6.5 Insurance is a ‘risk transfer, loss-spreading arrangement’. Its purpose is to distribute risk through providing a mechanism for individuals and organisations to purchase, by way of a premium, insurance products to mitigate that risk. Risk is then transferred to the insurer which indemnifies the insured against future events that may cause loss. Rigorous risk assessment is the ‘basic principle that underpins the successful operation of insurance models’. This risk assessment determines the criteria used in the underwriting process—in which individual applications for insurance are assessed—and pricing, which ‘ensures that the premiums paid by each policyholder reflect their risk relative to the whole pool’.
6.6 At the Commonwealth level, the insurance industry is governed by two primary pieces of legislation. There are three key categories of insurance in Australia: health, life and general insurance. Life insurance encompasses a variety of products that provide payment upon death or injury, including income protection insurance. General insurance encompasses cover purchased by individuals—such as travel insurance; and that purchased by organisations—including product and public liability and professional indemnity insurance. The general insurance industry in Australia is regulated by a prudential regulator and a corporate regulator.
6.7 The focus of this chapter is on life and general insurance, given their potential effect on the participation of mature age workers and volunteers. The key barriers for mature age workers appear to arise in relation to income protection insurance, travel insurance and volunteer insurance. These barriers include: accessing information about available and appropriate insurance products; limitations on availability of insurance; and increased premiums and restriction of benefits as a result of the imposition of age restrictions.
6.8 Such barriers may act as a disincentive to employment and other productive work for mature age persons. For example, where mature age workers are unable to access income protection insurance, this leaves them vulnerable in the event of illness or injury. This is of particular concern to specific groups of workers, such as sole traders, where workers’ compensation is not available. A case study provided by the South Australian Equal Opportunity Commission highlights this point:
I am a self-employed primary producer now aged 69 years and cannot access accident or illness insurance to cover me at work. I was told I was too old for illness insurance, but could get some cover for accident insurance at greatly reduced benefits up to the age of 70. I have therefore been working full time without any illness cover for 5 years, and soon will have no accident cover either when I turn 70. I have a clean bill of health each year from my GP which I submit to the insurance company. The government encourages us to work after retirement age, but does not care that insurance companies say we are uninsurable.
6.9 In the case of mature age volunteers, the Tasmanian Anti-Discrimination Commissioner reported that, of the 25 insurance arrangements held by organisations examined by her, all private insurers had arrangements that discriminated on the basis of age. Where insurance coverage for volunteers is not available, this either results in volunteering activity continuing without coverage, with potentially significant consequences, or acts as a barrier to volunteering. The following case study illustrates the potential consequences of continuing without coverage:
Whilst doing this volunteer work [my mother and father] were involved in a horrific accident which left my Dad in a coma for 6 months before he finally passed away. The [organisation] involved said that he was not covered by their insurance because he was too old (he was just 75.6 years old).
6.10 However, the extent to which age-based limitations, premiums and restricted benefits ‘influence mature age workforce participation will vary on the nature of each particular product’.
6.11 To address the concerns outlined above would require systemic reform of certain elements of the insurance framework in Australia. Two key systemic issues have emerged which are much wider than the focus of this Inquiry on barriers to work for mature age persons. The first issue is whether age is an appropriate indicator of risk. The second issue involves the insurance products available in the market and their design.
6.12 There is a broad suite of underwriting and pricing factors, including an applicant’s age, considered relevant to assessing risk. The Insurance Council of Australia (ICA) emphasised that ‘a lawful ability to reasonably differentiate on the basis of risk, is essential to the provision of affordable general insurance for the community’. Insurers have emphasised that any restriction on the use of age as an underwriting factor would have adverse consequences for the insurance market. In particular, insurers have argued that this may affect insurance offerings and premiums. In its submission, Suncorp emphasised the highly competitive nature of the insurance industry, noting that
the ability to target products and premiums to specific demographics—including age-based demographics—allows insurers to bring competitive offers to market. Regulation or restriction on the use of age as an underwriting factor, above what is already in place under anti-discrimination legislation, would significantly reduce competition in the market and lead to poor market performance.
6.13 However, the Tasmanian Anti-Discrimination Commissioner rejected arguments that the removal of age-based distinctions would make offering certain insurance products ‘uneconomic or distort the cost structure of insurance products’. In addition, the Australian Human Rights Commission (AHRC) has suggested that risk assessment should be conducted on the basis of factors other than age.
6.14 Examination of whether age is an appropriate indicator of risk, or should be used in the underwriting and pricing process at all, is a much wider question than the focus of this Inquiry. As a result, the ALRC makes no specific recommendations concerning the review or removal of age-based insurance pricing and underwriting.
