurers’ discrimination can be justified if they can show through actuarial or statistical data that such a practice was based on a greater level of risk that they required to adopt. [7] What is required is that there is a reasonable basis for discrimination. In essence, under the current discrimination law, insurers must demonstrate that there is reasonable actuarial and statistical data to justify their current stance towards that are mentally ill.

It does not appear that the insurance industry has made available such data. [8] This makes it difficult to examine the basis upon which insurers are imposing such restrictions against the Australian population who suffer from mental illness. In sum, there is a real possibility that the insurance industry is discriminating unlawfully against these groups of Australians.

Ingram v QBE

One case that challenged the insurance industry’s such practice was the dispute between Ms Ella Ingram and QBE. Ingram was scheduled to go to an overseas school trip to New York when she was 17 years old. Prior to departure, she was diagnosed with depression. She received medical advice not to go ahead with the trip. She was hospitalised for treatment. In total, she was left out of pocket by $4,292 in travel expenses. The insurer QBE denied her travel insurance claim on the basis that her policy did not cover any claims arising due to mental illness. This was despite the fact that Ingram had no pre-existing mental health conditions at the time she purchased the travel insurance.

Ingram commenced proceedings in the Victorian Civil and Administrative Tribunal (“VCAT”) against QBE. Victoria Legal Aid (“VLA”) represented Ingram throughout the proceedings. It argued that QBE’s denial of Ingram’s claim amounted to direct discrimination under Equal Opportunity Act 2010 (VIC).

As part of its wider campaign combating such an industry-wide practice, VLA called all insurers to: [9]

disclose and explain the basis of mental illness claims denials (not currently a practice)
consider a policyholder's individual mental health circumstances rather than imposing a general exclusion covering all mental health-related claims.

VCAT found in favour of Ingram. It ruled that: [10]

QBE engaged in direct discrimination in breach of section 44 of the Equal Opportunity Act, first, when it issued her with a policy that included the mental health illness exclusion and, second, when it refused her indemnity relying on the terms of that exclusion".

It made the order that QBE needs to pay Ms Ingram $4,292 in acceptance of her claim and a further $15,000 for non-economic loss.

Significantly, VCAT found that QBE failed to produce reasonable actuarial and statistical data to support its decision. It noted that the only data akin to such nature was produced on 31 August 2015, which were provided to VCAT as part of the proceedings. These were clearly not available to QBE at the time it issued the policy and assessed Ingram’s claim. [11] Therefore, VCAT found that QBE was not entitled to rely on the exemption concerning reasonable actuarial and statistical data.

However, VCAT was also careful to not create a universal rule. It refused to make a declaration that QBE had engaged in unlawful discrimination. The Tribunal Member made this refusal so as to avoid giving the impression that the decision automatically applies to all insurers. [12]

VCAT’s decision is certainly encouraging. It represents the first decision of its kind in Australia. However, the decision must be viewed with caution. Firstly, the decision dealt specifically with the Victorian legislation. Secondly, the Tribunal Member explicitly stated that the decision should not be treated as having created an all-encompassing rule applying to all insurers. In effect, it appears that campaign to address systemic discrimination towards that are mentally ill will still have to be an ongoing campaign.