Watch this space: use of adverse genetic testing results in life insurance to be prohibited

The recent announcement

The Assistant Treasurer and Minister for Financial Services Stephen Jones MP has announced that the Commonwealth Government will implement a ‘total ban’ on the use of adverse predictive genetic test results in life insurance underwriting. In making the announcement, the Assistant Treasurer said “this change will give Australians the confidence to undertake genetic testing without fear it will impact their ability to access financial security through life insurance”.

The use of adverse genetic test results in life insurance underwriting has been a vexed issue for several decades. The issue was considered extensively by the Australian Law Reform Commission (ALRC) in their landmark report Essentially Yours: The Protection of Human Genetic Information in Australia (ALRC Report 96) in 2003.

An overview of the issue

At the core of the issue is an inherent tension. On one hand, the potential for adverse genetic test results to affect an individual’s ability to obtain life insurance (or, at least, insurance at an affordable premium) is a significant barrier to access and take up of genetic or genomic tests. On the other hand, it is a foundational principle of risk rated insurance that there be a parity of information between the applicant for insurance and the insurer.

When it considered the issue in 2003, the ALRC was unpersuaded by the case for prohibiting or limiting the use of adverse genetic test results in life insurance underwriting. Core to their reasoning was a view that implementing such a prohibition or limitation was an unjustified intervention in a private commercial relationship between insurer and insured, akin to requiring life insurers to provide a social ‘safety net’. That function, they reasoned, was more appropriately performed by the social security system (ALRC Report 96, 26.96).

The release of Essentially Yours in 2003 coincided with the completion of the human genome project. In the intervening 20 years, genome sequencing costs have plummeted. Genomic approaches to diagnosis and intervention bring with them the promise of earlier diagnosis and personalised treatment with significant public health benefits. Data from Medicare shows a dramatic increase in the prevalence of genetic and genomic pathology services across the past decade. The pace of change in genomic medicine will undoubtably continue to accelerate.

Across the last decade, stakeholder concerns have grown that the use of adverse genetic test results in life insurance underwriting was impacting participation in important health research initiatives and discouraging genetic testing. In 2019, the Financial Services Council (what was then the peak body for the life insurance sector) introduced a limited moratorium on the use of genetic testing in life insurance. Under the moratorium (implemented under FSC Standard 11: Moratorium on Genetic Tests in Life Insurance), insurers could only request or use the results of a genetic test if the cover applied for exceeded specified underwriting limits. The FSC Standard is now incorporated in Appendix A of the Life Insurance Code of Practice published by the Council of Australian Life Insurers.

The current outlook

The Government’s announcement was prefaced by a November 2023 Consultation Paper, which canvassed the various options for regulatory intervention (that is, no change to the status quo; legislating a total or partial ban on the use of adverse predictive genetic test results; or essentially legislating the current position under the Life Insurance Code of Practice with increased thresholds).

The announcement implies that Government will pursue legislation to implement a total ban, but the announcement is silent on the precise legislative mechanism for implementing the ban. It seems likely that any legislative proposal will require an amendment to section 46 of the Disability Discrimination Act 1992 (Cth), which currently permits discrimination in the context of life insurance and superannuation products where the discrimination is based on relevant actuarial or statistical data or, in the absence of that data, is otherwise reasonable in the circumstances.

The Council of Australian Life Insurers have indicated their support for the announcement, welcoming the Government’s proposed five-year review of the legislative change.

Private health insurance in Australia is community rated (rather than risk rated) and is not affected by the announcement. Discrimination on the basis of an adverse genetic test result in private health insurance would involve improper discrimination in breach of the community rating principle in the Private Health Insurance Act 2007 (Cth).

Progress on the implementation of the ban will be covered in future issues of The Prescription.