How the insurance market discriminates
By Mike Narouei, Content Producer at Boring Money
2 Aug, 2018
OK, maybe that is a slightly inflammatory title. We know that financial services has its flaws, but even we would stop short of suggesting it deliberately discriminates against certain segments of the population. However, insurance companies are rather fond of taking short cuts, classifying people by their age or state of health, rather than assessing every person individually. This can lead to some erroneous assumptions and some high costs for those who fall into certain categories.
If you are refused cover, or it seems very expensive, two things are important:
Always check why you have been refused
Don’t accept a high premium without doing some homework about your options
These are the areas where you need to be wary:
People who have suffered mild depression or anxiety, particularly those whose medical reports mention suicidal thoughts or self-harm, may be refused life and other kinds of insurance (https://www.theguardian.com/society/2018/jan/19/people-with-mental-illnesses-refused-access-to-insurance-cover). Even if they get cover, they may be charged a higher price because they are deemed a high risk consumer. This can happen even if their mental health problems are some time in the past.
Mind (https://www.theguardian.com/society/2018/jan/19/people-with-mental-illnesses-refused-access-to-insurance-cover) has a list of helpful, specialist insurance groups too.
Anyone over the age of 70 who has tried to get travel insurance, or hire a car, will know that insurers consider age a risk. Unfortunately, the statistics are with them on this – failing eyesight and conditions such as dementia means that older people tend to have more accidents. Between 2014-2016, drivers aged 70 or older were involved in over 12% of serious road accidents even though they only did 7% of the mileage (https://www.homecare.co.uk/news/article.cfm/id/1590559/Police-warn-elderly-motorists-amidst-rise-in-accidents-involving-drivers-aged-over-70).
At the same time, age and infirmity go hand in hand, so your medical, life and critical illness insurance will increase with age. Again, there is probably little you can do to change your insurer’s mind and ultimately, you will probably need specialist provision. Age UK (https://www.ageuk.org.uk/products/insurance/car-insurance/) and Saga (https://www.saga.co.uk/) are the specialists here.
Same sex marriage has resolved some of the historic gay/straight prejudice for financial services companies, but it is a sad truth that non-married partners are not given the same rights as married couples. The problem is mostly around the transfer of funds. This takes a number of forms: you can transfer anything you like to your spouse without it incurring capital gains tax or inheritance tax, but this doesn’t apply to a life partner or ‘common law’ spouse (n.b. this concept doesn’t really exist).
If you don’t make a will, the majority of your estate will go to your spouse, but a non-married partner may get nothing, so this is vitally important. Whether you are married or not, you need to make sure the beneficiary of your pension fund or life insurance is clearly stated on a statement of wishes form – available from your provider. However, it’s more important for non-married partners who may have more problems convincing a pension group that they are the right beneficiary.
Cohabitation agreements can resolve many of these problems. They establish who owns what in a relationship and how they should be divided in the event of the relationship ending. It will also identify areas of potential conflict – childcare responsibilities, bills, mortgage payments – and how they can be resolved. Groups such as Co-operative Legal Services can help you find a solicitor. https://www.co-oplegalservices.co.uk/family-law-solicitors/cohabitation-agreements/
Physical illness or disability
Most recognise that travel insurance is a necessity rather than a luxury – it doesn’t just cover lost luggage, but your medical expenses if you need to stay in hospital or to be flown home. In countries such as America emerging medical expenses can run to hundreds of thousands of pounds. Unsurprisingly, insurers are more reluctant to cover people with existing medical conditions – HIV, cancer – because they are more likely to need treatment abroad. In Europe, an EHIC card can help, but is not a full substitute for travel insurance.
Cancer Research UK has a list of specialist insurance providers (https://www.cancerresearchuk.org/about-cancer/coping/practically/travelling-with-cancer/travel-insurance/specialist-policies-and-insurance-companies)
At the same time, insurers such as Emerald (https://www.emeraldlife.co.uk/) Life specialise in providing cover for LGBT households -and have options such as specialist HIV insurance.
One final thought: if you are getting clobbered by the insurers over cost, only insure if you really need to do so. In other words, if you would lose a life-changing amount of money – as in the case of foreign medical bills – or if there are children who rely on you to provide for them, that is where you need insurance. Consider whether saving up a lump sum might be an alternative if you have the self-discipline not to touch it.