Scientific reliability and actuarial relevance

27.3 Section 46 of the Disability Discrimination Act 1992 (Cth) (DDA) provides an exception from the operation of the disability discrimination provisions in relation to insurance. The effect of the exception is to enable insurers to discriminate lawfully where:

•  

  • the discrimination is based on actuarial or statistical data and is reasonable, or

  • in the absence of actuarial or statistical data, the discrimination is reasonable having regard to any other relevant factors.

27.4 In seeking to rely on genetic information to discriminate between individuals for the purposes of underwriting, insurers must therefore be able to demonstrate either the actuarial or statistical basis of their decisions or the reasonableness of their actions. Where the scientific reliability or actuarial relevance of genetic information is doubtful, its use in underwriting may take insurers outside the scope of the exception and render their discriminatory conduct unlawful.

27.5 Although questions of relevance and reasonableness often arise in relation to genetic information derived from genetic tests, the use of family medical history is also of concern. In its final report, the United Kingdom’s Human Genetics Commission recommended that the government continue to monitor the evidence used by the insurance industry to justify its use of family medical history in underwriting.^[2] This chapter also examines the use of family medical history by insurers in Australia and makes recommendations designed to ensure that this use is consistent with anti-discrimination laws.

27.6 In establishing whether it is reasonable for insurers to rely on genetic information in underwriting, two main issues arise—the scientific reliability of the genetic information and its actuarial relevance. The first factor relates to the link between the existence of a genetic mutation and the expression of a particular disorder; the second relates to the link between the expression of disease and increased morbidity or mortality.

27.7 As discussed in Chapters 2 and 3, the existence of a genetic mutation for a disease does not lead inexorably to the development of that disease, except in a number of rare monogenic disorders. Yet, the concern has been expressed that

genetic information is often credited with greater probative value than it deserves, and in many cases it is treated as if it was medical fact rather than mere prediction.^[3]

27.8 For example, a genetic test that indicates a predisposition to a recessive polygenic disorder will not be as scientifically reliable in terms of predicting the occurrence of disease as a genetic test for a dominant monogenic disorder. As Martin Bobrow noted before a House of Commons Select Committee:

[G]enetic tests are very good at distinguishing those who carry a particular gene from those who do not. They are somewhat less accurate at identifying those who will and will not eventually get the disease.^[4]

27.9 Moreover, the expression of a genetic disease or disorder may or may not have a bearing on an individual’s mortality or morbidity, particularly where the condition may be treated effectively. It is the role of actuaries to determine the actuarial significance of particular genetic information by analysing health data collected from large numbers of individuals. The data enable actuaries to calculate the risk that an applicant with a particular condition will make a claim, if insurance were granted.

27.10 In its submission, the Institute of Actuaries of Australia described the way in which actuarial data is compiled over time whenever a new medical treatment or test is developed.

In the early days statistics will be scanty. The development will be experimental at first. The impact of it on life rating factors will at that stage be based mostly on informed opinion. Only after scientific papers have been published will the development be put into widespread use. With familiarity, the development will be further refined and the results re-evaluated. This will lead to another round of medico-actuarial analysis, this time with a larger pool of statistics to work with. So the new development will work its way through a classic learning curve, with the level of confidence in it steadily growing.

This is the way that life insurers have always assessed new medical information for use in underwriting. IAAust sees no reason why insurers would not follow the same pattern with genetic information.^[5]

Genetic test information

27.11 Chapter 25 provided information on the use of genetic test information by Australian life insurers in recent years. As Figure 25–1 indicated, in the two-year period to November 2002, very few applications involving genetic test information were received by life insurers, and those that were received relate to a small range of tests: of the 235 such applications, over 200 involved tests for only five conditions.

