People with genetic and other medical conditions are often concerned about the possibility that insurance companies will refuse to issue policies to them, or to their families, because they have, or may have, a genetic condition, or a predisposition (a higher risk than normal of developing a genetic condition). This could give those people an economic disadvantage in addition to their health condition.
Some of these fears are unfounded because only certain types of insurance can legally be refused or limited and even for other types of insurance, insurance companies must justify their decisions if they are challenged under anti-discrimination legislation.
When can insurers lawfully use genetic and other medical information in issuing policies and setting premiums?
health insurance For both public and private health insurance, premiums in Australia are set at the same rate for everyone, regardless of risk, though an allowance is made for age.Setting the same premium rate is called “community rating”: National Health Act 1953 (Commonwealth). The means that health insurance companies cannot charge more for premiums, or limit cover, on medical grounds and they do not ask about your present or past health, or your family history.
Public health insurance is financed by a direct contribution to Medicare from salaries (plus general tax) and the contribution from each person employed is an amount fixed as a percentage of salaries.
Private health insurance is purchased by individual payments, all at the same rate, subject to age.
superannuation & disability insurance Insurance for a limited amount may be available with a superannuation plan. This is called ‘group insurance’ and therefore not subject to health information, including family history and genetic test results. If, however, insurance is required for a higher amount than allowed under the superannuation scheme, the application will require disclosure of this information.
Most superannuation policies include extra benefits for disability. Your injury or illness does not have to be work related.For example, a diagnosis of cancer, multiple sclerosis, or an injury suffered outside of work can be used for a disability claim.
Total and Permanent Disability (TPD) - pays a lump sum if you can’t do your usual job or any suitable work in the foreseeable future.Generally you don’t have to be unfit for ALL work to be eligible.For example, if you can’t do your physically active manual work, it won’t matter if your doctors say you could do desk work.
Total and Temporary Disability (TTD) - pays monthly payments if you can’t do your usual job in the short term.
Superannuation policies may also include a component of life insurance income protection. This tends to be modest and typically insures for much less than private policies.It may cover:
employment termination payments if you are stopping work. This will depend on why you are stopping work and whether or not it is voluntary.
terminal illness payments where a person is diagnosed as having less than 12 months to live.
payments on death. These are usually lump sums or pensions paid to dependents or interdependents of a deceased fund member.
life, superannuation, disability and other income protection insurance Similarly, inform the insurance These types of insurance are based on risk and, if a person has a higher risk of illness or early death because of a medical condition or predisposition, the premium will be higher and the insurance company may even refuse to issue a policy. A higher than average risk can lead to:
higher (non-standard) insurance premiums
a reduced period of coverage
exclusions for one or more medical conditions
offers of alternative insurance products; or
deferral of insurance.
All insurance contracts are contracts of ‘utmost good faith’ and people applying for insurance have a legal obligation under the Insurance Contracts Act 1984 (Cth), and also the common law, to disclose all relevant details to the insurance company. If you do not disclose all the information that you know, reasonably ought to know, or might be relevant to the insurance company, it can void the contract (meaning the contract is invalid), or it may pay less than the amount it initially agreed to pay.
This means that you must tell the insurance company anything relevant to your insurance policy at the time you apply and up to the time when your application is approved and accepted.Some companies will ask for more details than others but you are obliged to answer questions honestly and to the best of your knowledge. This includes telling the company about any medical condition you have, including the results of any genetic tests you have had, and your family history. Also, where a relative has had a predictive genetic test and the test result is known, you must disclose the test result but you need not provide any other personally identifying information such as their name. Some life insurance application forms now have specific questions about genetic testing. But when assessing any genetic risk, an insurance company should take into account ‘the benefits of special medical surveillance, early medical intervention and the likelihood of successful treatment’ (Investment and Financial Services Association (IFSA) Genetic Testing Policy, 2005, para 10.5).
You cannot be required, either directly or indirectly, to have a genetic test in order to obtain insurance. This has been clearly stated in the Investment and Financial Services Association (IFSA) industry standard on genetic testing: see, IFSA, Genetic Testing Policy, 2005, para 10.
The Investment and Financial Services Association Ltd (IFSA), the industry body representing life insurance companies in Australia, has a policy on genetic testing and life insurance to which all member companies must comply.This Policy states that no applicant will be required to undergo a predictive genetic test in order to obtain insurance or to renew a policy that has not changed.
If you are considering having a genetic test for insurance purposes, you should discuss this with your doctor or a genetic counsellor and also with your family (see IFSAGenetic Testing Policy, 2005, para 10.3). You might consider taking out a policy before being tested, so that the premium is based on your current health and family history (which may include a familial risk of a genetic condition), rather than on the test result.
A life insurance policy may be secured before genetic testing.
