Australia’s Financial Services Council recently announced a moratorium that will prevent life insurers from using genetic test results to assess applications for cover. Under the moratorium, consumers will be able to obtain up to AUD$500,000 worth of life cover without having to disclose the results of genetic tests.
In New Zealand, our own Financial Services Council is currently reviewing the use of genetic test results by life insurers, and is likely to be influenced by the position in Australia.
In recent years, technological advances have made genetic testing more widespread and accessible. For example, consumers can now access online services offering basic predictive tests and genealogy tests. But what if the results indicate a consumer’s predisposition to, for example, a certain type of cancer? Such a result could need to be disclosed when a consumer applies for life insurance.
While all mutually-rated underwriting requires some level of discrimination between consumers, risk assessments based on genetic testing have raised concerns as to unfair discrimination. This is because very few genetic tests can predict with certainty when an illness might begin, or how severe it might be. Additionally, if a consumer is aware that an adverse test result may prevent them from later obtaining life insurance (which is often required to obtain a mortgage, for example), they may be deterred from taking an otherwise medically necessary test.
The Australian moratorium is a response to these concerns, with the Financial Services Council stating that the moratorium will “free Australians from the fear of taking a genetic test as the result will no longer prevent anyone taking out life insurance.”
Under the moratorium, consumers will be able to obtain up to AUD$500,000 worth of life insurance cover without having to disclose the results of any genetic test. However, consumers will still be entitled to disclose a favourable genetic test result.
The moratorium will commence on 1 July 2019 and remain in place until at least 30 June 2024. It will be independently overseen by the Life Code Compliance Committee, with a review to take place in 2022.
United Kingdom moratorium
The Australian moratorium does not go as far as the United Kingdom, where a moratorium has been in place since 2001.
In the UK, insurers have agreed that consumers may obtain life insurance cover up to £500,000 without disclosing any predictive genetic test results, as will be the position in Australia.
Where Australian consumers are seeking cover above the AUD$500,000 threshold, all genetic test results must be disclosed. In the UK, however, consumers seeking cover above the £500,000 threshold are only required to disclose test results for conditions which are inherited in a clear and measurable manner and which have a sufficient probability that they will lead to an illness.
A condition must be approved by the Government before insurers can require the test results to be disclosed, and currently consumers are only required to disclose test results for Huntington’s Disease.
New Zealand position
The Financial Services Council of New Zealand (FSC) has recently withdrawn the majority of its Financial Service Guidelines, including its Genetic Testing Policy (Policy). The FSC is in the process of reviewing this Policy, along with its other guidelines.
Under the previous Policy, life insurer members of the FSC were entitled to ask consumers to disclose existing genetic test results to the insurer for the purposes of assessing risk. However, life insurers agreed not to initiate any genetic testing for applicants.
As part of its review, the FSC will undoubtedly look to the proposed approach in Australia. We expect that the Australian position will likely inform the position that the FSC takes in its new policy.
If you have any questions about this update, please contact the authors or your usual Bell Gully adviser.
This publication is necessarily brief and general in nature. You should seek professional advice before taking any action in relation to the matters dealt with in this publication.