Submissions and consultations

27.12 Despite the modest use of genetic test information to date, a large number of submissions expressed unease with the insurance industry’s ability to accurately interpret and use genetic test information, both scientifically and actuarially.^[6] Privacy NSW submitted that:

Evidence indicates that the insurance industry generally does not yet have the information which would be needed to make actuarially sound use of genetic test results.^[7]

27.13 The Human Genetics Society of Australasia submitted that:

There is inadequate scientific data for interpreting the majority of genetic tests for the purposes of insurance underwriting at this time. The interpretation of data needs to be undertaken by experts in the area, based on published data. It often takes many years following the discovery of a gene to understand the significance of a result, and sometimes even then specific results cannot be interpreted with certainty.^[8]

27.14 Fiona Richards submitted that:

I suspect that most insurance companies are not aware of the implications of intermediate range results in [Huntington’s disease] testing—this is a complex area which requires highly specialised knowledge. An advisory body would be able to provide this updated information to insurers and assist with interpretation of complex results.^[9]

27.15 As discussed in Chapter 26, where the scientific reliability or actuarial relevance of genetic information is uncertain, its use may result in unlawful discrimination. The Centre for Law and Genetics stated in its submission that:

In many cases, insurers would probably be able to justify their decisions to load premiums or decline cover on the basis of actuarial or statistical data. But given the broad range of genetic conditions and the increasing number of genetic tests that are available, serious concerns are being raised about the reliability of the actuarial data that is currently being used by insurers to make their underwriting decisions, raising doubts about the lawfulness of their decision-making. Indeed, many have argued that there is presently insufficiently reliable actuarial, statistical or other data available to allow use of genetic test information for underwriting purposes.^[10]

27.16 In its submission to the Inquiry, however, the Investment and Financial Services Association (IFSA) expressed the view that

the insurance industry’s current use of genetic information in underwriting has sufficient actuarial and statistical basis …

In examining the impact of genetic test results on the level of risk, underwriters generally rely on existing statistical data and research drawn from previous experience; medical research and expert actuarial advice; and in particular underwriting guidelines and ratings manuals of international reinsurance companies. Extensive actuarial and statistical analysis of data over many years is used to formulate such risk ratings and guidelines. The review and modification of these ratings and guidelines is an ongoing process applying actuarial and statistical analysis to the latest published medical research.^[11]

27.17 IFSA drew attention to its industry statement on haemochromatosis as an example of the industry’s approach to genetic test results. Of the 235 applications involving a genetic test result received by life insurers in the two-year period to November 2002, 170 involved a test result for haemochromatosis, a life threatening but treatable genetic condition. Working with the Murdoch Childrens Research Institute’s HaemScreen program, IFSA has developed an industry statement that makes clear that, for the vast majority of people tested in the HaemScreen program there will be no impact on their life, disability or trauma insurance. For the one in 200 individuals found by HaemScreen to be at high risk of developing haemochromatosis, there will be no impact on their application for life insurance as long as there is no evidence of medical problems caused by the condition.^[12]

Independent oversight of genetic tests

27.18 In response to concerns raised in submissions, in DP 66 the Inquiry proposed that the Human Genetics Commission of Australia (HGCA) provide independent oversight of the use of predictive genetic tests in insurance. The majority of submissions that considered this issue expressed support for the proposal,^[13] although some submissions expressed support for HGCA oversight only in the context of a two-tier system.^[14]

27.19 The Anti-Discrimination Board of NSW expressed a common view in the following passage from its submission:

Without an adequate independent mechanism for evaluating the scientific reliability and actuarial relevance of genetic information, an onerous burden will fall to individuals to lodge complaints under anti-discrimination legislation in order to test the actuarial relevance of the genetic information upon which the insurers seek to rely and the accuracy of the interpretation of that information in the underwriting process. To allow the scientific reliability and actuarial relevance of predictive genetic test information to be determined on a case by case basis is totally inadequate to address the complexities of determining the use of genetic information when applied to risk rating for insurance purposes.^[15]

