Why advisors should care about insurance self-injury exclusions

Clauses in individual and group benefits plans exclude coverage for people who try to harm themselves. These clauses, set by insurers, are used in products such as accidental death policies and disability policies to prevent claimants from injuring themselves for monetary gain.

But those clauses, and the language within them, are viewed by some as outdated.

A recent CBC investigation found several clauses that state insurers may “refuse to pay for treatment related to self-inflicted injuries and suicide attempts whether […] the insured person was ‘sane or insane’ at the time.”

But, in response to CBC’s investigation, some insurers are moving to eliminate phrases such as “sane or insane” in policy documents, and to offer more support for mentally ill customers. The issue is especially important since as many as 20% of Canadians will experience mental illness during their lifetimes, finds the Canadian Mental Health Association, and 8% of adults will experience major depression.

Read: Most think employers should support physical, mental health

To speed up this process, the Canadian Life and Health Insurance Association is offering guidance to insurers.

“The industry has always been interested in the issue of people’s mental health,” says Frank Zinatelli, vice-president and general counsel for the association. “[But] you don’t always do a deep dive to [check] the specific wording of some of the provisions in contracts that might have been around a long time.” So he’s encouraging insurers to look to the health sector and medical community for new language.

In a separate email response to Advisor.ca, Zinatelli also discusses what steps insurers are already taking, though there likely won’t be a single solution. “Companies are working toward updating or removing [inappropriate] words, where the mental state of the insured needs to be referenced. These changes will be addressed as the policy wording and booklets are updated.”

He adds insurers are reviewing the application of self-injury exclusions within their various products.

Read:

• Understand how doctors assess mental capacity
• Providing benefits is a significant cost for employers

How advisors can help

Discussing disability and mental health with clients is tough. So as insurers alter their policies and coverage options for self-injury claims, advisors should stay informed but only communicate these changes where appropriate, says Greg Pollock, president and CEO of Advocis.

Read: Disabled Canadians face financial difficulties

“Stigma around mental illness still exists and it can be challenging for clients to discuss what they’re going through,” he says. “Advisors have to allow clients to set the pace [if they] open up about their mental illnesses and how they’re affected.”

And only tell clients about these insurance developments if you sell insurance and help clients with claims, and know a client has struggled with mental illness.

When selling products such as disability policies, David Barber, group insurance broker and founder of Piper, Barber Consulting, suggests, “Get a letter of permission and authorization from clients that, should [contested] claims arise, you [have] the power to intercede on their behalf by working with lawyers and doctors as an advocate. If you get this type of letter when incidents occur or at the time of disability, insurers can say people are too incapacitated to be aware of what they’re doing.”

When requesting this letter, he advises saying: “We know from actuarial studies that one in three Canadians over age 50 will suffer from disability at some time during their lifetimes. This is a hard topic to talk about, but it’s key that we discuss how I can assist with your insurance needs.”

Read: How insurers can better connect with clients