Canada: Life Insurance And Mental Health

Last Updated: September 30 2019
Article by Tom Macmillan

Last month, CBC News published an article about an Ontario man, Robert Pugh, whose application for life insurance was denied on the basis that he suffered from generalized anxiety disorder.

The 32 year old advised Sun Life Financial that he took medication and CBD oil for the condition, under the supervision of his doctor, and had received treatment since his late 20s.

What made the story interesting, in part, was the fact that it was published at all. It is accepted practice that life and disability insurance policies differentiate between individuals on the basis of past medical history. If an applicant has a history of diabetes, for example, she can expect to pay more in life insurance premiums.

It comes as no surprise to the public that individuals with certain terminal conditions are denied life insurance altogether.

For some reason, however, the fact that Mr. Pugh's application was denied caught people's attention. It may well be that the uncomfortable feeling aroused by Mr. Pugh's situation has to do with the fact that the increasing public acceptance of mental health issues has come hand-in-hand with the expansion of the concept of human rights into the minutiae of our civil society.

A generation ago, public discussion of 'human rights' was more likely than not to relate to religious persecution, intrusions on liberty, or suffrage.

Fast-forward to 2019, and the 'human rights' cases we hear about in the news often relate to the dismantling of systemic barriers to inclusion within civil society, and very often to the provision of services to individuals.

Seen in this way, the transparent discrimination based on mental health in the context of an application for insurance may strike some as jarring. The story raises interesting questions about how it is that we conceptualize disease, insurance itself, and the extent to which the insurance industry is premised on a fragile tolerance of risk and payment.

Differentiation Permitted

It may initially come as a surprise to some that the Ontario Human Rights Code explicitly permits insurers to differentiate on the basis of age, sex, marital status, family status, or disability, when entering into a contract of automobile, life, accident or sickness, or disability insurance. Section 22 of the Code specifically sets out this exception for insurers, so long as such differentiation is reasonable and based on bona fide grounds.

The Supreme Court of Canada in 1992 addressed the issue of differentiation amongst insureds in the case of Zurich Insurance Co. v. Ontario (Human Rights Commission). That case was a challenge to the insurer's policy of charging higher premiums for automobile policies insuring men under the age of 25.

The Supreme Court agreed with the Ontario Court of Appeal that an insurer is permitted to discriminate based on age in this context. The Court noted that the Code permits such prima facie discrimination, so long as it meets the standard of being reasonable and based on bona fide grounds.

In support of the reasonableness of Zurich's policy, the Court pointed to actuarial evidence which showed that single male drivers aged 25 or younger represented the highest claim frequency, highest loss per car insured, and highest average claim cost of any category of driver.

Interestingly, the Court rejected the suggestion that there exists a reasonable alternative to the insurer's policy of charging increased premiums. It was argued that it would be simple for the insurer to have the category of young male drivers subsumed by the wider pool of insureds, so that the risk and premium burdens would be shared more equitably throughout the pool.

In rejecting this suggestion, the Court indicated the following:

If the premiums of Mr. Bates' class are arbitrarily spread out amongst other classes, the net effect of this change is that drivers in other classes will be forced to subsidize further a group of drivers who already fail to pay premiums sufficient to cover their insurance losses...

What is noteworthy about this passage is that it appears to challenge one of the foundations of the concept of insurance itself. It questions how far it is that we are prepared to share risk.

This question is of paramount importance when considering whether, for example, we wish to set up a system of insurance that prevents differentiation on the basis of a pre-existing diagnosis for generalized anxiety, and whether we are ready and willing to share more widely the risk and premium burden of that group.

Shared Risk

While the Supreme Court refused to entertain the suggestion that the insurance risk posed by young male drivers should be shared more broadly than was the industry standard at the time, the idea of shared risk is the necessary underpinning of the concept of all insurance.

