In September last year, Financial Services Minister Stephen Jones announced that the federal government would introduce a legislative ban on the use of genetic test results in life insurance underwriting.
This announcement was met with overwhelming support from the Council of Australian Life Insurers (CALI), with the group’s chief executive, Christine Cupitt, stating that it is “good for working Australians, it’s good for government and it’s good for industry, too”.
Following a renewed call-to-action from CALI late last year, Jones launched a technical consultation last month on the legislative design and technical details of the ban, including the definition of a genetic test, enforcement of the ban and implementation.
In a submission to Treasury regarding the proposed legislation, the Financial Advice Association Australia (FAAA) has countered the proposal, arguing that banning genetic testing in insurance underwriting will result in increased premiums for existing policyholders, making it harder for Australians to maintain their cover.
“Life insurance is a form of pooled insurance, where pricing is set and premiums are raised on the basis of the assessment of risk within the pool and claims experience applicable to that pool. If the level of risk within the pool increases and claims rise as a result, then premiums will naturally rise,” the FAAA said in its submission.
“Cross-subsidisation is also 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.
“This genetic testing ban is likely to result in certain Australians who are aware they have a higher-than-average risk after receiving genetic testing results, getting access to life insurance at a lower cost than their risk would warrant, whilst others will ultimately pay more.”
The FAAA further questioned the logic that genetic testing results would become off-limits for insurers while still being permitted to factor in other health-related information, such as weight, previous illnesses and injuries, blood tests, prior mental health problems and family history, despite all the above factors also influencing clients’ premiums and level of cover.
“Our key point is that it seems perverse that the ban on the use of relevant health information only applies to genetic testing and not any other form of predictive health information,” the submission said.
“It would appear that this debate has been driven more from the perspective of promoting genetic testing specifically, rather than improving access and the affordability of life insurance.”
For those who wish to obtain life insurance without the need for underwriting or disclosing their health status, the FAAA noted that group superannuation schemes and employer superannuation schemes offer insurance on an “automatic acceptance limit” basis, allowing them to obtain cover up to a certain limit.
“The existing genetic testing moratorium, which prevented the life insurers from requesting genetic testing being done or obtaining results, was based upon a cap of $500,000 of death and TPD cover and $200,000 of trauma or critical illness cover,” the submission said.
“This meant that those seeking insurance could still obtain a reasonable level of cover without being penalised for their adverse genetic testing results.
“Under the proposed policy, people who know they have genes that will likely lead to an exposure to serious health issues, could obtain $5 million or more of life insurance cover at standard premium rates.”
Although the FAAA recognised the importance of helping more Australians access crucial cover, the group suggested that an alternative solution is necessary as the current proposal could “reduce the level of cover in the general population, increasing reliance on the social security system”.
“The FAAA continues to favour a model where the existing moratorium on insurers using genetic testing in life insurance below certain caps was legislated (albeit with indexation of the thresholds),” the submission said.
“We think this would provide a sensible balance, allowing people with high-risk genetic test results to still access life insurance, but not at a level that would unreasonably impact the life insurance pools and increase costs for existing life insurance policyholders.
“This is a complex issue and needs to be carefully considered on the basis of a genuine understanding and awareness of the implications for all stakeholders.
“We do not want to put obstacles in the way of people accessing genetic testing, however, neither do we want to see this ban work to the disadvantage of existing and future life insurance policyholders who will potentially pay much more for insurance as a result of the ban.”
Congratulations FAAA. It’s nice to see someone recognising insurance pools risk. The more opportunities people have to select against the pool the higher everyone’s premium will go.
We need to bring premiums down so more people can afford life insurance.
The FAAA’s stance assumes that genetic testing offers a precise and dependable measure of future health risks. This assumption is flawed. Genetic testing may provide useful data in certain instances, but for most health conditions, it yields only very poor probabilistic estimates, not definitive predictions. Health outcomes are predominantly influenced by lifestyle factors—such as diet, physical activity, stress levels, and environmental conditions—rather than genetic predispositions. Insurers already evaluate these factors through existing tools, including medical examinations and health histories. Incorporating genetic data adds unnecessary overlap and introduces speculative elements that could skew risk assessments. The FAAA overestimates the reliability of genetic testing and undervalues the multifaceted nature of health determinants.
Permitting insurers to utilize genetic testing introduces significant ethical challenges. Genetic information is inherently personal and unchangeable. Employing it to set premiums or determine coverage effectively penalizes individuals for characteristics beyond their control. Such a policy could discourage people from pursuing genetic testing at all, even when medically recommended, due to concerns about insurance consequences. This deterrence could undermine public health efforts by reducing early diagnosis and preventive measures. Additionally, genetic data’s sensitive nature makes it susceptible to misuse, security breaches, or unauthorized distribution once shared. The FAAA’s approach fails to adequately address these privacy vulnerabilities and the potential for genetic discrimination, particularly against already disadvantaged groups.
The FAAA’s proposal risks amplifying existing inequities in insurance access. Individuals with advantageous genetic profiles and greater financial resources could benefit from reduced premiums, while those with less favorable genetics or limited means might face increased costs or exclusion. This structure would transform insurance into a benefit primarily accessible to the genetically and economically privileged, rather than a broadly available risk-mitigation mechanism. Low-income individuals and marginalized communities, who often encounter obstacles to healthcare, would experience further disadvantage. The purpose of insurance is to distribute risk fairly across populations, not to deepen disparities based on genetic or economic status.
The advocacy for genetic testing in insurance underwriting carries unsettling historical undertones. The field of genetics has origins tied to eugenic principles, which sought to categorize human value based on hereditary traits. Although genetics is now regarded as a scientific discipline, its use in this context risks resurrecting discriminatory frameworks. By emphasizing genetic data, insurers would implicitly suggest that an individual’s risk or worth is predominantly defined by their genetic composition—a notion with problematic precedents. The FAAA presents its position as a pursuit of actuarial accuracy, yet it inadvertently supports a deterministic view of genetics inconsistent with equitable insurance principles.
Trauma cover premiums will skyrocket… even higher.
Then, nobody will be able to afford cover.
FAAA out of touch as usual….do they want Gattaca to become reality?
If a gene is resulting in actual health issues then it needs to be disclosed as a pre-existing condition. Before that occurs its none of insurers business what an individuals DNA is.
Did the FAAA consult any specialist risk advisers on this subject
The current situation with genetic tests is that if the applicant has had a genetic test in the past they have to disclose it to the insurer and the insurer will make a judgement on the information contained in that test.
Currently insurers cannot demand a genetic test.
Frankly, that’s how the position should main be maintained. Any other conversation coming from the FAAA suggesting that not having genetic tests would somehow increase premiums is just running the life insurers arguments.
Which is really interesting given that the FAAA often states that it represents both advisers and consumers.
How is this position consumer friendly?