26.95 The Inquiry recognises the range of genuine concerns raised by the use of genetic information in underwriting mutually rated insurance. However, for the reasons explained below, the Inquiry’s view is that a shift away from the fundamental principles of voluntary mutually rated insurance, based on parity of information between the applicant and the insurer, is not warranted at the present time.
26.96 A contract of insurance is a private commercial relationship between an insured and an insurer by which the former agrees to pay a regular premium in exchange for a payout on the occurrence of a defined event. Although insurance can provide insureds and their families with significant financial support in adverse circumstances, private insurers should not be expected to provide a social safety net for Australians regardless of their genetic status—that function is more appropriately performed by the social security system and the public health system.
26.97 Australians do not appear to regard private insurance of the kind presently in question as an essential good. While accurate statistics are not available, it is common knowledge that not all, or even most, adults have voluntary life insurance. This suggests that most Australians consider life insurance to be an option rather than a necessity. It may also reflect the fact that other investments and financial products, which are not mutually rated by reference to genetic status, are available, including group life cover provided as a component of superannuation, to provide individuals with financial security for the future. In addition, Australians generally appear to view such insurance as a personal good rather than a social good. If so, it is difficult to justify the imposition of higher costs on the community at large.
26.98 A departure from a system of equality of information between applicants and insureds raises significant issues of equity. If high-risk individuals can join an insurance pool at standard rates, the increased claims by those individuals must ultimately be borne by others. In the absence of a government subsidy, that cost will be borne by other insureds in the insurance pool in the form of higher premiums. This gives rise to inequities because individuals in the pool do not contribute in accordance with the risk they bring to the pool.
26.99 Although the number of applications for life insurance involving genetic test information is currently quite small, it is important to adopt policies that are sufficiently robust to endure in the longer term. As genetic tests become cheaper and more widely used, and as our knowledge of the genetic basis of common disorders such as asthma, diabetes and depression expands, the relevance of genetic test information is likely to grow. If insurers were denied access to that class of information in underwriting, the disparity in the information known to the applicant and the insurer would grow, enhancing the prospect of adverse selection.
26.100 Giving more favourable underwriting treatment to applicants because of the genetic basis of their disease creates an arbitrary distinction between individuals according to the source of their ill health or disability. It is not clear why a person suffering from a cancer that is not (currently) known to be genetically linked should be treated less favourably than a person suffering from a cancer that is. It is for these reasons that the Inquiry rejects the idea of ‘genetic exceptionalism’—that is, the idea that genetic information is so fundamentally different from, and more powerful than, all other forms of personal health information that it requires different and higher levels of legal protection (see Chapter 3).
26.101 The legal principles upon which personal insurance is currently underwritten do not prevent an individual from obtaining insurance at standard rates merely because of his or her genetic status, so long as that status is unknown to the applicant. The present law targets decision making on the basis of differential information; it does not target decision making on the basis of underlying genetic status as such.
26.102 In light of these considerations, the Inquiry has formed the view that a departure from the fundamental principle underlying the market in voluntary, mutually rated personal insurance in Australia, namely, equality of information between the applicant and the insurer, cannot be justified at this time. The Inquiry notes that many of the concerns raised in submissions relate to the manner in which insurers use, or are perceived to use, genetic information in underwriting rather than the underlying duty of disclosure. The Inquiry is of the view that these concerns can be addressed without departing from the existing principle of parity of information between the applicant and the insurer. Chapter 27 includes a range of recommendations (including oversight by the HGCA of genetic tests used in insurance) to ensure that the use of genetic information by insurers is fair and transparent, and that insurers are kept to the terms of the exemption granted to them by anti-discrimination laws.
Adverse impact on health outcomes
26.103 The Inquiry notes the concerns raised in relation to the use of genetic information by insurers and the potential adverse impact on individual or public health outcomes. The Inquiry is of the view that these problems can be addressed in part through better provision of information, for example, by ensuring that individuals are aware that taking a genetic test will not affect their ability to access health insurance but that it might affect their ability to access life insurance products.
