Life (Insurance) After HIV

After learning he couldn't buy life insurance on his own because he is HIV-positive, Mike Grant thought it would be worth exploring whether he might qualify for coverage under a group plan offered by his husband's employer.

"I was thinking, maybe because it's a group plan, just maybe I could possibly get $100,000 of coverage," Grant says.

He was prepared for the possibility that his HIV status might make him ineligible for even a group plan, but he was unprepared for what happened the moment he revealed his status to the employer's insurance broker.

"He was excited because it was going to be a big policy," he recalls. "I was thinking, Great! This is going fantastic. It looks like there's not going to be an issue. Then I said, 'Before we get to filling out the application, you should know I'm HIV-positive.' "

According to Grant, 51, who lives in San Francisco, the broker was visibly taken aback.

"He literally inched back from his desk, went over and closed the door and said, 'Well, I can give you a guaranteed policy, but I can't give you anything else.' "

The broker's tone of voice had gone from convivial to flat. Guaranteed life insurance costs four to five times as much as conventional life insurance. Such policies pay a fraction of the benefit and usually come with an upfront period of two years during which the only payout is a refund of premiums if the insured person dies.

"My husband, who is not HIV-positive, said, 'Well, I don't think I'm going to get a life insurance policy through you either.' "

Grant's story isn't unusual. For decades, aside from high-cost, low-benefit guaranteed policies, for which the only question insurance companies ask is the applicant's age, there hasn't been a life insurance product available to people living with HIV.

What's unique about Mike Grant's story is Bill Grant, his older brother -- a self-described serial entrepreneur who made a respectable fortune in Silicon Valley building a technology-based payment-processing company.

"I know my brother," says Bill, who, after building his successful tech company, became a vintner in California's wine country. "Mike's healthy. He's going to outlive me. I said to myself, 'Something's wrong here.' "

The brothers learned of Mike's inability to get life insurance at a time when the two were starting a new business together along with other partners. For Bill, buying life insurance to protect his business and fellow investors as well as his family had always been one of the basic "must-dos" involved in launching a start-up.

That was in 2009. He was stunned by the lack of access for his younger sibling to a product he had always taken for granted. Bill, who is neither gay nor HIV-positive, knew he had to do something to change the situation for his brother, who is both--and for the untold numbers of people in the same boat as Mike.

Little did he know that that would eventually mean starting a full-service financial products company focused on serving the LGBT community with a special emphasis on offering people living with HIV equal access to individual life insurance for the first time in history.

But what about the conventional wisdom circa 2009 among actuaries, those famously fiscally conservative folks who tabulate things like life expectancy? Isn't it counterintuitive to even consider covering people living with HIV, perhaps even today?

"It is and it isn't counterintuitive," says Aequalis cofounder Andrew Terrell. Aequalis is the LGBT-focused financial-services company he and Bill Grant started two years ago.

At about the time Bill was both frustrated and motivated by his brother's experience, he learned that Terrell was researching mortality data for a hedge fund that was heavily invested in viatical settlements. Viatical settlements became popular as early as the late 1980s among people diagnosed with HIV because they allowed them to "cash out" existing life insurance policies for pennies on the dollar.

"The hedge fund's manager was trying to figure out what to do with these investments, and I was assigned to take a look at them," Terrell says. "The deeper I looked into the data, it actually became obvious that people with HIV were indeed living longer. It was actually a bad investment to bet against insured people with HIV living long, full lives."

Already motivated by his brother's disheartening experience, Bill Grant was excited by Terrell's research.

"When I heard someone was actually looking at this, I decided to come off the bench, get out of the vineyard, and fly to Connecticut for a meeting with Andrew," says Grant. "I said, 'Andrew, tell it to me like I'm a 12-year-old.' "

Terrell laid out the numbers for Grant. They recall the clarity of the mission those numbers commanded. They would do what no one in the insurance industry had previously found the vision or courage to do: unlock the life insurance market for people living with HIV.

"As long as this group of people is ignored, there's a certain stigma that is exacerbated by the life insurance industry continuing to decline people," says Grant, who at the time had no experience in insurance.

After launching Aequalis, they took their data to Prudential Individual Life Insurance along with a fully vetted plan and an agreement from a reinsurer to back it up. It turned out that in 2007-08, Prudential had already done some research into the possibility of covering people living with HIV.

"We came to the conclusion that not all of the individuals living with HIV had the life expectancy that allowed them to be matured," says Prudential Individual Life's chief underwriting officer, Mike McFarland. "But certainly many of them did." (The International Risk Management Institute defines maturation in this context as "the date at which the face amount of a life insurance policy becomes payable by either death or other contract stipulation.")

McFarland says that in North America, the industry-wide stance of not insuring HIV-positive people had created a dearth of mortality data. "There was no credible profile of an insurable individual living with HIV," McFarland says. There were data from Europe and South Africa, where companies have been offering life insurance to people with HIV for years. Still, that wasn't enough to persuade Prudential to hit the play button in the domestic market in 2008.

In business to make money, insurance companies needed a "credible profile" to describe an insurable HIV-positive customer, i.e., one who is not likely to die too early in the life of the policy to be a profitable risk. According to McFarland, there simply wasn't a North American profile.

Then along came Aequalis.

"Aequalis came to us roughly 18 months ago, and they brought with them [reinsurance company] Munich Re, one of our partners, along with mortality data they had already been collecting," says McFarland.

"They are really impressive," he says, adding that Prudential is as committed to serving the LGBT community and people living with HIV as is the staid company's new partner, Aequalis.

According to McFarland, the Prudential life insurance coverage Aequalis is now offering to HIV-positive customers is not a new product--it's coverage already available to any eligible customer. What's new is the fact that the underwriting process no longer disqualifies people living with HIV. Just a few short years into the world of Obamacare, where consumers already take for granted that it's unlawful to be disqualified from medical coverage due to pre-existing conditions, that's not the case with life insurance.

Make no mistake, Prudential's decision to knock down its section of a firewall the life insurance industry erected decades ago to keep HIV-positive customers out is a business decision. The company is now convinced there is money to be made, thanks to the actuarial research provided by Aequalis.

One caveat: People with an AIDS diagnosis are still ineligible for life insurance. Asked whether that includes people who had once been diagnosed with AIDS but whose viral load is now undetectable, McFarland is candid about his unfamiliarity with that distinction.

"If that diagnosis had been made 10 or 12 years in the past and their overall health outlook was positive, it would be foolish of us not to at least give them some consideration," he says, adding his own dose of nuance about the underwriting process.

For Mike Grant, however, one thing is certain. "As far as I'm concerned, this is a new day for people living with HIV," says Grant, who now works with his brother as Aequalis's marketing director.