27.20 The Centre for Law and Genetics expressed the view that:

The prospects of ensuring that accurate and reliable information is uniformly available to agents and brokers would be greatly enhanced if this responsibility was shared between the insurance industry and government, through the work of an expert committee established for the specific purpose of evaluating the scientific and actuarial relevance of genetic tests proposed for use by the insurance industry in setting insurance premiums, along the lines of the Genetics and Insurance Committee (GAIC) established in the United Kingdom.^[16]

27.21 The Anti-Discrimination Commission of Queensland commented that it would be important to ensure that the process was open and transparent with adequate opportunities for stakeholders to make submissions. The Commission was of the view that this would improve public confidence in the use of genetic test information by insurers and that underwriting decisions would be more likely to be consistent with anti-discrimination legislation.^[17]

27.22 The Australian Life Underwriters and Claims Association, on the other hand, did not support the proposal. The Association expressed the view that where a genetic test is reliable enough to be used by the medical establishment it should be available for use by insurers. In addition, the Association was concerned that an independent approval process might result in unacceptable delays in the availability of tests to underwriters.^[18]

27.23 While IFSA was of the view that the insurance industry’s current use of genetic test information in underwriting has sufficient actuarial and statistical basis, it was not opposed to involvement of the HGCA. IFSA suggested:

In the case of new genetic tests being developed, IFSA would support the proposed HGCA’s role in reviewing and approving tests as being suitable for medical diagnostic, therapeutic or predictive purposes in Australia on the understanding that they can then also be used for underwriting. IFSA believes the authorisation of tests for use in underwriting should stand or fall with the authorisation of tests for use in medical practice in Australia for therapeutic, diagnostic or predictive purposes.^[19]

27.24 In addition, IFSA made clear that:

IFSA opposes any prohibition on the use of existing predictive genetic test results in underwriting pending specific approval by the proposed HGCA. The industry believes that the inability to continue to use results of existing genetic tests—which have been already approved for medical therapeutic, diagnostic or predictive purposes—in underwriting would be inconsistent with the principles of a commercially based mutually rated insurance system. It would effectively create a moratorium on the use of genetic test results by the insurer and, by preventing consideration of relevant genetic test information in assessing an individual’s risk, would expose the industry to the risk of adverse selection by those asymptomatic individuals aware of their positive test results who, but for the moratorium, would otherwise be unable to obtain cover at standard rates and inevitably destabilise the system.^[20]

27.25 The Institute of Actuaries of Australia noted that there was likely to be a delay in establishing the HGCA and that there would be a need for transitional arrangements so as not to undermine existing insurance practices. The Institute was of the view that the review process to be adopted should be developed by the HGCA once it was established. There would be a need for two processes, one in relation to genetic tests already in use by insurers and one for new genetic tests. The Institute also emphasised that membership of the HGCA would need to include relevant insurance experts.^[21]

27.26 The Centre for Law and Genetics made the following suggestion:

The wording of Proposal 24–3 calls for clarification in relation to the use of negative genetic test results: ie genetic tests which indicate that the person is not at risk of the particular genetic disease or disorder tested for. Strictly construed, this Proposal would preclude insurers from having regard to the results of any predictive genetic tests: these would first need to be approved by the HGCA for use by insurers. We believe a distinction needs to be drawn between positive and negative genetic test results. Whilst there is clearly a need to regulate insurers’ use of positive genetic test results for the protection of individuals at genetic risk, it would seem that a restriction on the use of negative results of predictive genetic tests would work against the interests of the individuals affected.^[22]

Industry code or legislation

27.27 DP 66 also asked whether the proposal for oversight by the HGCA would be implemented most effectively through an industry code or legislation. A number of submissions expressed the view that legislation would apply more comprehensively, given, for example, that not all life insurers are members of IFSA.^[23] Others were of the view that this proposal could be implemented effectively through industry codes.^[24] IFSA suggested that its Genetic Testing Policy could be amended to prohibit the use of genetic tests that had been considered and rejected by the HGCA and to prohibit the use of new genetic tests until they had been considered and approved by the HGCA. This would allow insurers to continue to use existing genetic tests until they were considered by the HGCA.

