GDV statistics as at April 2016 reveal that almost 31% of income protection (IP, Berufsunfähigkeit) claims are due to nervous disorders and mental illness, with a steadily upward trend. Statistics published in the UK by the Association of British Insurers in May 2016 tell a similar tale, the figure being 26%. The malfunctioning of the musculoskeletal system, that includes back and limb conditions, was traditionally the main cause of claims, but these now lie well behind in second place.
This shift may be attributable to the more differentiating underwriting of manual occupations, with IP portfolios now containing more white collar workers. However, long-term studies such as the UK’s Adult Psychiatric Morbidity Survey indicate that there is a steady increase in the prevalence of mental disease in the general population. The broadest category in this survey is labelled “common mental disorder” (CMD), and is defined mainly as a state of anxiety and depression, the symptoms of which include fatigue, lack of concentration and insomnia. In the latest 2014 survey 12% of men and 19% of women admitted to suffering or having suffered from one or more of these conditions, which were usually untreated. An estimated fifth of all days off work in the UK are due to CMD.
It is worth noting that the CMD category does not include conditions, such as posttraumatic stress disorder, psychotic, personality and bipolar disorders, alcohol and drug dependence, which an IP underwriter should be able to identify. CMD, in contrast, is often unobtrusive, so that presumably many sufferers and potential sufferers slip undetected through the IP underwriter’s selection filter.
Applicants with a history of mental sickness may be insured at normal rates if the outbreak of the illness was a form of burnout provoked by an identifiable event, such as bereavement, divorce, unemployment or occupational stress. However, the condition is frequently not acute, but chronic, and for the risk to be accepted in such cases, an extra premium is required.
Nervous disorders and mental illness present an enormous challenge for insurers writing IP. Not only defining the degree of disability at the claim stage is difficult, but also establishing when such a claimant can be expected to return to work. Furthermore, in some countries – notably Australia and the UK – insurers come under pressure to accept IP applicants with mental disorders, declinature being…