The Money and Mental Health Policy Institute has found examples where customers were denied income protection payouts due to mental health problems, charged higher prices for life cover which saw them go partly uninsured, and denied life cover outright.
In a statement yesterday (February 8), the charity said life insurers could be discriminating against people with mental health problems by failing to base their decisions on accurate data.
Chief executive of the charity, Helen Undy, said: "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."
Undy said "it’s about time" the Financial Conduct Authority took decisive action to show life insurers that protecting their commercial interests does not put them above the law.
I claimed on my income protection insurance. I was denied, because of my mental health...This eventually led to me losing the home I'd bought. I'm now homeless.Life insurance policyholder
Earlier this week, the FCA sent life insurers a letter outlining their responsibilities under the incoming consumer duty.
The regulator said firms need to consider the diverse needs of their customers – including those with characteristics of vulnerability – at every stage of the product or service lifecycle.
In its research, the Money and Mental Health Policy Institute spoke to 292 people with lived experience of mental health problems about life, motor and home insurance.
Across both general insurance and protection, the charity identified a common theme of higher premiums and a higher likelihood of cover being denied.
"I claimed on my income protection insurance. I was denied, because of my mental health," one person said.
Another said: "I had to declare [my mental health problem] as part of getting income protection and life insurance, in a medical interview. It was really nerve wracking and I was turned down by a number of providers due to it, even though it is well managed and has been for a number of years and does not stop me from working."
We are only covered for a percentage of the mortgage cost if we pass away during the mortgage term.Life insurance policyholder