Insurance is shared risk, and our current system of insurance relies on some amount of subsidy from low-risk to high-risk insureds. In the automobile context, this means that low-risk drivers in general subsidize high-risk drivers. In the life and disability insurance context, this means that young and healthy individuals in general subsidize others.

Looking at the hypothetical extremes of a group risk model, on the one hand we have a system with no insurance. In such a world, each individual bears her own risk for disaster, be it in the form of having to pay for damages caused by her negligence, or having to pay the entire cost of some misfortune that befalls her.

At the other end of the spectrum is blanket insurance coverage, borne equally by all and available to all. In this system, there would be no differentiation of premiums; a low-risk individual pays as much as a high-risk individual.

Our current life insurance model lies between poles. Insurers are permitted to differentiate between individuals on the basis of perceived risk. The issue, of course, is to come to terms with how much differentiation we wish to tolerate as a society, as the more widely and aggressively such differentiation is employed, the closer we get on the spectrum to the model where risk is no longer being shared by the group, but is instead borne by each individual.

A purist may ask why it is that any differentiation should be tolerated. If insurance is the spreading of risk across society, is it not more true to the form of insurance that everyone (or almost everyone) be covered, with the risks and premiums being shared evenly? Would the costs of such a model not be outweighed by the benefit of ensuring that there is appropriate coverage for all potential personal disasters?

The answer to 'why not' may lie in the extent to which self-interested individuals are prepared to buy into a system of equally-shared risk. Most people do not give much thought to the extent to which they may be subsidizing other individuals who may be higher risk, but when they do it may be accompanied by a sense of unfairness on the part of low-risk individuals who feel that they disproportionately contribute.

The true value of allowing for differentiation may then be to placate those who feel that they are unfairly over-contributing to the pool of insurance funds. In other words, the answer to, 'why am I paying so much for insurance which is mostly being used by others?' can be answered by, 'you are paying much less than you would were you a higher-risk individual.'

Without some amount of differentiation to quell such grumblings on the part of low-risk contributors, then when premiums are too high there could be a risk of widespread opting out. If a sense of excessive unfairness starts creeping into the system, there is a risk of it crumbling.

This underscores the fragility of a system of insurance that relies on optional participation. While contributors to the insurance pool are prepared to abide by some level of disproportionate payment on the risk that some misfortune may befall them, there is a point at which individuals want some reassurance that they are paying less than higher-risk individuals.

There may be an element of cynicism in this view of our loose loyalty to collectivism, but it is this author's opinion that self-interest is clearly a part of the policies surrounding insurance funds, and that a degree of differentiation is a tool to ensure acceptance by individuals in a system of shared risk – and shared cost.

More Precise Differentiation, Not Less

So where does that leave individuals like Mr. Pugh, and why was his application rejected outright?

A 2016 study from Cambridge University on mortality rates among people with anxiety disorders revealed that such disorders significantly increased mortality risk. Such scientific support would likely be enough for Sun Life to justify differentiation under the Code, and may well have formed the basis for the insurer's refusal of the application.

Why wasn't Mr. Pugh told that he could purchase coverage at an increased premium? An optimistic view is that our understanding of mental health issues is still in its infancy, and that with further time and study, science will gain a more complex and nuanced understanding of the magnitude of risks involved. Insurers assessing risks and setting premiums may then follow suit.

As there are varying levels of risk with different cancer diagnoses, it appears unlikely that in the future all sufferers of generalized anxiety will continue to be completely denied life insurance.

It is unlikely that there will be an overhaul of the system of differentiation to a more egalitarian model. The more likely outcome is more precise differentiation by insurers on the wings of more understanding of mental health concerns.

Rogers Partners LLP is an experienced civil litigation firm in Toronto, Ontario. The firm represents insurers and self-insured companies in numerous areas, including motor vehicle negligence, occupiers' liability, product liability, professional negligence, construction claims, statutory accident benefits, disability benefits, municipal liability, medical negligence, sexual abuse, and insurance coverage disputes.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

In association with
Related Topics
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions