Insurers have been accused of depriving access to life insurance and other kinds of cover to people with depression and anxiety, even for physical conditions unrelated to their mental health.

People who have suffered even mild mental health conditions or one-off episodes say they have been refused life insurance altogether, aggravating their financial insecurity.

Dozens of complainants have been in touch with the Guardian about the alleged discrimination. Charities and campaigners described the findings as “extremely worrying” and showed that insurers were operating based on an outdated understanding of mental illness.

In some cases, insurers appear to base their refusal on long-distant episodes of depression or anxiety, or when customers admit to having had suicidal thoughts or self-harming noted on their medical records. These customers are then allegedly deemed unsuitable to insure even for circumstances where death is not linked to a mental condition.

One refused applicant was a victim of the 7 July 2005 London bombings who experienced post-traumatic stress disorder. She described being turned down as “upsetting” and “worrying”, saying it showed ignorance about mental illness.

“I was never given a specific explanation as to why I had been rejected but I have not got any physical health issues,” said the woman, who did not wish to be identified.

“I can see it from the perspective of the insurance company; they are not going to want to provide cover for mental health related issues to someone who has had mental health problems. But I was surprised to be rejected for any coverage at all, particularly given my otherwise good health,” she added.

Others say they were penalised after attending one or two grief counselling sessions following a family death, leading to rocketing premiums.

Charities warned that gaps in the law mean customers have little protection against this form of prejudice.

“The difficulty is that the only protection available is to people who are disabled under the Equality Act and even then there are certain exemptions for insurance business,” said Michael Henson-Webb, head of legal at mental health charity Mind.

“The current definition of disability under that Act doesn’t cover everyone with a mental health problem and makes it difficult for individuals with mental health problems and their legal advisers to clearly determine their rights.”.

Laura Peters, advice manager at Rethink Mental Illness, said: “What is judged as ‘high risk’ seems to be based on an increasingly outdated understanding of mental illness. This viewpoint is resulting in people ... being disproportionately penalised for their condition with eye-watering premiums or flat out rejection. Life and health insurance can be a vital safety net.”

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“It feels to me wholly inappropriate and discriminatory. This is something that the government needs to investigate as a matter of urgency. We need to get a fundamental review of these policies,” he said.

The Guardian heard from dozens of people about the matter. Many of them were rejected for life insurance but others had problems getting health or travel insurance. They said the reason for their refusal had not been made clear but many said the only probable cause was their mental health record.

Many believed they were turned down because of having suicidal thoughts or self-harming noted in their medical records, but others said they were told to apply again at a later date due to having had a recent diagnosis.

The suspicion is that insurers are cherry-picking customers to minimise risk and boost the bottom line.

Henson-Webb said: “Some insurers are operating with a total lack of transparency. That so many people seem none the wiser as to why they have been declined insurance means they aren’t being given information about how decisions have been made.

“It looks as though some insurers are making crude assessments such as the ‘three strikes’ rule, which could amount to discrimination.”

One insurance broker, who asked to be anonymous, said: “Some insurers target different markets and like ‘clean lives’. It sounds awful but they are hard-nosed businesses.”

He added: “My wife looked to apply for new cover recently and she had gone to her GP about work-related stress and the insurer automatically increase the premium. How many people go through work related stress? I thought that was ludicrous.”

Another respondent, 27-year-old Cara Lisette from Hampshire, said that she had been denied cover but at the same time her partner who had an eye condition had been accepted with exceptions put in place. “This seems unfair, that he can get cover that excludes his condition but I cannot get the same,” she said.

A lot of those who responded said that discrimination had made them wary of getting further treatment.

Insurers say applications for life insurance go through careful assessment and are evidence based. They say that when dealing with customer’s with mental health problems they ask questions such as how long it has lasted and how it has been treated. They also ask about any time off work or suicide attempts. Insurers acknowledge that in a small number of cases, mental health backgrounds may result in a premium loading or exclusion, or in the most severe cases, a refusal to offer cover.

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A spokesman for Royal London said: “Most mental health conditions are mild or self-limiting, and as a result we are able to offer standard rates to more than 90% of customers who inform us of their condition.”

An Aviva spokesperson said: “We take our responsibility to comply with the Equality Act 2010 very seriously. The Act includes special rules that permit insurers to assess customers individually and to offer acceptance terms at the standard rate, at an increased premium or to refuse to offer cover based upon each individual applicant’s risk.

“We do not refuse to offer cover or offer cover on different terms to people with a disability, unless there is statistical evidence the condition presents a higher risk than for someone who does not have a history of the condition.”