Are banks discriminating against older customers?

More than nine million people in the UK have bank accounts for which they pay a monthly fee - in return for a package of bells and whistles. Travel insurance, mobile phone insurance and breakdown cover are the three most common benefits, and if you make use of all of these, they can prove to be good value for money.

But once you get into your late 60s and beyond, the travel insurance often drops away. As I highlighted in my blog last week, travel insurance is rightly more expensive for older travellers as they make more claims and larger claims than younger travellers. So once people reach a certain age, banks take the view that they can no longer afford to include travel insurance in the bundle.

I've always thought this was fair enough. Ideally, banks would provide their customers with a chance to pay a bit extra, to remain insured, but either way, I could appreciate that the sums don't add up if you carry on charging the same monthly account fee while the cost of one of the benefits is going through the roof.

All or nothing

But after writing my blog last week, I was contacted by a reader who put the other side of the argument. Sure, he understood that his bank couldn't afford to continue offering him medical cover as he got into his 70s and beyond - but what about the other elements of travel insurance? Cancellation cover, baggage cover, loss or theft of personal property while abroad - the cost of all these elements of cover does not rise exponentially once travellers get into their 70s. But no allowance is made for this, and in almost all cases, cover is withdrawn immediately.

There are some notable exceptions. Royal Bank of Scotland & Natwest allow you to pay an extra £50 a year if you're over 70 - to stay insured. Similarly, Nationwide, allows you to purchase an "age-upgrade" once you reach 75 (the polite way of asking you to stump up some more cash).

But the likes of Halifax, Barclays, HSBC, Lloyds, First Direct, Clydesdale and Yorkshire Banks simply terminate your cover altogether when you reach the upper age threshold, with no option to pay more - and no way to hang onto the non-medical elements of cover.

Why get rid of affluent customers?

Arguably, these banks are in breach of age discrimination legislation - if not technically, then certainly in spirit. It's also just bad business. For the customers who realise that their insurance is no longer valid, they're left with no choice but to consider taking their current account elsewhere. Seventy is no longer old - these could be valued customers for another 30 years or more. And if they're paying for a packaged bank account, the chances are that they're affluent customers as well.

If I was a shareholder in a bank and knew that the management were leaving themselves at risk of legal challenge, while leaking valuable affluent customers, I'd be reconsidering whether this was a company I wanted to invest in.