Despite mounting pressure on life offices to change current practices, arranging cover for gay men continues to be a thorny issue for underwriters, finds Paul Robertson
In the 1980s the feared epidemic of HIV and AIDS caused insurers to safeguard their portfolios, by raising premium rates and introducing lifestyle questionnaires and HIV testing. The number of people who went on to become infected with the HIV virus was far below the worst-case expectations, and as a consequence, the cost of life assurance has reduced substantially over the last few years as well as risk loading. However, the insurance industry as a rule still requires medical/HIV testing of gay men and has been accused of acting unfairly.
Two grey areas
There are two gate-keeping areas for HIV. One is marital status ' single males are asked to complete a questionnaire and if on that questionnaire he admits he is gay, they are then asked for a medical and an HIV test. Assuming a negative test, until recently an underwriting decision was then made which could also include past details of sexually transmitted diseases and lifestyle ' information not asked from heterosexual clients.
This is set to change due to recent British Medical Association guidelines telling GPs to withhold medical details with no long-term implications.
Phil Carvosso, head of gay specialist IFAs Carvosso & Co, points out there are insurers still loading premiums based purely on sexual orientation, which he does not believe can be justified by the performance on their term books.
'We are a bit weary of gays being included in the same breath as an intravenous drug user. If I were an insurance underwriter I would be more worried about the spread of Hepatitis C at the moment. Insurance is one of the most important aspects of finance for gay men because most have a dual income with no children, and they rely on this income,' he says.
Carvosso has a point. At the end of November UNAIDS, an agency of the United Nations, released data on the disease worldwide. Its conclusion for high income countries states: 'More than half of the 4,279 new HIV infections diagnosed in the UK in 2001 resulted from heterosexual sex, compared to 33% in 1998.' In addition, AIDS mortality rates remain low. A total of 450 people died of AIDS in the UK in 2001.
The reaction of the industry has been to treat immigrants from high-risk countries in the same way as gay men.
Tony Jupp, chief underwriter at Norwich Union Life, explains: 'Over 70% of those who have developed HIV and are heterosexual come from East and sub-Saharan Africa. So there is a question in the application forms that asks if you have lived outside the UK in the last four years. If that answer is 'yes' and they are from a high risk area, then we ask them to have a test.'
He adds: 'What we have to ensure is that we do not take on people who are already HIV positive and get into a situation where we take a premium of someone who we cannot pay a claim to. It is better to understand the situation at the outset than have a difficult conversation later on at the claims stage.'
Exercising caution
Both life offices and IFAs specialising in gay financial planning are wary of revealing the most generous underwriting practices. The life companies wish to avoid anti-selection skewing the risk on their books and advisers wish to keep specialist knowledge specialist.
However, Norwich Union, for example, will not force a client to fill in a lifestyle questionnaire below £150,000 of life cover, which puts them at the generous end of the spectrum. Income protection insurance is a bit easier to come by without testing than life cover, as HIV is usually excluded, so there is no diagnosis issue. If you get HIV you do not get to claim, so there is no need for lifestyle questions. For critical illness (CI) insurance, although it is true HIV is sometimes totally excluded, AIDS often has associated conditions with it which are covered, resulting in the need for questionnaires.
CI cover has become a little easier to purchase without testing. Carvosso says: 'While most insurers are still questioning sexuality from the first pound of cover, we are able to get up to £1m worth of critical illness cover without the need for HIV testing, which is a good step forward.'
This deal is through UnumProvident's Elixia 123 CI policy, however the company is aware of the anti-selection risk.
Eugene McCormack, marketing director at UnumProvident, says: 'We have not designed products to be sympathetic to the gay community. The product is a modern product that is defined in terms of the environment as we understand it now, so it is clean of any reaction to the HIV virus in the past. As a result it is a bit more generous to people in the gay community, as it does not have a lifestyle questionnaire.'
The cover has different trigger levels. All males aged 45 for example, would require a medical at around the £750,000 level. At around £850,000 Unum would be looking at blood tests for everyone.
'The product does not actively act against the gay community. I think the market will follow us in 2003. The issue when designing products is sustainability in an environment where medical conditions have been overtaken by medical processes,' says McCormack.
Two key issues
So what of the future? There are two main issues today. One concerns people with HIV, and whether or not they should be able to get life assurance, currently available in other countries, such as the USA and France.
Richard Walsh, head of health at the Association of British Insurers (ABI), says: 'We are encouraging companies to think about whether or not there is likely to be a market. There are an estimated 33,000 adults with HIV in the UK, but one-third does not know about it. 20,000 is a low pool of people to insure, normally 30,000 would be a minimum, but numbers are rising all the time. This would be quite a long way off as it would be a new product.'
The other issue concerns gay men and the questions they are asked on application forms. The European Discrimination Directive will take force in the near future and is expected to work in the same way as disability legislation. Discrimination will be allowed but only that which is evidence-based and 'reasonable.'
Walsh says: 'We have been looking at industry practice with some of the gay lobbyists and are hoping to expand the current code of practice, but it is still at the talking stage ' not even a formal consultation. We would be looking towards next year before a revised version of best practice came out. There is also quite a lot of variation across the industry in terms of how it approaches this matter, which is what we want to address.'
The ABI is also considering a consumer guide so that people know what they are likely to be asked and why they are likely to be asked it.
Jupp predicts the situation changing. He says: 'I would envisage that if this situation continues to improve in terms of life expectancy, the industry will be putting together short-term policies for the HIV positive. There is always a rate for a risk but it would have to be good value and we would need reinsurance on it.'
A catalyst for this change may be through the courts. Carvosso & Co is questioning the right of the insurance industry under the data protection registrar to ask questions about sexuality.
Carvosso says: 'We are waiting to hear back from the registrar, but you cannot ask someone where they were born anymore or be intrusive on race or creed. We have played nicely with insurers to date to try to make them change the way they underwrite, but we are still getting nowhere.'
Slow pace of change aside, the industry is becoming much more aware it has a need to be seen to be fair and to understand the risks it is putting on its books.
There is a sizeable amount of gay men already insured. Jupp points out that if 8% to 10% of the population are gay then they are taken care of in the general mortality tables and their risks are already inherent in the base rates.
He says: 'The average policy is around £100,000 and 400,000 to 500,000 are written a year, that is a lot of the 'so-called at risk' group covered.'
