Personal finance: A change in policy on HIV risk

UK life insurers currently refuse applications from anyone who is HIV-positive, arguing the risk is too great. Now one company plans to launch a policy which will accept HIV-positive people who can afford its premiums. Paul Slade reports.

The life insurers' first screen for detecting Aids-risk among potential customers is a question in all applications forms asking if you have ever been tested positive for HIV, the precursor to full-blown Aids.

Answering yes to this question means the application is automatically turned down. Single men answering "no" get a follow-up questionnaire asking whether they are in a high-risk group for Aids - that is, whether they are homosexual, bisexual, an intravenous drug user or a haemophiliac. If you belong to one of these groups, your premiums will be increased by an average of 250 per cent.

Ivan Massow, an independent financial adviser whose clients are gay men, argues that huge loadings like these - and he has seen increases as high as 600 per cent - are the natural consequence of some insurers cherry-picking only the low-risk clients they want. Among the worst offenders, he says, are Allied Dunbar, Equitable Life, Royal Life and Virgin Direct.

Mr Massow says: "They just want nice, clean, middle-class, heterosexual, white suburban risk, and they don't want anything else. The big, quality firms like Norwich Union are taking on an unnecessary large proportion of the risk because of cherry-pickers who are saving money by excluding risk. They're not even rebating the full effect of that reduction in risk back to their policyholders, so the premium advantage to the general consumer isn't that great."

Peter Clark of the Institute of Actuaries confirms: "A life insurance company which is offering very competitive premium rates will perhaps only offer those rates for people in very, very low risk categories. An office with less competitive rates may be easier about the broad range of people to whom they will offer those rates."

There is no central guidance on what loading offices should apply to high-risk groups. Mr Clark says: "It's a commercial matter for each insurance company, based on its own assessment of the risk and, where available, its own statistics. Historically, life companies have taken different approaches to these issues."

While some gay men are tempted to deny their sexual orientation when completing policy application forms, the danger is that an insurer will reject any subsequent claim, even if the death on which a payout is being claimed is unrelated to Aids.

There has been good news in the Aids statistics lately, as new drugs show good results. Figures from the Terrence Higgins trust show that the number of Aids cases diagnosed fell by 31 per cent in the year to September 1996, and the number of deaths fell by 38 per cent in the same period. There are about 16,000 people in the UK who are HIV-positive, but yet to develop Aids.

The biggest improvement in the mortality figures came from gay men, who are most likely to have their HIV infection diagnosed early enough for new treatments to work in delaying the onset of Aids. But insurers will want to see evidence of sustained improvement over years to come before reducing their loadings as a result.

Mr Clark - also chief actuary at Sun Life - accepts that the industry's early calculations of Aids risk took too gloomy a view. He says: "The projections that actuaries produced 10 years ago have, I'm very pleased to say, have been shown to be unduly pessimistic. Since then, there has been a number of positive reactions by life offices and quite a significant number of cases of loadings being reduced."

Mr Massow disputes this, saying his clients have seen little difference in insurers' attitudes. "Insurance and mortality tables are notoriously out-of-date," he says. "New diseases like Aids baffle the insurance industry a bit whenever they get better or worse."

Insurers in South Africa and parts of America already offer policies for HIV-positive clients, although the take-up has so far been limited because of the high premiums involved.

Malcolm Tarling of the Association of British Insurers says: "I know these schemes haven't been wildly successful overseas because the demand's not been that great. It's fairly short-term cover, and it is very expensive."

Now Pinnacle Insurance, a UK niche player which has so far specialised in products such as payment protection insurance, has plans for the UK's first policy for HIV-positive people, which it hopes to have on the market by July. The premiums to be charged and the cover on offer have yet to be finalised.

Pinnacle's marketing director, Graham Bolton, says: "As a concept, we're very happy to underwrite all risks. But we're looking to make available a product that does pay out, and clearly there's a price to the risk. Obviously, the more competitive it is, the more we're going to sell."

Mr Massow is sceptical about the Pinnacle policy's chances, and suspects it will amount to little more than a funeral expenses plan. He says: "I don't think it will work in the UK, because there aren't enough people who are HIV-positive, and it will be too expensive for those who are - especially if they're gay men, who don't have any dependants. I just don't know how much demand there's going to be for it."

He is currently working with sympathetic MPs in the hope of introducing legislation which would make it illegal for insurers to load premiums purely because of the applicant's sexuality. But until he succeeds, if ever, gay people will continue to face discriminating policy charges simply by telling the truth about their sexual orientation.