With the ban on soliciting or using genetic testing information in life insurance underwriting commencing in just a few months, AFCA has proposed changes to its rules that would allow the complaints body to handle claims arising from non-compliance.
The changes affect the exclusions in rules C.1.4b and C.1.4d. Under the current rules, AFCA must exclude complaints about:
- Life insurance policies being offered on non-standard terms based on underwriting or actuarial factors
- Decisions to refuse to provide cover, except in circumstances where the decision relates to a medical indemnity insurance product or the complainant alleges that:
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- The decision was made indiscriminately, maliciously or on the basis of incorrect information
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- They were misinformed about their insurance cover
Both of AFCA’s proposed amendments would introduce clauses that permit complaints if they relate to insurers unlawfully soliciting or using genetic testing information.
In a submission, the Financial Advice Association Australia said the rule changes “incorporate the requirements of the law and should be effective in that regard,” but cautioned that there will likely be “challenging situations” that have yet to be identified.
“We suspect that there will be situations in the underwriting process where information could be revealed that relates to the completion of a genetic test, and the result of this test, that could create challenges,” the FAAA said.
As an example, the FAAA suggested that an applicant might provide genetic testing information to a life insurer that has both supportive and adverse implications. And while the insurer would only be able to use the supportive information, they would still need to “take steps to destroy or redact the information that is adverse and ensure they do not use it.”
The submission also noted that life insurers commonly request information from doctors as part of the underwriting process. Should a doctor inadvertently provide information about genetic testing, the FAAA said insurers will need “careful procedures in place to avoid retention [of], reference to or reliance on this information.”
“It is our view that guidance should be issued to assist with this,” the association said.
The submission continued: “We suspect that there might be an assumption that there is a very clear differentiation between genetic testing information and clinically diagnosed information, however there may at times be a risk of the intersection between the two that creates problems.
“We are also concerned that these types of issues could create challenges for financial advisers and they would benefit from guidance on how to treat certain situations and avoid contributing to an increased risk of disclosing information to life insurers that would not be in compliance with the law for insurers to use.”
Last year, the FAAA argued that banning genetic testing information would result in increased premiums for existing policyholders even if “Australians who are aware they have a higher-than-average risk” end up getting a better deal.
“Cross-subsidisation is … an important factor. If some of the members of the insurance pool are not paying the level of premiums that are warranted by the risks they present, then other members of the insurance pool will ultimately pay more. This is an issue of equity,” the association said.