If you have a genetic test later and you find you are gene negative, you can ask the insurance company to reduce the premium. But if you are positive, the premium that was originally set will remain in place under the contract you have with the insurance company.This is because life insurance policies offered by insurance companies in Australia are ‘guaranteed renewable’.You only have to apply for the cover once and you do not have to provide other health or genetic information later, such as the result of a later predictive test or changes in your health status. Once you have the policy, it will protect you as long as you make the premium payments. Under the IFSA Genetic Testing Policy, 2005 (para 10.7), your genetic test results can be used only for assessing your own policy, not for your relatives if they later apply for their own insurance cover.
What you should do when taking out life or income protection insurance
Consider applying to several companies at the same time; an insurance broker/agent may be helpful.
Involve your doctor, specialist or geneticist if necessary in negotiations with the insurance company. They may help by writing a letter to the insurance company, explaining your gene test result or condition; and describe any screening and prevention strategies, where applicable.
Ensure all correspondence with brokers, agents, health professionals and the insurance company is in writing.
Provide honest answers to all the questions asked by the insurance company and do not conceal information that the company may consider relevant when granting you a policy.
Read your policy carefully (including the fine print!) and get help if necessary.
Tell the insurance company about any medical surveillance, early medical intervention and or treatment that you are having, both when you first apply for the policy, and also after the policy has been issued, as the terms of the policy may be reassessed to your advantage.
company if a predictive genetic test result indicates that you are at lower risk than previously estimated based on family history alone, so that the policy can be reassessed with this new information.
other insurance Products sold by general insurers such as travel insurance, sickness cover, accident insurance, require annual renewal and any new information relevant to risk must be disclosed at the time of renewal.
Exercising your legal rights regarding insurance Insurance, particularly life and income protection insurance, can be very important for people in ensuring financial security for their family, especially to make sure that additional costs related to future illness are covered. This type of policy is the one most likely to be disputed but it is also possible to challenge other decisions about insurance.
If an agent or broker tells you that an insurance offer may be declined, deferred, offered at non-standard rates, or otherwise affected by a genetic test result, you should check this advice with the insurance company’s underwriter in writing and request a copy.
If the insurance company refuses to grant you a policy or charges you a higher premium than normal, or imposes other conditions on your premium, it must give you reasons for its decision (or it may contact your doctor, who will discuss the reasons with you): IFSA Genetic Testing Policy, 2005, para 10.12. The insurer should also try to offer you alternative terms or products in such a case: para 10.13. At the same time, it will tell you how you can lodge a complaint about the decision (para 10.12.3).
If you decide to lodge a complaint, the first step will generally be an investigation by the company internal dispute resolution system.If that does not resolve the dispute, the company must tell you your legal rights to challenge the decision further (IFSA Genetic Testing Policy, 2005, para 10.14) and you can then proceed in accordance with that advice.
If the complaint procedures explained by the company do not meet your needs - or if the insurance company you approach does not comply with the IFSA Genetic Testing Policy, 2005, which is not legally binding - then you could use the formal complaint procedure in the section What Can You Do?
Insurance companies can lawfully discriminate in certain circumstances
Note, however, that even if you think that an insurance company has unfairly discriminated against you, its actions may not be unlawful.The federal and state legislation described later in this booklet (see Section 4), acknowledges the commercial nature of life and annuity insurance as a form of voluntary mutually rated insurance which of its nature involves differentiating between applicants on the basis of their health status and family histories of health problems.Under section 46 of the Disability Discrimination Act 1992 (Cth) and section 44 of the Equal Opportunity Act 1995 (Vic), for example, an insurance company offering life or annuity insurance can lawfully discriminate on the ground of future health risks, if the discriminationis “based upon actuarial or statistical data” and the discrimination is reasonable. (The insurance products covered by this provision include insurance for life, disability, trauma, business and bank loans.)The insurance company has the onus of proving this if you lodge a formal complaint.
Case Studies of Discrimination in Insurance
Lola, who has multiple sclerosis, complained that she was being discriminated against because the superannuation fund of which she was compulsorily a member limited her benefits not only in relation to her pre-existing condition of MS, but regarding any other illness or disability. The matter was settled when the fund advised that restrictions would be removed.
Bob complained that he had been discriminated against by being refused life insurance/endowment insurance cover on the basis that he had Tourette's syndrome and attention deficit disorder. The insurer agreed to provide the cover as applied for, and to update its assessment manual to include these conditions.
Beth complained that she had been discriminated against when she was refused loan insurance after disclosing on the application form that she had been treated for melanoma. The tumour had been removed 14 years previously without recurrence or spread. After an additional medical report was obtained the insurer agreed to provide cover for the remaining period of the loan without charge.
Shirley was rejected for life insurance based on her family history of Huntington’s disease, despite her genetic test being negative.Her neurologist wrote a letter to the insurers, explaining the issues and that if a patient is gene negative then their risk overall is no more than any other individual, with the implication of legal redress for prejudice.Shirley’s case was reviewed and she was offered life insurance at a competitive rate.
This information is intended as a general guide only and you should obtain legal advice if you have specific questions.