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Family medical history at centre of insurance dispute

A DISPUTE has arisen in the insurance industry about the extent to which someone's family medical history is being used to deny them certain types of insurance cover.

One of the industry's smaller companies has argued that the practice of delving into people's family histories is rife among providers of income protection insurance, which pays out if you are off work due to sickness, and is leading to discrimination.

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Simon Burgess, managing director of insurance company British Money, has written to Martin Wheatley, the chief executive of the city watchdog, the Financial Conduct Authority (FCA), to complain. He says that income protection providers "discriminate on 'health by association' via intrusive medical questionnaires".

Burgess says "Providers ask for information about the health of other family members and use this as the basis for accepting or rejecting applicants".

He describes the practice as "institutionalised discrimination" and asks for the FCA to abolish it in the same way as differences in premiums between men and women have been scrapped.

The insurance industry does not deny that information about family illnesses may be taken into account. Malcolm Tarling of the ­Association of British ­Insurers says "Insurance is all about risk assessment … (Insurers) will be as clear and transparent as possible so that customers understand what they need to disclose and why - such as for example with health and life insurance why your family history may impact on the risk of you needing medical treatment or your life expectancy."

However, whether this leads to people being refused policies is another matter. Kevin Carr, chief executive of the Protection Review, which monitors and promotes the protection industry, says "We cannot think of one example where someone's family history has led to them being automatically denied income protection insurance. They may be asked to pay a higher premium if the insurer thinks there is an increased risk of them suffering the same health problem or they may have a certain condition excluded but they will not be denied cover."

Roy McLoughlin, a specialist protection adviser at financial consultants, Master Adviser, who has spent more than a decade advising consumers on income protection says insurers are more interested in the applicants themselves. He says "It is the individual's own state of health that insurers focus on. Bad-back and cancer sufferers may get turned down but if people go to a specialist adviser who knows the right companies and can fight their corner, then rejection is less likely."

This sentiment is echoed by the chief executive of one of the UK's largest protection advisers, LifeSearch. Tom Baigrie says: "Cover can still be available, even for those with risky occupations or existing medical issues in the family. Some of the smaller insurers, such as friendly societies, which people won't typically find by shopping around online, specialise in these areas. An independent expert can help to find the best cover at the right price."

Mr Burgess believes that people applying for income protection should not be asked intrusive or intimate medical questions, or penalised for not revealing certain things. He points out that, besides medical discrimination. "There's widespread 'discrimination by circumstance'. (For example) if a person who was raped and had to have an abortion failed to disclose this in an application, a future claim would be rejected. How is this fair?"

He says that for insurers to "discriminate" against people for things outside their control is wrong. He argues "Just because it is a common practice to ask about your family medical history it does not mean that it is fair. There are other ways of doing things. There is portfolio underwriting where groups of employees are insured without detailed questions being asked and where insurers take the rough with the smooth."

However, Carr warns that for insurers not to ask medical questions before issuing policies is not necessarily to consumers' advantage.

He says: "The alternative are products that accept everyone at the same price, but come with a myriad of exclusions, often including pre-existing conditions, which is a form of discrimination itself, and with reviewable terms and conditions."

Over-50s life assurance is an example of a type of policy that will accept everyone without checking their state of health. These are widely recognised as offering very poor value for money except to people who are in bad health. There is usually no payout on death in the first two years, unless it is due to an accident. The amount paid in premiums can sometimes exceed these policies maturity values.

There is not necessarily a need to resort to such poor -value products. Another alternative for people with medical problems that have led to them being refused cover by mainstream insurance companies are specialist insurance providers such as Pulse Insurance Ltd.

The Financial Ombudsman Service received 1421 complaints about income protection last year, almost 50 per cent up on the 950 it received in 2011-12. It upheld 30 per cent of cases in favour of the consumer against 41 per cent two years earlier.

On average the ­ombudsman upholds 58 per cent of complaints, but the figure is distorted by the 80 per cent uphold rate for complaints about card protection insurance.

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