Each life assurance company is writing their own rules around Hepatitis C and there are no existing industry guidelines, according to Chris Morgan, managing director of Compass.
Mr Morgan said given the problems that the insurance industry had around Hiv, which is equally as sensitive, this is quite astonishing.
Mr Morgan said: "Once again, the life assurance industry is burying its head in the sand over an issue that could seriously affect its risk pool. Our recent research concludes that each company has very different ideas on how each applicant with Hep C should be treated.
"We have contacted the Association of British Insurers, and it has confirmed that it currently has no guidelines for the way that Hep C is treated within the life assurance industry. When you consider that an estimated 500,000 people in the UK are currently affected by Hep C, this is somewhat remarkable."
Mr Morgan added the ABI has made a great effort to ensure that the underwriting practices around Hiv are now fair and non-intrusive. The HIV expert working group has since been disbanded and replaced by a new expert advisory group on health and insurance.
Compass, which provides financial services to the gay community, is urging the ABI to take a closer look at the underwriting of Hep C, and ensure that applicants are treated with respect - and without intrusive questions. It added the knowledge gained from the removal of discrimination around HIV could prove invaluable in looking after people living with Hepatitis C.
A spokesman for the ABI said: "Insurers are acutely aware of the issues around diseases like Hep C and do treat customers sensitively and with respect. The ABI has been doing a lot to improve how gay men are treated when applying for life insurance products - for example, you will not be asked if you are gay or if you have had tests for sexually transmitted diseases.
"If you have had a test for Hep C with a negative result then you do not need to tell your insurance company and this will not be taken into account. If you have been diagnosed with Hep C or HIV then often this will require specialist medical underwriting. The best way to find the right cover in these cases is to go to a specialist insurer or use an insurance broker."