6.15 The second systemic issue is product innovation and design. A number of stakeholders submitted that
the competitive marketplace and increasing market demand is the most powerful driver of product innovation. As the population ages and people remain in the workforce longer we submit that products have, and will continue, to be developed to meet the needs of older workers.
6.16 Product innovation and design are essentially market-based issues and reform will require the cooperation of the insurance industry, seniors organisations, consumer groups and the Australian Government. The ALRC recognises the nature of the insurance market and the importance of ‘risk appetite’ for insurance offerings. While not recommending legislative or regulatory reform in this area, the ALRC considers that IRAG is an appropriate forum for discussion of these issues. The ICA has indicated that it ‘welcomes continuing discussions within IRAG on consumer needs and wants’ and recognises the ‘potential role of IRAG discussion as an inspiration for product innovation’.
 G Pynt, Australian Insurance Law: A First Reference (2nd ed, 2011), 4.
 Insurance Council of Australia, Submission 94.
 Financial Services Council, Submission 89.
Insurance Act 1973 (Cth) and Insurance Contracts Act 1984 (Cth). Chapter 7 of the Corporations Act 2001 (Cth) governs the regulation of insurance intermediaries such as agents and brokers.
 Income protection insurance is otherwise known as personal accident, sickness and disability insurance and protects the insured in the event of being unable to work due to sickness or injury (the ‘prescribed risk’). The benefit is provided by way of regular periodic payments—a wage substitute.
 Travel insurance provides for the payment of agreed sums to cover losses or expenses, including medical expenses, incurred in the course of travel.
 The prudential regulator is the Australian Prudential Regulation Authority (APRA), which is responsible for general administration of the Insurance Act 1973 (Cth): Australian Prudential Regulation Authority Act 1998 (Cth). APRA has the authority to set prudential standards for the general insurance industry and has developed a detailed framework of prudential standards and practice guides.
 The corporate regulator is the Australian Securities and Investments Commission (ASIC), which is responsible for, among other things, the general administration of the Insurance Contracts Act 1984 (Cth), monitoring and promoting market integrity and consumer protection and licensing: Australian Securities and Investments Commission Act 2001 (Cth).
 The types of insurance relevant to volunteers include public liability insurance, directors/officers insurance and personal injury/accident insurance.
 See, eg, COTA, Submission 51; National Seniors Australia, Submission 27; South Australian Equal Opportunity Commission, Submission 11. See also Australian Human Rights Commission, Working Past Our 60s: Reforming Law and Policies for the Older Worker (June 2012); National Seniors Australia and COTA, Ageism in Travel Insurance 2012 Survey Report (2012); Tasmanian Anti-Discrimination Commissioner, Volunteers, Age and Insurance (2013), Unpublished Report. At the time of writing, the ALRC was provided with an advance copy of the report, prior to its public release.
 See, eg, COTA, Submission 51; National Seniors Australia, Submission 27; South Australian Equal Opportunity Commission, Submission 11.
 See, eg, South Australian Equal Opportunity Commission, Submission 70.
 Tasmanian Anti-Discrimination Commissioner, Volunteers, Age and Insurance (2013), Unpublished Report, 34.
 Private Submission to Ibid, 39. Note, this scenario also raises issues relating to common law liability of organisations with volunteers.
 Suncorp Group, Submission 39.
 Ibid; Insurance Council of Australia, Submission 21.
 Insurance Council of Australia, Submission 21.
 See, eg, Suncorp Group, Submission 39.
 The Commissioner noted that there is no suggestion that insurers be required to make uniform insurance offerings. Any intention to account for different appetites for risk is not in and of itself discriminatory: Tasmanian Anti-Discrimination Commissioner, Volunteers, Age and Insurance (2013), Unpublished Report, 85.
 Australian Human Rights Commission, Working Past Our 60s: Reforming Law and Policies for the Older Worker (June 2012), 14.
 Financial Services Council, Submission 89. See also Suncorp Group, Submission 39.
 While product innovation and design are essentially market-based issues, refusal to offer an existing insurance policy to persons on the basis of their age would be unlawful under anti-discrimination legislation, except if the conditions under the insurance exception are satisfied.
 IRAG was established in April 2011. The purpose of IRAG is to bring together peak industry bodies, consumer and Australian Government representatives to exchange views ‘about issues in the insurance field that should be considered for reform—be it legislative change or changes to regulatory or industry practices’: InsuranceNEWS, Shorten Sets up Another Insurance Review Body <www.insurancenews.com.au> at 18 April 2011. See also the Hon Bill Shorten, ‘Launch of the Report Reducing the Risks: Improving Access to Home Contents and Vehicle Insurance for Low-Income Australians’ (Paper presented at Brotherhood of St Laurence, Fitzroy, 9 June 2011).
 Insurance Council of Australia, Submission 94.