People with mental health problems charged nearly 27 times more for insurance products – leaving many going without vital financial protections
8 February 2023
- People with mental health problems are facing sky high insurance premiums, reduced cover or are being refused insurance altogether — sometimes even when their conditions are stable and manageable.
- This is the warning of new research by the Money and Mental Health Policy Institute. It shows these factors are leaving people unable to afford insurance, more exposed to financial risk and experiencing unnecessary distress during the cost of living crisis.
- The research raises concerns that some firms could even be breaking the law and discriminating against people with mental health problems by failing to base their decisions on accurate data.
- The charity is calling on the Financial Conduct Authority to urgently investigate whether insurance firms are making fair decisions about customers with mental health problems — and to punish those which are not.
The new Money and Mental Health research highlights the difficulties people with mental health problems face when navigating the insurance market — from accessing products to disclosing a mental health problem to providers and challenging decisions.
As part of the research (which was supported by a grant from the Which? Fund), Money and Mental Health conducted a mystery shopping exercise of fifteen travel insurance providers, to test how disclosing a mental health condition impacts on the price and quality of insurance offered (1).
In particular, the charity examined how the options offered by insurance firms differed for customers with depression and bipolar disorder, compared to those without mental health problems. It also looked at how options changed depending on the severity of a mental health condition, and whether it was historic or ongoing.
The results of this exercise highlight worrying outcomes for customers with mental health problems:
- Premiums often sky-rocket after a customer discloses a mental health condition, sometimes even when the condition is stable or historic. The testing shows that someone with severe depression is being charged an average of three times more than someone with no medical conditions. This jumps to an average of eleven times more for someone with severe bipolar – with some people with this condition having to pay prices that are twenty-seven times more than a person with no medical condition.
- Shockingly, some people are seeing their premiums more than double even when they haven’t experienced symptoms in over five years. The testing suggests that some insurers view people as more ‘high risk’ when they are receiving treatment or taking medication – when it may actually indicate that someone is managing their condition well.
- Many insurers exclude mental health conditions from the cover they offer, without reducing prices. 5 out of the 15 insurance firms included exclusions for mental health conditions, without reducing the price of the insurance product — raising questions about whether people with mental health problems are getting fair value from insurance products.
- Insurers are often declining to offer protection to people with more severe mental health conditions. In the mystery shopping exercise, 9 out of 15 firms refused to insure a customer with severe bipolar disorder. This raises concerns that many people with severe mental health conditions will not be able to access vital travel insurance.
Further surveys of 292 people with mental health problems carried out by Money and Mental Health show these issues are not confined to travel insurance, and are common across the insurance industry (2).
Many research participants say that eye-wateringly high premiums are leaving them struggling to afford insurance or going without vital cover. This is causing serious distress and anxiety for many people, as well as leaving them more exposed to financial harm.
People also say that the negative outcomes they have received have discouraged them from telling insurance providers about their mental health problems in future. Some research participants were clear that they felt they had been discriminated against.
By law, insurers are allowed to treat people with disabilities (including mental health conditions) differently when it comes to pricing decisions and what cover is offered – but only if these decisions are backed up by accurate and up-to-date information. Given the lack of transparency from the industry about what data it uses, Money and Health is concerned that some firms could actually be breaking the law over pricing decisions for people with mental health problems.
Money and Mental Health is calling on the Financial Conduct Authority (FCA) — which regulates financial services — to urgently investigate whether people with mental health problems are being unfairly penalised by insurance providers, and to ensure that insurance pricing decisions are compliant with key financial regulations and legislation like the Equality Act 2010.
The FCA should also set out specific expectations for the industry around how firms can provide fair value for customers with mental health problems, particularly where cover excludes their mental health.
Money and Mental Health is also urging insurance providers to be more transparent about how decisions are made about customers with mental health problems. Firms should ensure that these decisions are based on up-to-date data which reflects the fact that people can manage and recover from mental health problems.
Commenting on the research, Helen Undy, Chief Executive of the Money and Mental Health Policy Institute, said:
“The insurance industry sells peace of mind, but that’s not on offer for many people with mental health problems, who may arguably need it most. Across many types of insurance, people with mental health problems are facing really poor outcomes. It’s hard to believe that these extortionate premiums accurately reflect the risk to insurers, especially when people who have been able to manage their condition for years are still being charged significantly more.
There is a real sense among people with mental health problems that they’re not being treated fairly – many even say they feel discriminated against by insurers. Not only is that causing unnecessary distress, it is also leaving people more exposed to the risk of financial harm during a cost of living crisis.
“These insurance firms are still making their pricing decisions behind locked doors – in a way that is almost impossible for researchers, consumers or even politicians to hold to account. It’s about time that the regulator took decisive action to show that protecting their commercial interests does not put firms above the law.”
Martin Lewis, Founder of the Money and Mental Health Policy Institute charity, said:
“Insurers have always profited from a grey fog of confusion that covers their prices. With each person often getting a bespoke quote, it creates an easy breeding ground for discrimination, and it is tough for any individual to be able to prove they have been harshly treated.
The injustice behind that is heightened when the people who may be facing unfair discrimination are vulnerable. That’s why Money and Mental Health’s research is so important – to gather wide scale data which indicates those with mental health issues are sometimes being penalised, unfairly, possibly illegal and resulting in them paying extortionate prices.
The regulator has already taken action to stop existing insurance customers being discriminated against, by having to pay more than new customers. So now we’re loudly calling.“
To set up an interview or for any other media enquiries, please contact Rachel Fergusson, External Affairs Officer at Money and Mental Health, on 07935 216 804 or firstname.lastname@example.org.
Notes to Editors
- Mystery shopping exercise of 15 travel insurance providers conducted in August 2022. To understand the scale of the issue across the sector we looked at a range of different firms, including five larger providers, another five who specialised in pre-existing medical conditions and five smaller providers. Eight different ‘personas’ were tested across all the providers and more in-depth options were tested with three. This allowed us to keep other characteristics like age and destination constant, while only varying people’s health conditions to explore the impact on price and quality.
- Two surveys were carried out with members of the Money and Mental Health Research Community, a group of nearly 5,000 people with lived experience of mental health problems. We carried out our first survey of 157 people between 6 and 20 March 2022 on people’s experiences of buying and using insurance. A second survey of 211 respondents was conducted between 12 and 24 August 2022, digging into some key issues in more detail. 292 people took part in at least one survey.
About the Money and Mental Health Policy Institute
The Money and Mental Health Policy Institute is an independent charity set up by Martin Lewis, and committed to breaking the link between financial difficulty and mental health problems. We conduct research, develop practical policy solutions and work in partnership with both those providing services and those using them to find what really works. www.moneyandmentalhealth.org
Which? is a not-for-profit organisation wholly owned by the Consumers’ Association (registered charity no. 296072). The Which? Fund is funded by the Consumers’ Association, and supports research projects aiming to improve understanding of the consumer harms affecting diverse and disadvantaged communities, including in digital markets, and to develop evidence-based solutions to these issues. More information is available at: https://consumerinsight.which.co.uk/which-fund.