27.28 The Inquiry was informed that the Insurance Council of Australia (ICA) is currently reviewing the General Insurance Code of Practice.^[25] Amendments to the Code will be submitted to the Australian Securities and Investments Commission (ASIC) for approval. As with the IFSA Genetic Testing Policy, the Code could be amended to implement the recommendations in this Report. Alternatively, the ICA may wish to consider developing a separate genetic testing policy for general insurers.

27.29 DP 66 sought feedback on whether, if the proposal were implemented through legislation, this should be through amendment to the duty of disclosure in the Insurance Contracts Act 1984 (Cth) (Insurance Contracts Act) or the insurance exemption in anti-discrimination legislation. The acting Disability Discrimination Commissioner expressed the following view:

Government, the public and industry should be able to expect insurance to be properly regulated by insurance law and industry mechanisms in the first instance, with discrimination law providing a safety net or check on these mechanisms if necessary rather than needing to be the first resort on any issue.^[26]

27.30 On this basis, he was of the opinion that any changes should be implemented through amendment to insurance industry law and practice, and that a complementary amendment to the DDA would not be needed. The Anti-Discrimination Commission of Queensland noted that, if insurers were limited to relying on those genetic tests approved for use by the HGCA, underwriting decisions would be more likely to be consistent with the provisions of the DDA.^[27]

27.31 The acting Disability Discrimination Commissioner also noted that it would be possible to reflect any changes by amending the Guidelines for Providers of Superannuation and Insurance issued by the Human Rights and Equal Opportunity Commission (HREOC).^[28] It would also be possible to recognise the changes through the issue of a temporary exemption under the DDA.

Inquiry’s views

27.32 In exempting insurers from the operation of the DDA, the legislature has recognised that differentiation between individuals goes to the very nature of mutually rated insurance. However, the exemption from the general proscriptions of the Act is expressly confined to discrimination based on reasonable actuarial or statistical data, or—where no actuarial or statistical data are available—to discrimination that is otherwise reasonable. If neither test is satisfied, the inherently discriminatory conduct of insurers in underwriting mutually rated insurance will be unlawful.

27.33 The Inquiry notes the concerns expressed in consultations and submissions in relation to the use of genetic test results in underwriting. Society’s understanding of the genetic basis of disease is changing rapidly and this presents a serious challenge for underwriters in establishing the necessary links between genetic mutation and disease, on the one hand, and between disease and mortality and morbidity, on the other. Experience with genetic test information is relatively new, so that there has been no deep accumulation of data and precedents upon which to base underwriting decisions in such cases.

27.34 Apart from the HREOC complaint process or formal review by a court, the present system offers no independent oversight of whether the discriminatory use of genetic test information is based on reasonable actuarial or statistical data, or is otherwise reasonable. Insurers themselves determine which genetic test information is considered to be scientifically reliable and actuarially relevant, and then apply this information to underwriting individual applications. From the perspective of an applicant who has received an unfavourable underwriting decision, this practice may give rise to dissatisfaction—even if the decision is sound in fact and falls within the terms of the insurance exemption.

27.35 In the light of these considerations, the Inquiry has formed the view that independent oversight of the use of genetic test information in underwriting is needed and that the HGCA is the appropriate body to undertake that role. The Inquiry does not suggest that insurers routinely use genetic information to underwrite applications in a manner that falls outside the terms of the exception in s 46 of the DDA or equivalent legislation. Rather, the Inquiry believes that independent oversight would help to build public confidence that genetic test information is being used to discriminate only in the limited circumstances permitted by law and that insurers’ use of genetic test information is transparent and based on objective information. In this context, the Inquiry recalls the note of caution sounded by the United Kingdom’s House of Commons Science and Technology Committee:

