Risks to Life Insurance Companies from Mental Health Conditions like Anxiety and Depression
Dr. Jones
Here are some of the top risks to life insurers from increasing rates of anxiety and depression:
Increased Mortality Rate: Studies have shown that severe mental health disorders can reduce life expectancy. Depression, for example, has been associated with a higher risk of diseases like heart disease, which can lead to an increased mortality rate.
Increased Claims: If policyholders with mental health conditions have a higher risk of death or morbidity, life insurance companies may face an increased number of claims, which can impact their profitability.
Difficult Risk Assessment: Underwriting mental health conditions is complex. It requires assessing the severity, treatment adherence, presence of other risk factors, etc. This complexity can lead to either overestimating or underestimating the risk, potentially affecting premium pricing and profitability.
Stigma and Non-Disclosure: Many individuals may not disclose their mental health conditions due to societal stigma or fear of higher premiums. Non-disclosure can lead to mispriced policies, which can have financial consequences for insurers when claims are made.
Rising Prevalence: The global prevalence of mental health disorders, including anxiety and depression, is on the rise. This could lead to an increased number of applicants with such conditions, making it essential for insurance companies to refine their underwriting processes.
Higher Management Costs: Policyholders with mental health conditions might require more frequent medical assessments or check-ins, leading to increased administrative and management costs for the insurance company.
Side Effects: Medications such as zoloft, celexa, lexapro, zyprexa, seroquel and trazodone are commonly prescribed for these conditions, but all drugs have side effects, the profile of which varies and must be considered by insurers.
Potential for Legal Challenges: Denying coverage or charging significantly higher premiums based on mental health conditions can open insurance companies to potential legal challenges based on discrimination.
Reputational Risk: If not handled sensitively and ethically, underwriting or claim decisions related to mental health can lead to negative publicity. A company that is perceived as unsupportive or discriminatory towards those with mental health conditions can face reputational damage.
Economic Factors: People with severe anxiety or depression may experience periods of unemployment or underemployment, affecting their ability to pay premiums consistently. This can lead to policy lapses or increased administrative work for the insurer.
Co-existing Physical Health Conditions: Mental health conditions, especially when chronic, can co-exist with other physical health issues, compounding the risks for the insurer. For example, depression can lead to poor lifestyle choices like smoking or lack of exercise, which can further increase health risks through issues like visceral fat accumulation.
In summary, while mental health conditions like anxiety and depression present unique challenges for life insurance companies, it's essential for these companies to adopt a nuanced and informed approach. Regularly updating underwriting guidelines, increasing awareness among staff, and partnering with mental health professionals can help insurers address these challenges while supporting their policyholders.