Punished for being honest: insurers lay stress trap

Those with ‘psychological equivalent of common cold’ see premiums double. By Adam Williams

Insurers have been accused of unfairly penalising customers who have suffered from everyday stress and anxiety during the pandemic.

Honest consumers have had thousands of pounds added to the cost of their insurance policies after admitting they have been stressed during the coronavirus crisis. Doctors said the harsh rules incentivised applicants to lie to avoid higher prices.

Medical experts said questions asked by insurers could also dissuade people from seeking medical help for fear they would be denied insurance in the future.

Insurers require customers to disclose known medical conditions so they can provide an accurate quote for cover. But doctors say the questions are worded in a way that means applicants must declare even minor problems such as everyday stress, with which the vast majority of the population will have suffered, rather than just clinically diagnosed conditions.

When stress or anxiety is divulged, premiums can more than double as insurers deem there to be a higher risk of suicide.

Fairer Finance, a consumer campaign group, analysed quotes for a £200,000, 25-year life insurance policy for a healthy 35-year-old man, comparing policy prices where customers declared minor stress issues against those where they did not.

Budget, an insurer, more than doubled its quote from £10.92 to £26.73 a month once stress was declared. Virgin Money Insurance increased its monthly premium from £11.11 to £16.48, while Beagle Street quoted £16.73 rather than £11.27, a 48pc increase in both cases. Canada Life’s premium increased from £11.51 to £16.26 a month, a rise of 41pc.

Dr Elena Touroni, a psychologist at the Chelsea Psychology Clinic, said most people had faced stress and anxiety during lockdown and such a common experience should not be penalised by insurers. She feared it could deter people from getting medical help for more serious conditions.

“This is really worrying,” Dr Touroni said. “When the need arises, it’s important to tend to your mental health as early as possible. It’s important for insurance companies to create a user journey that doesn’t lead people to avoid seeking the appropriate help.”

James Daley of Fairer Finance said the financial impact could be substantial. “These are 25-year policies, so if you multiply the change in premiums by 300, that’s how much extra someone would pay in total over the course of the policy,” he said. “In the case of Budget, that’s almost £5,000 more.”

Budget and Beagle Street, which are owned by the same parent company, said: “The vast majority of people who disclose anxiety or stress are able to obtain life insurance with no extra premium.” Virgin said it “worked hard to offer competitive prices”. Canada Life declined to comment.

Those who have suffered from diagnosed mental health problems can face punishment even if they have recovered. In some cases the presence of a doctor’s note has not been enough to change the insurer’s decision.

One Telegraph Money reader, who wished to remain anonymous, said his premiums rocketed after a short period of work-related anxiety. Despite 18 months having passed and his psychiatrist having declared the episode over, his insurer demanded an increased premium of £218, £72 per month more than previously.

Dr Stephen Pereira, a psychiatrist, said many of his patients feared they would be refused insurance in the future. “The stigmatisation of people who seek help is forcing good and honest people into a position where they are considering lying, and that is not right,” he said. “Mild conditions should be seen as a cough, cold or fever. This is the psychological equivalent of a common cold.”

Not all insurers were found to have penalised customers who declared minor stress or anxiety. Scottish Widows, HSBC, Aegon, LV and the Post Office all returned the same price, Fairer Finance found.

Dr Nick Johl, a clinical psychologist with Cambian Healthcare, said he was concerned about invasive questions. “The more these insurance companies pick and prod our mental health history, there is an increased chance of clients not disclosing key information or going to other providers. More importantly, it could increase stigma around the implications of having mental health difficulties,” he said.

The Association of British Insurers said it planned to introduce a new set of industry standards next month to “improve accessibility, the application process, communication and transparency around decision making for people with mental health conditions”.

Insurance customers have also reported problems when they have tried to claim on their policies during the pandemic. Which?, the consumer group, found that insurers had tried to shift liability to other companies such as airlines, holiday firms and banks.