Equality of access to insurance for aging Australians is now firmly on the federal government’s agenda.
A number of recently released papers make it clear that general insurers are being called upon to respond to current gaps in the private insurance market and address areas of potential inequality for insurance applicants and existing policy holders.
The 2012-13 budget contained various incentives to encourage employers to retain mature aged workers. The difficulties that older Australians have in accessing certain forms of insurance have also been highlighted in submissions to the Issues Paper ‘Grey Areas—Age Barriers to Work in Commonwealth Laws’ released by the Australian Law Reform Commission (ALRC) as part of its Age Barriers to Work Inquiry (the Inquiry). In response to the issues raised in the submissions, the ALRC has now completed a review of Commonwealth Laws and has made draft recommendations for insurance reform in a newly released Discussion Paper. The Discussion Paper seeks further consultation from stakeholders by 23 November 2012.
ALRC examines barriers to workforce participation by older Australians
The ALRC’s Discussion Paper contains draft recommendations for legal and regulatory reform to address inequities currently faced by older Australians when wishing to participate in vocational or volunteer based activities. The Discussion Paper specifically addresses issues that arise in relation to older persons accessing income protection insurance, travel insurance, and insurance for volunteers.
The Discussion Paper states that in respect of income protection insurance, travel insurance, and insurance cover in the workplace age limitations and high premiums for people over the age of 45 currently present a barrier to the ability of older persons to participate in the workforce and volunteer (eg, cover is generally not available for persons over the age of 65 for income protection insurance). In relation to travel insurance, age limitations and higher premiums for older persons mean that many people are unable to take out travel insurance for their own personal use, as well as for travel undertaken for employment or volunteering purposes. Furthermore, people over the age of 65 with a disability will not be covered by the National Insurance Disability Scheme (NDIS); this may exacerbate existing employment barriers for mature aged people with a disability.
The Discussion Paper recommends that the Insurance Reform Advisory Group (IRAG) examine the following options:
- creation of a central information portal to provide older persons with clear and simple information about available insurance products;
- design of comprehensive but affordable insurance products for mature aged people;
- development of new mechanisms for reviewing age-based pricing and underwriting as well as for ensuring that the industry uses appropriate actuarial and statistical data for underwriting products; and
- provision of training to insurance distributers so that they are better equipped to provide clear and simple information about insurance products available to older persons.
Commonwealth anti-discrimination laws are currently being consolidated into a single legislative instrument and the exemption for insurers with respect to age discrimination legislation is being reviewed. Insurers should consider participating in the public consultation process for the draft legislation once it is released later this year.
Currently the Age Discrimination Act 2004 (Cth) contains an exemption for insurers with respect to age discrimination that would otherwise be in breach of the Act. It is anticipated that the exemption could be: omitted altogether from the government’s proposed consolidation of federal anti-discrimination legislation; substantially written down to limit its application; or amended to require insurers to apply for a specific exemption or demonstrate reasonable cause for refusing insurance to certain applicants. The ALRC has indicated that once draft anti-discrimination legislation is released it will further consider issues of age discrimination with respect to insurance. Insurers ought to be aware that if the exemption is written down or not imported into the federal anti-discrimination laws then underwriting guidelines for general insurance products issued to older Australians will need to be revised. (The Issues Paper and Discussion Paper each define ‘older persons’ as people who are over the age of 45.)
At present, insurers can be asked to produce actuarial or statistical data to the Australian Human Rights Commission (AHRC) and its President in circumstances where it is suspected that the insurer has discriminated against a complainant on the basis of age and the discrimination is not exempted under s 37 of the Age Discrimination Act 2004 (Cth) (please see our article). In its Discussion Paper, the ALRC indicated that it will take recommendations from IRAG in relation to the appropriate mechanism to ensure that the insurance needs of older Australians are met whilst striking a balance with the underlying actuarial and statistical underwriting requirements of insurers.
The ALRC recommends that IRAG consider: establishing an independent body to assess practices in relation to underwriting and compiling actuarial data; requiring general insurers to publish a quarterly report detailing all age specific data and claims details; and whether another mechanism should be introduced requiring insurers to demonstrate whether age based actuarial and statistical information relied upon for underwriting purposes is reasonable. The ALRC requests comments on the operation of the insurance exemption including whether there should be provision for an individual to request and receive the actuarial or statistical data on which the action or decision is based. It was also proposed that the AHRC should consult with the Insurance Council of Australia and the Financial Services Council to develop guidance material in relation to any exemptions for age-discrimination that may be applicable to insurers under the proposed consolidation of federal anti-discrimination laws. In addition, in the course of the review of the General Insurance Code of Practice, the ways in which the Code could be amended to encourage insurers to consider the needs and circumstances of mature age persons should be examined.
The federal government has endorsed many of the suggestions put forward in the Final Report of the Advisory Panel on the Economic Potential of Senior Australians (EPSA Report). The Advisory Panel on Positive Aging (Panel), announced on 14 September 2012, has also been convened and has the dual roles of raising awareness and consulting with industry stakeholders and also reporting to government on how best to reform policy design in light of an ageing population. The Panel will build on the recommendations in the EPSA Report and will address barriers and issues for older persons in relation to the areas of housing, education, employment, volunteering, and the digital revolution.
IRAG has also recently commenced collaborative roundtable discussions with the insurance industry to explore ways to develop travel insurance products which provide coverage that better meets the needs of older Australians wishing to travel (please see our article).
It is clear that the regulatory landscape for general insurers is being reformed so that it is responsive to government and community expectations with respect to the needs of older Australians. IRAG is playing an integral role in the reform process. It is likely that insurers will increasingly be required to calibrate the underwriting basis of their products in order to tailor them to the needs of older Australians. In light of this, general insurers ought to be aware of their legal obligations under state and federal anti-discrimination laws.
Call to action
The due date for submissions in relation to the ALRC’s Discussion Paper is 23 November 2012.
In addition to this, the federal government’s draft consolidated anti-discrimination legislation will soon be released for comment. General insurers will need to examine their own underwriting, product issue, and claims processing practices in the light of proposed changes to ensure that the issues faced by older Australians are commercially considered.