We regret that the insurance industry insisted on using genetic tests before their reliability had been fully established. In hindsight it would have been better if the insurance industry had proceeded far more cautiously in this difficult area, which at present can bring them little financial return but a great deal of adverse publicity.^[29]

27.36 The Inquiry recommends that the HGCA should, as a matter of priority, establish procedures to assess and make recommendations in relation to particular genetic tests used in underwriting mutually rated insurance, having regard to their scientific reliability, actuarial relevance and reasonableness. Industry codes should ensure that, once the HGCA has made a recommendation in relation to a particular test, members are required to use that genetic test information only in accordance with the HGCA’s recommendation. Under this scheme, the HGCA would not be involved in making or reviewing individual underwriting decisions.

27.37 In DP 66 the Inquiry put forward a similar proposal, although limited to oversight of predictive genetic tests. During consultations a number of individuals indicated that diagnostic genetic tests also raise issues of scientific reliability, actuarial relevance and reasonableness. The Inquiry agrees with this view and has cast its present recommendations accordingly.

27.38 The Inquiry does not agree with the view that, where a genetic test is reliable enough to be used by the medical profession, it should necessarily be available for use by insurers. As discussed in Chapter 11, the Therapeutic Goods Administration (TGA) evaluates some goods used in genetic tests for quality, safety and efficacy, among other things. Although the TGA may comment generally on the use of specific tests in clinical settings, this evaluation does not extend to whether the test is appropriate for use in a particular clinical situation. This decision is made on a case-by-case basis by the medical professional arranging the test. The TGA approval process involves an examination of the scientific reliability of a particular test—for example, it examines whether genetic test X gives a reliable result for genetic mutation Y—but it does not consider the actuarial significance of potential test results.

27.39 The only other formal government evaluation of particular genetic tests occurs in relation to listing under the Medicare Benefits Schedule (MBS). As discussed in Chapter 10, the Medical Services Advisory Committee provides advice to the federal Minister for Health and Ageing about tests that are to be subsidised through Medicare. MBS listing requires an appraisal of evidence relating to the safety, clinical effectiveness and cost effectiveness of a particular test. These considerations extend beyond the scientific reliability of a genetic test to matters of cost and public funding. Only four genetic tests are currently listed on the MBS: if MBS listing were to be a precondition for making genetic tests available to insurers, many tests currently used by the industry would be unavailable for the purpose of underwriting.

27.40 IFSA has suggested that the HGCA could make recommendations in relation to whether particular genetic tests are suitable for use for diagnostic, therapeutic or predictive purposes in Australia, and that use in insurance should flow automatically from this. In the Inquiry’s view, the use of genetic tests in the medical context, where the health and well being of the individual are the paramount consideration, raises different issues from the use of genetic tests in insurance, where the test result may have adverse consequences for the individual. It is easier to justify the use of new or experimental genetic tests that might benefit the health of an individual in the medical context than the use of such tests in underwriting.

27.41 As discussed in Chapter 5, the Inquiry recommends that the HGCA be established with a balanced and broad-based membership, including both expert and community representation. A body established in accordance with those recommendations, and utilising whatever sub-committees or working parties may be appropriate, will have the level of expertise and authority necessary to provide appropriate oversight of the use of genetic tests in underwriting.

27.42 The Inquiry has refrained from making recommendations about the processes and procedures for the HGCA in considering genetic tests for use in insur-ance. These should be developed by the HGCA, in consultation with peak industry bodies and other stakeholders. The Inquiry considers that the process should be open and transparent, with adequate opportunity for stakeholders to make submissions.

27.43 As indicated above, the Inquiry is of the view that the recommendations of the HGCA in relation to the use of genetic test information in underwriting should be implemented through the development or amendment of relevant industry codes. This approach allows flexibility in a rapidly developing area. The insurance industry peak bodies have demonstrated a willingness to work with government and stakeholders to improve industry practices through self-regulation. This situation should, however, be kept under review by the HGCA in accordance with Recommendation 26–2.

