Posted: 26 May 2020

The future of mental health and the insurance sector

The insurance sector faces a tricky road ahead after 2020’s difficult start. That’s why our Insurance services team will be publishing regular articles, breaking down what insurers need to consider, both in the near future and farther afield. Today we’re starting with the impact of COVID-19 on mental health and the role of insurers…

COVID-19 is the biggest challenge that we have faced as a nation in decades. It’s testing the resilience of our health sector, it’s testing our emotional resilience through lockdown and beyond, and it’s testing our financial resilience as a nation.

We are increasingly optimistic about winning the health battle, although no doubt debate on the approach will continue. Did we lockdown too hard compared to Australia? Could we have closed borders quicker like Taiwan? New Zealand’s life and health insurers are unlikely to face a wave of COVID-19 claims but could face a ripple of health claims from delayed elective surgery and complications of delayed medical treatment.

The Government is helping to cushion the economic blow with a $50 billion COVID-19 response package, but they can’t protect all jobs. It’s also invested in mental health, with spend budgeted to increase from $77 million in 2019 to a forecasted $140 million in 2020 and $208 million in 2021.

Emotionally, lockdown was tough and things are likely to get tougher as the economic downturn extends, with the Government’s 2020 Budget forecasting unemployment to peak at just under 10% of the labour force by September 2020, from a low base of just 4% at December 2019. We’re likely to see an increase in mental health claims as business owners strive to keep their businesses afloat while employees suffer from reduced job security and, in some cases, reduced pay.

This is a fluid situation and it’s going to take time for insurers to find constructive ways to balance the impact of the increased mental health demands. It’s a good time for insurers to consider how they can alleviate financial stress for their customers, and many are offering premium holidays for impacted customers.

A few insurers have also taken some specific steps to support customers’ mental health – for example, Accuro has a Mental Health Navigator programme which offers customer support, while AIA includes mental health checks on its vitality programme. Both have taken a customer-centric approach, ramping up claims prevention over claims management. This Deloitte UK article consider the return on investment in mental health from an employer perspective. Insurers looking to support their customers' mental health could equally apply some of the learnings from it.

The way forward might not be clear, but in the short term, considering the unique and specific needs of customers is an important way that insurers can respond to the demand for mental health services. After all, in this COVID-19 recovery, helping customers with their financial and emotional resilience is the key to supporting their business going forward.

In our next spotlight on the insurance industry’s upcoming challenges, we look at how COVID-19 is impacting insurance innovation.

The content of this article is accurate as at 22 May 2020, the time of publication. This article does not constitute professional advice. If you wish to understand the potential implications of current events for your business or organisation, please get in touch. Alternatively, our COVID-19 webpages provide information about our services and provide contacts for relevant experts who can help you navigate this quickly evolving situation.

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Shami Shearer

Shami Shearer

Director - Actuarial and Insurance Services

Having worked in the NZ Life Insurance industry for most of the last twenty years, I delight in sharing my deep understanding and insights gained from being involved in a range of roles and projects that touch on all aspects of the business. One of my strengths is the ability to bring to light key issues and explain complex technical matters in simple terms. Recently I have been applying this skill to assist insurers in understanding the impacts of IFRS 17 on their business and planning for implementation of the new standard.