Insurer Prevails in Dispute Over Misrepresentation of Mental Health

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

The dispute arose when the complainant made a claim on her total and permanent disability (TPD) policy for major depression. In response, MLC (the insurer) decided to amend the policy by adding an exclusion for mental illness, effectively denying the claim.

The insurer argued that it was within its right to add the exclusion because the complainant had misrepresented her mental health history when applying for the policy in March 2015.

Upon reviewing the application form, it was discovered that the complainant failed to disclose her use of anti-depressant medication and provided incorrect answers to questions regarding her mental health.

Misrepresentation of Mental Health

One of the questions on the application form asked whether the complainant had ever experienced or sought advice for anxiety, stress, or sleeplessness. The complainant answered "No," despite having a history of depression and taking medication for it.

The Australian Financial Complaints Authority (AFCA) determined that this answer was a misrepresentation.

The complainant also provided a false answer to another question regarding the use of medications in the last five years. Despite her two-year history of depression and recent medication use, she answered "No" to the question.

AFCA concluded that these misrepresentations were significant in the insurer's decision to add the exclusion for mental illness.

Ruling in Favor of the Insurer

The complainant argued that she was unaware of her depression diagnosis and believed her medication was intended to improve her mood, rather than treat depression.

However, AFCA rejected her explanation, noting that she had sought treatment for "anxiety-related condition" and had taken medication to improve her mood.

AFCA ruled in favor of MLC, stating that the insurer demonstrated the intent to add a mental illness exclusion even without the complainant's misrepresentations. The ombudsman also noted that other insurers would have made similar decisions.

Published:Tuesday, 5th Dec 2023
Author: Paige Estritori

Please Note: We do not endorse any specific products or companies. Some content is sourced from third parties, including press releases, and may not be independently verified for accuracy or completeness.

Share this news item:

Insurance News

Clear

Deloitte's 2026 Insurance Predictions: Key Trends Shaping the Future

17 Apr 2026: Paige Estritori

As Australia's insurance industry stands on the cusp of significant transformation, Deloitte's latest report, 'Insurance Predictions 2026,' offers a comprehensive analysis of the key trends poised to reshape the sector. The report underscores the imperative for insurers to adapt to rapid technological advancements, escalating climate risks, and evolving regulatory landscapes. - read more

APRA Warns of Heightened Risks in Australia's Insurance Industry

17 Apr 2026: Paige Estritori

The Australian Prudential Regulation Authority (APRA) has recently issued a cautionary statement regarding the elevated risks confronting the nation's insurance sector. This alert underscores the necessity for insurers to bolster their resilience against a backdrop of climate hazards, cyber incidents, and global geopolitical tensions. - read more

Private Health Insurance Premiums Set to Increase by 4.41% in April 2026

17 Apr 2026: Paige Estritori

Australian private health insurance policyholders are set to experience a significant premium increase, with rates rising by an average of 4.41% from April 2026. This adjustment marks the most substantial hike since 2017, reflecting the escalating costs associated with medical and hospital services. - read more

Understanding the 4.41% Increase in Private Health Insurance Premiums

17 Apr 2026: Paige Estritori

From April 1, 2026, Australian private health insurance premiums are set to rise by an average of 4.41%, marking the most significant increase since 2017. This adjustment reflects the escalating costs associated with medical and hospital services, which saw a 5% increase in the last financial year. - read more

APRA Halts 25% Premium Increases in Commercial Auto Insurance

17 Apr 2026: Paige Estritori

In March 2026, the Australian Prudential Regulation Authority (APRA) took decisive action to address significant premium hikes in the commercial auto insurance sector. Responding to widespread industry concerns, APRA issued emergency regulations to freeze unjustified baseline premium increases exceeding 25%, pending external review. - read more

Click for more Insurance News