Poor mental health is costing the UK £105bn each year, with insurers paying a substantial portion. With costs set to rise further, how should the industry respond, for the benefit of claimants – and insurers’ balance sheets?

Five years ago, James Lishman woke up to find his house shaking. He was living just 250 yards from the oil storage terminal in Buncefield in Hertfordshire, and was about to be trapped by the force of the biggest UK explosion since the Second World War.

“It felt like an earthquake: the ceiling was falling down and the windows were rattling apart,” he says. “I curled into a ball to try to limit what was hitting me. There was a massive explosion followed by another.”

The Buncefield disaster had a huge effect on Lishman. He experienced flashbacks and suffered from constant ringing in his ears; he had to reduce the hours he worked as a hair stylist; and his social life was curtailed. At first, he was misdiagnosed with a minor psychological disorder, but treatment failed to alleviate any of his symptoms.

It took four years for his condition to be recognised as post traumatic stress disorder (PTSD), a severe anxiety disorder that can develop after any event culminating in psychological trauma.

Lishman is just one of many people living with a psychological disability or disorder in the UK. According to the latest research by the Centre for Mental Health, the annual cost of mental ill health in England has soared to £105.2bn (from £77bn in 2003), and results in losses to the economy of more than £30bn

a year because of sickness absence and unemployment. The insurance sector is picking up a substantial part of this bill owing to a greater number of psychological-related insurance claims.

As a result, industry commentators are warning the sector of long-term costs for both claimants’ wellbeing and the industry itself if it continues to stall in its efforts to provide psychological treatment to claimants, particularly after a traumatic incident.

Law firm Beachcroft partner and head of disease Paula Jefferson believes all forms of psychological claims have increased, and these range from disgruntled employees claiming for stress and harassment, to asbestos and mesothelioma victims saying they suffer from depression.

Jefferson points out that recent case law has made it easier for claimants to seek compensation for historic cases of abuse, sparking a rise in this type of claim.

Moreover, there is also a trend for more people to claim for trauma following an injury such as a an accident on the road or at work.

“Claimants can suffer traumatic responses to accidents, and they can suffer from anxiety or even from depression,” says AXA PPP Healthcare, health economist and business manager Eugene Farrell.

Jefferson adds: “Generally, across the board, more people do say they have suffered a psychological reaction to the injury they have suffered.”

Over a quarter of all road accident claims now include a claim for PTSD, according to psychological rehabilitation provider Moving Minds’ business development manager, Adrian Hill. He believes that the insurance sector can expect to see up to 50,000 claims for PTSD each year.

Hill points out that the attachment of a claim for psychological injury to a personal injury case adds an average of at least £5,000 to the overall cost of the claim.

But the costs can be much higher. If anybody in the insurance sector is still sceptical, they should take note of the Judicial Studies Board (JSB) guidelines on psychological injury claims. These recommend that the damages for a moderate to severe case of psychological injury should be from £3,875 to £76,000, while a severe case of PTSD can win up to £66,000 in damages.

Jefferson says the inclusion of a psychological injury in a claim should sound alarm bells. “It could increase the claim substantially and could create a need for expert evidence, so it is going to increase the costs,” she warns.

“Even if someone makes a claim for psychiatric injury and it turns out to be a fairly short-term travel anxiety, insurers will have to spend more money to get expert evidence to say that this is all it has been.” Whatever the verdict, the outcome for insurers will be higher costs, even if it is not higher damages.

Timing is everything

In many cases, early intervention can be critical, both in preventing the claimant from developing a long-term psychological problem and in helping to reduce overall costs. But lack of knowledge about different forms of psychological conditions and the importance of early action within the sector remains a problem.

“Some insurers are very aware of the importance of early intervention and how it is likely to influence the claim for trauma. However, other insurers are not as quick on the uptake,” says Moving Minds clinical director Dr Manda Holmshaw.

“Despite the fact that so many people suffer from mental health difficulties – more so than any other physical condition – the insurance industry has always been very cautious, possibly owing to a lack of information on the subject.”

