Strain eases on stress victims claim

Insurers face increasing payouts. Michael Drewett reports; 'As stress levels increase, those companies with restrictive definitions will fall further and further behind the times'

PEOPLE who feel so stressed they have to cancel a holiday may in future receive compensation for the cancellation costs.

Most travel insurance policies exclude claims for cancelling a holiday due to stress. However, as stress has become a growing plague for white- collar workers in the 1990s, the Insurance Ombudsman Bureau, which arbitrates in claim disputes, now says this is an "unusual exclusion". And unless such an exclusion is specifically drawn to the attention of someone buying a policy, a spokesman said the Ombudsman would tend to rule in the stress sufferer's favour.

Because the coverage of travel policies is often not explained fully to buyers, the move is a ray of hope for stress sufferers from the world of insurance

Tony Baker, deputy director general of the Association of British Insurers (ABI), says stress is a condition that insurers generally try to exclude from policies or treat with "caution". It has "very high claims potential", says Mr Baker. With holiday policies, insurers are worried that if cancellation due to stress is not excluded it will be open to abuse.

"It is relatively easy to get something from your GP saying you are suffering from stress," says Mr Baker. Insurers have to avoid providing cover for people who might decide to switch holidays at the last minute or decide, for example, that the weather in the UK is not too bad, he adds.

Elsewhere, compensation from insurance can be severely limited and in many cases too big a problem for the stress sufferer to pursue. A big problem arises when an employee gives up work citing personal injury or incapacity. Most people's access to cover for this is through an employer's liability insurance. But the onus is on the sufferer to conclusively prove that it was the employer's fault under "duty of care" obligations to staff.

The modern corporate culture of long hours and increased workloads potentially breach these duty-of-care provisions. However, anyone who has just lost a career through ill health is unlikely to be in the best condition to take on a corporation in court.

Derek Howie, assistant liability manager for Eagle Star, says: "In general, employers' liability cover is a back-stop against successful litigation by an employee. It is entirely different from private cover where - in theory at least - if your condition qualifies under the scheme rules you should get paid. The difference is the proof of 'fault' rather than simply acknowledging the existence of a condition."

The alternative is to claim under a private policy - what is typically called permanent health insurance - if you have one. These policies replace a proportion of an individual's income if you can no longer work, and if a doctor will confirm the condition. But even they have pitfalls. Some companies will pay simply if you cannot return do your current job. But others pay only if you are "unable to perform any occupation" that is particularly onerous. Others switch to the less generous provision after a year or two.

Most of the disputes that come before the Insurance Ombudsman centre on such changes - where your claim is paid for perhaps two years and the insurer then turns round and says you should be doing something else. "In some cases, that is fair enough, but where genuine psychiatric counselling is involved, it can be quite a blow. Stress disputes are some of the most difficult we have to adjudicate on," says the Ombudsman's spokesman. The clear advice from the Ombudsman is to confirm exactly what definitions apply to any policy you have or are thinking of buying. If the contract does use the better definition of "own occupation" how long will it pay for? What are the terms of any earnings-related rule? (such as payments up to X per cent of previous income).

Insurers will also often demand more than the report of your GP, and pre-existing stress-related conditions will often bar you from being able to take out a policy - or to take one out at a reasonable premium.

The ABI defends insurers' tendencies to use exclusions and caution for covering stress on the grounds of discouraging fraud and reducing the price of cover overall. But some argue that insurers should be more enlightened.

Kevin Pearce, a specialist at Allied Dunbar (which incidentally uses an "own occupation" definition with an unlimited timeframe), says: "Stress is the great modern illness. Stress-related claims are increasing noticeably ... the National Curric- ulum changes have resulted in many more teachers suffering stress problems, and in many cases the Department of Education and Science is simply pensioning them off.

"As cultural attitudes change, we are also seeing a long-term trend for individuals to at least admit they might be ill. If the insurance you buy is not to add extra stress one or two years down the line, make sure it covers what you thought it did. As stress levels increase generally, companies with restrictive definitions will fall further and further behind the times."

Sun Alliance is one of the few companies to offer cheaper life insurance rates for what are called preferred lives. It introduced "lifestyle" discounts earlier this year for non-smokers who drink moderately, are within defined weight-to-height ratios and who are less exposed to stressful environments.

And by more differentiation of rates between good and bad stress risks, the hope is that insurers could be a force in reducing overall levels of stress.