27.44 Industry codes issued by IFSA and the ICA cover the vast majority of insurers in Australia. Insurers operating outside these codes will remain subject to the provisions of the DDA. Where the HGCA recommends the rejection of a genetic test on the basis that it is not scientifically reliable, actuarially relevant or reasonable, reliance on that test by an insurer may give grounds for complaint under the DDA.

27.45 In implementing the Inquiry’s recommendations, it is necessary to establish suitable transitional arrangements. The Inquiry considers that insurers should be permitted to use genetic tests in underwriting in accordance with industry policies (as amended in accordance with this Report), until such time as the HGCA makes a recommendation in relation to a particular test. The HGCA should ensure that tests are considered in a timely fashion and that the process of review is constrained by reasonable time limits built into the HGCA procedures. The HGCA should consider, as a matter of priority, those genetic tests that are in use by the insurance industry and give rise to concern in relation to scientific reliability or actuarial relevance.

27.46 The Inquiry does not recommend an amendment to the duty of disclosure in s 21 of the Insurance Contracts Act, nor to the obligation of insurers in s 22 of the Act to inform applicants in writing of the ‘general nature and effect of the duty of disclosure’. The duty of disclosure extends only to information that is known, or which reasonably ought to be known, to be relevant to the decision of the insurer whether to accept the risk and, if so, on what terms (see Chapter 25).

27.47 Despite the qualified nature of the duty of disclosure, in practice applicants may disclose and insurers may collect information that is not relevant to the decision of the insurer; for example, in response to general questions about the applicant’s health. In general, it is the insurer who assesses what information is relevant and what is not. Under the proposed arrangements, the HGCA will assess whether a particular genetic test is relevant for use in underwriting. Those tests that are rejected by the HGCA will not be relevant to the decision of the insurer because they will have been found to lack scientific reliability, actuarial relevance or reasonableness. Accordingly, applicants will have no duty to disclose the results of genetic tests that have been considered and rejected by the HGCA.

27.48 However, insurance applicants cannot reasonably be expected to know which genetic tests have been considered, recommended or rejected by the HGCA. Nor should applicants be expected to know, without the provision of additional information, the implications of the HGCA’s decisions for the applicant’s duty of disclosure. The Inquiry is therefore of the view that peak industry bodies should require their members to inform applicants of the nature of their duty of disclosure in relation to genetic test information and to provide applicants, upon request, with information about the relevant recommendations of the HGCA. In particular, insurance application forms that seek to collect health information about applicants should advise applicants that not all genetic test results have to be disclosed and that applicants may obtain further information about this from the insurer. Insurers should ensure that they have access to up-to-date information in relation to those tests that the HGCA has recommended not be used in underwriting, so that they can provide accurate information to applicants.

27.49 The Inquiry’s recommendation that insurers should be able to continue using genetic tests until such time as the HGCA makes an adverse recommendation in relation to a particular test removes much of the pressure, canvassed above, to create an exception for the use of negative test results. Nevertheless, the Inquiry considers that the HGCA should be free to develop recommendations on the use of negative test results in underwriting on a test-by-test basis. It may be that in some circumstances a negative result is more scientifically reliable, actuarially relevant or otherwise reasonable than a positive test result and might be used, for example, to displace a family medical history relating to the particular condition. Since such use does not prejudice the interests of an insurance applicant, the Inquiry leaves it open to the HGCA to recommend that insurers be allowed to use that information in appropriate cases.

Family medical history information

27.50 Although the majority of submissions focussed on the interpretation of genetic test results, the Inquiry also received submissions expressing concern about the use of family medical history in underwriting. Concerns included the unreliable nature of family medical history information and the potential for this information to be misunderstood and misapplied. In its submission to the Inquiry, IFSA described the way in which family medical history is collected and used in life insurance:

The use of family medical history is an integral part of the underwriting process. Family medical history has been used for over 100 years within the life insurance industry worldwide.

