What you need to know about underwriting depression

The South African Depression and Anxiety Group states that 20% of the population will develop a depressive disorder during the course of their lives. Only one third of those will receive treatment, despite its 80% success rate in alleviating symptoms. This is, in part, due to the fact that many consider depression a case of the blues. It is, however, a serious illness, whose symptoms can interfere with daily functioning and adversely affect lifestyle.

The depressive mood disorders most often encountered in insurance are:

• Reactive depression/adjustment disorder: a temporary situational depression caused by a specific event, such as having a baby (post-natal depression).

• Major Mood Disorder (MDD): a psychiatric disorder characterised by depressed mood or loss of energy and interest in activities, fatigue, difficulty concentrating, agitation, appetite changes and sleep disturbances. Also referred to as major depression, depression, dysthymic disorder, dysthymia or affective disorder.

• Bipolar affective disorder/manic depression: the presence of depressive moods or episodes, alternating with elevated, euphoric, or irritable moods classified as hypomania or mania.

How does the underwriting of depression affect the life insurance industry, considering that it is expected to become the second leading cause of disability worldwide, and the leading cause in high-income nations? The answer is that insuring a person suffering from depression presents an increased risk to insurance companies. If your client has been diagnosed with a depressive disorder, or received treatment for depression, the underwriter will want to know the following:

• Date of diagnosis

• Method of treatment

• Past methods of treatment

• Doctor’s details

• Symptoms and dates of last symptoms

• Details of any previous hospitalisations

• Details of any suicide attempts

• Specifics of time taken off work as a result of the condition

Other than back conditions, depression is the easiest condition on which to submit a fraudulent claim. It is also prone to malingering – a medical term for fabricating or exaggerating symptoms for motives such as financial compensation (often tied to fraud), avoiding work, and obtaining drugs. This makes the disclosure of a previous diagnosis vital to the underwriting process.

Depression also has a direct impact on a sufferer’s risk of premature death or disability due to suicide or failed suicide attempts; and the abuse of medication, drugs or alcohol which increase the risk of a serious accident. Therefore, regardless of your client’s age or health status, they will need to provide information on their mental health and whether they have been diagnosed with or treated for depression.

As a broker, gathering this information can present a challenge and needs to be handled with sensitivity. Attempting to hide depression, however, can prove to be damaging at claims stage; so it is essential to inform your client of the risks of non-disclosure.

Based on the information provided, insurers may place a permanent suicide exclusion on life cover or apply a mortality loading. Brokers often grapple with such decisions to exclude depression on disability and income benefits, as the exclusion clause often includes associated conditions such as chronic fatigue and fibromyalgia. However these conditions are associated with depression and can render claimants unable to work for periods of time, with a significant impact on income benefits claims.

If your client has sought treatment and successfully managed their condition for a number of years, a previous diagnosis of depression may be of less concern to the underwriter, particularly in cases of situational depression. Altrisk, for example, does not load or exclude on the basis of reactive depression; provided it was successfully treated.

As the broker, be realistic with your client in assessing their situation, as their depression may not necessarily exclude them from life insurance and disability coverage.