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John* got a car loan for a modest run-about car and also bought add-on insurance.  He alleges that he was told it would kick in if he became unable to work due to illness.  He thought it sounded like a sensible thing to buy.  John was subsequently diagnosed with mental illness and lost his job.  Relieved he had bought the insurance, John contacted his insurer.  He alleges that he was told that the policy did not cover claims for mental illness.  John ultimately lost his car.

With Mental Health Week drawing to a close, it’s time to start talking about access to insurance for people with mental illness and whether we should allow insurers to have such broad exclusions for mental illness.

What are ‘unfair contract terms’

Unfair contract terms legislation means that if there is an ‘unfair’ contract term in any standard consumer contract, a court or tribunal can declare it void.  This provides important protection for people going about purchasing day-to-day goods and services, and means that traders are encouraged to review their terms and conditions so that they are not unfair.

Insurers enjoy an exemption.  This means Australians don’t have this protection when it comes to one of the most important things they buy.  With recent insurance scandals fresh in our minds, it’s time to ask why.

17-year old school student Ella Ingram and her legal team at Victoria Legal Aid did a wonderful job asserting Ms Ingram’s basic human rights in relation to a blanket mental health exclusion in her travel insurance policy. [1]

Despite VCAT agreeing with Ella and clearly ruling that QBE illegally discriminated against Ms Ingram by including and applying a blanket mental health exclusion in a travel insurance policy, insurers continue to include and apply these unfair exclusions in their travel and other insurance policies. Australians wishing to dispute the application of these unfair exclusions must do so on a case-by-case basis.  With many not having access to legal representation or the ability to, it’s just not fair.

Earlier this year the CommInsure scandal showed us how outdated and unfair medical condition definitions have been used in life insurance policies.  What can we do to resolve this?  Is the answer right under our noses?

Taking away this special treatment for the insurance industry and making them accountable for unfair contract terms could be the answer.

Unsurprisingly, insurers don’t want to lose their special exemption.  The Insurance Council of Australia argues that extending unfair provisions ‘should only be undertaken in light of clear and specific evidence that where an imbalance exists, or where consumers are currently experiencing disadvantage or loss as a result of unfair contract terms’ that the law as it stands cannot address.

So much work has been done to reduce the stigma associated with mental illness, but it seems that the insurance industry is stuck in the past.  Blanket exclusions for mental health issues are unfair, we have more than sufficient evidence to prove the consumer detriment, and our laws should apply to insurers.

Philippa Heir, Senior Solicitor (Insurance) Consumer Action Law Centre

The above piece is available for commercial use through a Creative Commons license.

* This story has been de-identified.

[1] Ingram v QBE Insurance (Australia) Limited (Human Rights) [2015] VCAT 1936 (18 December 2015).