26.104 The Inquiry notes that IFSA’s Industry Statement on Haemochromatosis and its Genetic Testing Policy include an explanation of the potential impact of test results on access to life insurance products. This information could also be provided through medical practitioners and genetic counsellors. A brochure prepared for genetic counsellors by the Centre for Genetics Education advises pretest patients to consider carefully the implications for insurance of undertaking a genetic test. Armed with accurate information, individuals will be in a better position to make informed decisions about whether and when to undergo testing and whether and when to take out insurance. In relation to testing for research, potential participants should be informed about the implications of testing and, for example, given the opportunity to participate in the research without being informed of their individual results, as provided by the National Statement on Ethical Conduct in Research Involving Humans.
26.105 As noted above, many of the concerns about the use of genetic information by insurers relate to the way in which insurers use, or are perceived to use, genetic information. The recommendations in Chapter 27—ensuring that genetic information is used for underwriting only when it is reasonable to do so, that applicants may request clear and meaningful reasons for adverse decisions, and that applicants are able to seek effective review of those decisions—should help to allay those concerns.
26.106 The Inquiry also notes that genetic test results are a form of personal health information. Individuals are required to make choices about other forms of medical testing, either for individual health reasons or prior to participating in a research project or other public health initiative. The results of this testing may also have adverse consequences for the individual’s ability to access insurance. As noted in Chapter 3, the Inquiry does not generally support approaches based on genetic exceptionalism.
The need for ongoing review
26.107 However, given developments in other jurisdictions, including the introduction of two-tier systems in some European countries, the Inquiry is of the view that the HGCA should keep this matter under review.
26.108 Within the last ten years, many countries have begun to confront the challenges posed by the use of genetic information in underwriting. Different approaches have been taken in different jurisdictions, and some countries have experimented with a number of models within a relatively short period of time. The variety of responses suggests that this shared problem has no universal solution that is likely to commend itself to all. Account must be taken of important differences between insurance markets and between social objectives when comparing jurisdictions.
26.109 The consequences of changing the framework for regulating the use of genetic information in underwriting are likely to take considerable time to manifest themselves. A thorough evaluation of new regulatory structures is thus likely to take some time. In Australia at present, the number of cases in which genetic test information is used to underwrite personal insurance is very small (see Chapter 25). In this environment, much can be gained by monitoring developments in countries that have begun to experiment with alternative approaches.
26.110 To this end, the Inquiry considers that the HGCA should keep under review the experience of the insurance industry in using genetic information in underwriting, both in Australia and overseas, in order make recommendations to government at a later time, if the need arises. The work of the Genetic Discrimination Project Team in providing more detailed information on the nature and extent of genetic discrimination will assist with this process.
26.111 In keeping a watching brief on the experience of the industry, the HGCA should liaise with peak industry bodies, including IFSA and the Insurance Council of Australia, and with industry regulators, including the Australian Competition and Consumer Commission, the Australian Securities and Investments Commission and the Australian Prudential Regulation Authority.
Recommendation 26–1 As a general matter, there should be no departure from the fundamental principle underlying the market in voluntary, mutually rated insurance, namely, equality of information between the applicant and the insurer. However, where the underwriting of insurance involves the use of human genetic information, the insurance process should be subject to the Recommendations in this Report. (See Chapters 27 and 28).
Recommendation 26–2 The Human Genetics Commission of Australia, in consultation with peak industry bodies and regulators, should keep a watching brief on developments in the insurance industry in relation to the use of human genetic information, both in Australia and overseas, with a view to reviewing Australian insurance practices as the need arises.
 Statistics produced by the Insurance and Superannuation Commission in 1996 suggested that about one-third of Australians had life insurance. However, the reliability of the data has been questioned by IFSA.
 See comments by L Ralph in Senate Legal and Constitutional Legislation Committee, Inquiry into the Provisions of the Privacy Amendment (Private Sector) Bill 2000 (2000), The Parliament of Australia, 35. See also R Pokorski quoted in T Lemmens, ‘Selective Justice, Genetic Discrimination, and Insurance: Should We Single Out Genes in Our Laws?’ (2000) 45 McGill Law Journal 347, 384.
 Centre for Genetics Education, Submission G232, 18 December 2002.
 National Health and Medical Research Council, National Statement on Ethical Conduct in Research Involving Humans (1999), NHMRC, Canberra.
 Genetic Discrimination Project Team, Submission G252, 20 December 2002.