More young applicants are reporting mental health challenges, but should that be a mark against them?
Pulling data from 18,000 customer interactions in Q4 of 2025, online insurance platform PolicyMe recently published a snapshot of Canadian term life insurance. Many of the trends they highlighted could be seen as reassuring. Canadians, for example, seem to be using term life insurance as intended, favouring coverage of around $500,000 and 30-year term lengths between the ages of 18 and 44, while they’re accumulating savings and building their lives. That coverage amount and term length starts to dwindle as they age, reflecting less need for that coverage. All very straightforward.
What may be less straightforward is a growing incidence of mental health conditions among Canadians applying for term life insurance. 51.3 per cent of Canadians who provided medical data reported experience with the diagnosis, symptoms, or treatment of at least one medical condition. Mental health conditions, however, are the single most common kind of medical condition reported by Canadians aged 18-29 and aged 20-44.
“Mental health disclosures are a lot more prevalent now in younger demographics than they are in the older demographics, which is really interesting to see. And I think from a sociological standpoint, is consistent with what you might expect with, Covid, isolation, and social media, and all these different trends that have been occurring publicly that are decreasing connectivity with others and social interactions,” says Andrew Ostro, Co-Founder & CEO of PolicyMe. “From an insurance perspective, I think it demonstrates a need to rethink the price a little bit. I mean, underwriting rules in general.”
Traditionally, Ostro says, products have been priced based on historical data trends around what has led to mortality in the past. Major changes in the kinds of conditions that people report, especially between age groups, could prompt a rethink of how predictive those models actually are. Ostro fears that the continued view of all mental health conditions as an indicator of higher mortality could result in more “false declines” where clients are left without coverage when they shouldn’t be.
If insurance companies use the wrong rule sets of use data that’s no longer relevant, there could be clients declined who should be approved and approved who should be declined. Many of the medical conditions reported by older people, for example, roughly line up with physiology. Higher incidence of cancer, for example, fits with people living longer. The mental health trend, however, may represent the lifting of generational taboos and a greater capacity to discuss these conditions without stigma.
Certain mental health conditions, such as deep depression, schizophrenia, and bipolar disorder are all still correlated to suicide and other physical health conditions that can lead to higher mortality rates. Ostro contrasts those more severe conditions with more low-level conditions like anxiety. Clients may report something like anxiety more frequently because they’re seeking help to manage it. That treatment could function as a form of preventative medicine, keeping anxiety from developing into a more severe mental health condition. Ostro likens that kind of therapy to seeing a personal trainer to help maintain physical health. He notes, however, that the insurance industry might not always be set up to adapt to these changes.
“If people are defining mental health differently now than they did. 20, 30 years ago, then you need to rethink the rule,” Ostro says. “The types of the types of mental health conditions have changed a lot. And it requires a pretty large rethinking of how to approach the problem. And that's something the insurance companies are typically not great at.”
Ostro says that insurers tend to require extreme confidence to change their underwriting rules. He argues, though, that this could prove counterproductive. If the underwriting model doesn’t change quickly enough it can result in the wrong decisions being made and new risks being overlooked by the insurer. Insurers do need to be careful about mental health, given most policies only have a suicide inclusion for the first two years, but he believes there should be a better understanding in underwriting policy that treatment for certain mental health conditions could actually be viewed in a positive light. The
For financial advisors working with their clients on life insurance policies, Ostro says that certain carriers have been quicker to respond to changing mental health views in their underwriting policies. He notes that where a decade and a half ago any disclosure of marijuana usage would be viewed as a sign of a risky customer, it is now viewed in much the same way as controlled alcohol consumption. Ostro believes that advisors can seek out those more flexible underwriters and act as advocates to push more conservative insurers to rethink their approach to mental health.
“I think we’re probably in that sort of period where some carriers are moving quicker and others are seeing that and catching up,” Ostro says. “It’s important for financial advisors to be aware of who’s leading the charge here. Ask your wholesalers or the underwriters that you work with about carriers’ approach to mental health, that will help quite a bit.”