Family medical history can be a relevant factor in assessing the likelihood of an individual meeting the policy conditions to substantiate a claim. It is used to identify potential medical risks on the basis of the probability that the insurance applicant may be susceptible to certain risks due to a familial/hereditary link with his or her immediate family.

The majority of insurers in Australia have a section in their standard application forms asking about the applicant’s family medical history. The purpose of the question is to identify whether the applicant’s immediate family members (limited to biological mother, father, brother(s) or sister(s), known collectively as 1st degree relatives) have been diagnosed with, or have died from a number of medical conditions which medical research has identified as having a strong familial link or for which there is an identifiable direct genetic link (such as Huntington’s disease). The insurer does not ask for family history information relating to the applicant’s children or their uncles, aunts, cousins or relatives that are not immediate family.^[30]

27.51 IFSA also included a number of examples of the way in which family medical history impacts on risk rating of applications for insurance. This information is generally drawn from reinsurance manuals. The following information was provided on familial colorectal cancer:

No family history of colorectal cancer equates to a 2% lifetime risk of developing colorectal cancer. That is 2 in 100 people will suffer this condition at some stage of their life.

1 first-degree relative with colorectal cancer translates to a 6% lifetime risk of developing the disease. If an applicant is over 45 years of age and asymptomatic at the time of underwriting they would be assessed as:

•  

  • borderline ordinary rates for life insurance;

  • up to +50% extra morbidity for trauma insurance;

  • borderline ordinary rates for disability insurance.

1 first-degree relative aged < 45 years of age when first diagnosed with colorectal cancer translates to a 10% lifetime risk of an individual developing the disease. If an applicant is under 45 and asymptomatic at time of underwriting they would be assessed as:

•  

  • up to +50% extra mortality for life insurance;

  • +75% extra morbidity for trauma insurance;

  • up to +50% extra morbidity for disability insurance.

2 first-degree relatives with colorectal cancer translate to a 17% lifetime risk of developing the condition. If the applicant is under 45 and asymptomatic at time of underwriting he or she would be assessed as:

•  

  • up to +50% extra mortality for life insurance;

  • up to +100% extra morbidity for trauma insurance;

  • up to +50% extra morbidity for disability insurance.^[31]

27.52 Family medical history is one of many factors taken into account in the underwriting process. Other factors include the age of the applicant, past and current medical status and lifestyle including, for example, whether the applicant is a smoker. Insurers rely to a large extent on reinsurance manuals to provide information on how each of these factors affects risk. The extent to which insurers rely on family medical history is discussed in Chapter 25.

Submissions and consultations

27.53 A number of submissions expressed support for the inclusion of family medical history information within the oversight functions of the HGCA.^[32] Privacy NSW submitted that:

Questions have been raised about the accuracy of actuarial decisions based on family history information. Ideally, if a Genetics Advisory Committee is formed, the safest option is to include family history information in the proposed moratorium on the use of genetic testing information. Alternatively, if family history information continues to be used, the Genetics Advisory Committee should assess the way it is used in the light of progress in genetics. Proposers should be provided with appropriate information to assist them to understand how this information may affect their applications.^[33]

27.54 The New South Wales Anti-Discrimination Board submitted that:

In our view use of family medical history, whether or not such information can amount to genetic information, should be subject to greater scrutiny to determine whether or not the information used in the underwriting process is scientifically reliable and actuarially relevant. The independent body we propose above should play a role in evaluating the scientific reliability and actuarial relevance of both genetic and non-genetic information.^[34]