QBE rehabilitation adviser Bronwen Williams believes it is important for the sector to adopt a holistic approach to rehabilitation. “When people have been injured, there has traditionally been a focus on the physical side of things because it is tangible and more noticeable,” she says. “Psychological symptoms can be more subtle, there can be a stigma, and that is one thing the industry needs to be aware of.”

This can lead to a wait-and-see approach to psychological rehabilitation and late referrals. Hill explains: “The typical lag between people being in an accident and a referral for treatment is around 18 months.

“Like with any type of rehab, the earlier the injury is treated the better. We are aware that insurers want to sit back and see how things develop, but a referral for treatment within 12 months of the accident would leave us in a better place to be able to assist and get things turned around.”

According to Hill, the average damages awarded for a case of PTSD that is treated between six and 12 months of a critical event stands at £1,925. The figure rises to £8,083 for cases of PTSD untreated for three or more years after an incident. He adds that if the claimant is treated earlier, it can keep damages within the minor category of the JSB’s guidelines (£2,600-£5,400).

“Early identificaion is key,” adds QBE’s Williams. “This can prevent chronic conditions from developing, which could then result in a prolonged treatment period.”

Stumbling blocks

However, there are a number of challenges confronting insurers when it comes to grappling with psychological injuries and ensuring that they secure the best medical advice.

For example, Dr Holmshaw believes that up to 30% of cases of PTSD can be misdiagnosed by medico-legal professionals, leading to unnecessary and incorrect treatment. “It prolongs the claims cycle when claimants are diagnosed with PTSD and they actually have travel phobia.”

She adds that a case of travel anxiety is much more straightforward to treat than PTSD and is much less costly in terms of damages. As a result, she warns that insurers need to be careful about selecting their medical experts and rehabilitation providers, and to take note of their approaches to treatment.

In particular, she urges insurers to avoid the use of critical incident debriefing, a form of therapy offered to a group after a traumatic experience that encourages them to talk about their experience. While this has been a popular approach following critical incidents, she points out that studies have shown that the therapy can exacerbate the traumatic experience by encouraging the person to relive it.

She says: “Studies on the reaction to 9/11 show that people who had early counselling as a group did worse later on when compared to people who didn’t have it,” she says. She argues that a low-key approach offering ongoing support can be a better – and more cost-effective – option.

Farrell believes that, ultimately, insurers need to promote their provision of psychological treatment as a benefit of the policy they have sold, especially as pressure on public sector purse-strings curtails the quantity of treatment available from sources such as the NHS and charities.

He says: “This should be seen as one of the benefits that insurers are providing, so it is not seen as claims mitigation, but rather as supporting the individual when something goes wrong.”

In addition, the provision of this form of rehabilitation can be effective in rooting out fraudsters. “After referral, around 27% of people drop out because just having a psychological assessment makes them think ‘how am I going to keep this up?’. They have to be consistent, and even if they have done a lot of research, it is really difficult to do that,” says Dr Holmshaw. “If one does a psychometric test every three or four sessions and someone never gets better – even if things are going really well – you know that something is up.”

On the up

Commentators agree that insurers need to be primed for an increase in psychological claims.

“No-win, no-fee claims have increased not only around personal injuries but also for psychological injuries, and that is going to push up claims costs,” Farrell says.

“It is not that people are now more traumatised than people who had accidents before; there is just a lot more awareness. Trauma is the new stress,” he says.

Farrell adds, however, that while early intervention may be key to reducing the overall cost of psychological claims, insurers should embrace early intervention because, ultimately, “it is the right thing to do”.

As Buncefield victim Lishman points out, the right course of action can help troubled claimants regain their quality of life.

“It has helped me enormously. It has really changed the way I cope with the disability and the discomfort that I have been left with,” he says of his treatment.

“I can prepare myself for situations that two years ago would have left me in a right state. I can now manage things a lot better.” IT