A risk not worth taking

Homosexual men who aren't shunned by insurers face much higher premiums. Jean Eaglesham reports

QUEEN VICTORIA would not have been amused by last Friday's World Aids Day, had she been around to witness it. But she would have found a disconcerting echo of the attitudes of her age, and ample evidence for her view that lesbians simply do not exist, in the discriminatory approach adopted by the financial services industry towards gay people.

While, for example, the insurance industry's post-Budget machine is gearing up to sell ill-health insurance (called PHI) on the back of the new tax breaks announced by the Chancellor, Kenneth Clarke, many of the same companies are, legally, refusing to sell these policies to gay men, even though HIV/Aids and related illnesses are normally excluded anyway.

PHI pays you an income, tax-free in the wake of the Budget, if you cannot work because of ill health or disability. It is becoming an increasingly mainstream product, following the severe cuts in state invalidity benefit last April. The policies are often riddled with exclusions and premiums from the same company vary widely, depending on the policyholder's sex, age, health and occupation.

Like any insurance policy, these variations should reflect the underwriting risk. Women, for example, typically pay 50 per cent higher PHI premiums than men because of the higher incidence of claims, while a deep-sea diver may pay four times as much as an office worker of the same age, sex and general health.

Given this approach, it might seem logical that premiums are higher for gay men, given the higher odds that gay men will contract Aids. Where cover is offered, premiums are generally higher for gay men. But the vast majority of PHI policies either rule out payouts for Aids-related illnesses or retain the right to cancel the policy outright if the policyholder becomes HIV-positive.

Peter Kelly, at Allied Dunbar, justifies increasing premiums for gay men, despite the HIV exclusion, on the grounds that "if you're HIV-positive, there's a higher chance that we'll have to pay out on claims for other, unrelated ailments". But some insurers disagree. Sun Alliance and PPP, unusually, both claim that they subject PHI applications from single men to standard medical underwriting criteria, without usually checking whether the applicant is gay or not.

Insurers who do treat gay men differently for PHI policies sometimes give unusual reasons in their justification. For example, Ivan Massow, at London- based independent advisers Ivan Massow Associates, cites a recent case where Zurich Life refused to insure a doctor who had tested negative for HIV after undergoing a medical. The doctor was gay and specialises in HIV research, so he might reasonably be assumed to know the risks and how best to protect himself.

The reason given by Zurich Life for the refusal was simply that the HIV/Aids exclusion in its policy had never been tested in court. A spokeswoman for Zurich Life said: "We don't have an actual policy of excluding homosexuals, but we do discourage them from applying because we're targeting a family audience." When questioned, however, she added that they were "less likely" to discourage gay women.

In fact, the insurance industry generally takes the approach that homosexuals are solely male. It could be argued that lesbians should get discounted premiums relative to other women on both PHI and life insurance policies. The risk of lesbians contracting HIV, for example, appears lower than average - industry statistics indicate that roughly two-thirds of the Aids- related insurance claims made to date by women come from married women. And since lesbians are less likely to get pregnant or give birth, they might reasonably be expected to retain a better standard of health generally.

But insurers were dumbfounded when asked if they had considered offering lesbians discounts. "How would you demonstrate that they are gay?" asked Peter Wright, at the Prudential, although this identification problem does not prevent the Pru from, as Mr Wright says, increasing the life insurance premiums of "normal [male] homo- sexuals, if there is such a thing" by pounds 3 to pounds 5 for every pounds 1,000 of the sum insured.

Mr Kelly said that discounts for lesbians would be "going a little too far. The life insurance rates for women who are non-smokers are phenomenally cheap already."

A lesbian couple pays 25 to 50 per cent less for life insurance than a straight couple because women tend to live longer. The straight couple in turn could pay, at most, half of what a gay male couple would be charged, assuming the gay couple could get the insurance at all.

Gay men can be charged anything from 50 to 400 per cent higher life insurance premiums than heterosexual men, depending on the insurer concerned, according to Mr Massow. Most insurers routinely send lifestyle questionnaires to any single, separated or divorced man who applies for life insurance to find out, among other things, whether he is gay. The questions include asking how often as well as how many men individuals have slept with. If you say you are gay, Abbey Life, for example, increases the premiums by pounds 4.38 for every pounds 10,000 of cover. This loading would at least double the premiums on a typical life insurance policy.

Single men, whether gay or not, may also find that they are forced to take an HIV test if they want a large mortgage. Both Commercial Union and Prudential, for example, make HIV tests mandatory for cover of pounds 150,000 or more for single men. A test is only required for women and married men for cover of pounds 250,000 or more. By comparison, single women do not receive a lifestyle questionnaire and are not required to take tests any more often than married men or women.

But gay women do not escape so lightly on all financial issues. One pension issue hits gay women and men, as well as unmarried heterosexual couples. So-called widows' pension rights, under which someone nominated by the pension scheme member gets paid a pension after they die, are a much valued and integral part of most good schemes.

But Inland Revenue rules restrict such benefits to the member's spouse or someone who is "financially dependent" on them. Despite paying the same contributions, unmarried couples often have to forfeit this benefit.

A similar problem can apply to personal pension plans, because the insurers may refuse to allow same-sex couples to buy a joint life annuity (an investment, bought with the pension fund, that provides a guaranteed income until both partners have died). Stonewall, the gay rights pressure group, believes this problem also probably reflects uncertainty about what the Revenue means by "financially dependent".

Stonewall campaigned to amend the Pensions Bill to force occupational schemes to allow members to nominate unmarried partners (whether of the same sex or not) for widows' benefits. While the campaign was defeated, Stonewall achieved what it believes is an important breakthrough. The Government said that the limits on who scheme members could nominate for widows' benefits was up to the trustees to decide, and the Inland Revenue would not challenge that decision.

This may mean that more schemes follow in the footsteps of companies such as John Lewis, which allows members to nominate gay partners. But it will still leave many schemes where benefits are restricted to spouses, particularly public-sector schemes, where extension of the benefit would require a change in the law.