27.55 The Inquiry was informed that placing limits on insurers’ access to family medical history information would have serious consequences for the industry and would be more likely to lead to adverse selection than limits on access to genetic test information.^[35] In its recent report, the United Kingdom Human Genetics Commission recommended that the voluntary moratorium not be extended to cover family medical history. This recommendation was based on modelling which indicated that the exclusion of family medical history from underwriting was likely to have a significant impact on insurance premiums.^[36]

27.56 A related issue is the way in which insurers deal with the interaction between family medical history information and genetic test information. As noted above, the Inquiry received one submission reporting an incident in which insurers appeared to underwrite on the basis of the applicant’s family medical history of Huntington’s disease despite the provision of genetic test results showing that the applicant did not have the genetic mutation for that disease.^[37]

27.57 The Human Genetics Society of Australasia (HGSA) made the point that:

In the setting where a person has had a genetic test for a familial condition and they have been shown not to have the mutation, this should negate the effect that their family history has on the loading. The basis for this recommendation is that where a family mutation is not present, the evidence is clear that that individual is either at the same risk of the condition in question as others in the community or not at risk at all.^[38]

27.58 In DP 66, the Inquiry proposed that insurers, through their peak bodies and in consultation with the HGCA, should develop industry policies on the use of family medical history information. A number of submissions expressed support for this proposal.^[39] The Centre for Law and Genetics noted that this would be an important step towards increasing the transparency and accountability of insurance practice in this area.^[40]

27.59 The Australian Life Underwriters and Claims Association was concerned that a binding, industry wide policy on the use of this information by insurers would be an inappropriate fetter on the underwriting freedom of insurers. The Association noted, however, that a high level policy guideline to assist insurers to avoid discrimination would be more acceptable.^[41]

27.60 IFSA responded to the proposal in the following terms:

IFSA acknowledges that the current published industry policy on the use of genetic tests in underwriting does not cover the use of other forms of genetic information such as family medical history. To ensure industry practice in relation to use of family medical history in underwriting is consistent and properly takes into account all relevant concerns, IFSA agrees with the Inquiry that as a peak body of the insurance industry, IFSA should work in consultation with the proposed HGCA to develop appropriate industry policies that document current practices to address this issue.

IFSA sees the existing Genetic Testing Policy as the appropriate mechanism to incorporate a suitable policy on underwriting practices in respect of family medical history, and will commence discussions with its members in 2003 to give effect to this.

Moreover, IFSA will seek the involvement of the proposed HGCA in its development and maintain its practice of proactively reviewing its standards and policies on a regular basis (including the Genetic Testing Policy) to ensure such standards/policies reflect community attitudes and advances in technology (medical or otherwise).^[42]

Inquiry’s views

27.61 Chapter 25 noted that family medical history information has been used by insurers for the purpose of underwriting for over a century. Consequently, the industry has had a long period in which to collect statistical data and assess its actuarial relevance, particularly when compared with genetic test information. However, the use made of family medical history is in some ways more abstract and subjective than genetic test information. In particular, problems may arise because of the quality of the data collected about genetic relatives or the lack of medical understanding about the genetic influences on common diseases.

27.62 The Inquiry does not propose that the HGCA be asked to consider the use of the family medical history for underwriting purposes in particular circumstances. Such an approach is likely to be impractical, given the variability of circumstances in which family medical history may be relevant. However, the Inquiry is of the view that insurers, through their peak bodies, should develop industry policies on the use of family medical history in underwriting to ensure that where such information is relied on by insurers, it is scientifically reliable, actuarially relevant or otherwise reasonable. Such policies should be developed in consultation with the HGCA and the Institute of Actuaries of Australia.

27.63 Amongst other things, the policies should provide guidance for members on the following matters:

•  

  • the relationship between family medical history and other factors used to assess risk, so that the former is only given its due weight;

  • the relationship between family medical history and genetic test information, particularly where a genetic test result is negative;

  • the proximity of the blood relationship between the applicant and his or her family members that justifies collection of family medical history; and

  • the need, if any, for verifying diagnoses of family members and the procedures for doing so.