4.34 A number of key tensions arise in the context of insurance, primarily between the importance of risk assessment and pricing that reflects the risk, and the insurance needs of groups within the community such as mature age workers.
4.35 There is a broad suite of underwriting and pricing factors, including an applicant’s age, considered relevant to assessing risk. The ICA emphasises that ‘a lawful ability to reasonably differentiate on the basis of risk, is essential to the provision of affordable general insurance for the community’. Throughout this Inquiry 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 such consequences may affect insurance offerings and premiums. In its submission, Suncorp emphasised the highly competitive nature of the insurance industry and noted 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.
4.36 However, as outlined above, a number of stakeholders have also expressed a range of concerns with respect to mature age workers and insurance.
4.37 The ALRC recognises that there is a need to improve the availability and affordability of insurance for mature age workers and to prevent discrimination against this group in insurance. However, in doing so there is a need to ensure that legislative and regulatory frameworks do not inadvertently hinder legitimate risk assessment by insurers.
4.38 To address concerns about specific types of insurance—such as income protection, travel and workplace insurance—there is a need for systemic reform of some aspects of the insurance industry. The focus of such reform is: the availability of, and information about, insurance products for mature age workers; age-based limitations on some insurance products; and the relevance, transparency and accessibility of the actuarial and statistical data upon which age-based insurance underwriting and pricing processes occur.
4.39 Many of the concerns highlighted by stakeholders require complex and multifaceted solutions. Such solutions may not involve legislative or regulatory changes, but are essentially market-based issues that will require cooperation between the insurance industry, seniors organisations, consumer groups and the Australian Government. IRAG is a key forum at which each of these stakeholders are represented. The ALRC therefore considers that IRAG is the most appropriate body to consider a number of the systemic reforms outlined in this chapter and accordingly makes two key proposals directed at this group.
4.40 The following sections of this chapter outline issues that stakeholders raised with the ALRC. The ALRC suggests that IRAG further consider these areas for reform in its work. The specific areas for reform—access to information about insurance products; age limits and the need to redesign insurance products; and underwriting and actuarial data—are outlined in turn below.
Access to information about insurance products
4.41 One of the difficulties for mature age workers, aside from the age-related barriers and limitations on insurance products themselves, is accessing information about available insurance products. While there are a range of insurance products available for mature age workers, many have differing age restrictions, coverage and premiums.
4.42 A number of comments from respondents received as part of the 2012 survey by National Seniors Australia and COTA on ageism in travel insurance noted difficulties in understanding and comparing insurance policies:
The schedules of what is covered and what is not are very difficult to compare as the insurance companies tend to use different and confusing language to describe the same thing.
4.43 Another respondent suggested that ‘it would be useful to have a website for travel insurance where one specifies their requirements and a list of qualifying requirements are displayed’.
4.44 While mature age workers, like all consumers, have a level of individual responsibility for sourcing and comparing insurance policies, if lack of awareness is contributing to perceptions of age discrimination in insurance, the development of information sources is one necessary aspect of reform. Consequently, as a preliminary reform step, the ALRC suggests that the insurance industry, seniors organisations, consumer groups and the Australian Government should work cooperatively to establish central information sources about insurance for mature age workers.
4.45 There are a number of existing sources and initiatives in this area including MoneySmart, and the Consumer Referral Service launched by the ICA on 1 July 2012 that provides contact details for insurers, including a listing for ‘Seniors Travel Insurance’.
4.46 These sources could be utilised, or contribute to the development of a new central information portal or source, in order to provide mature age people with clear and simple information about available insurance products. This information should extend beyond the provision of contact details for insurers. Any such guide should be available online and in hardcopy and be reviewed regularly.
4.47 The ALRC also suggests that insurers ensure appropriate training of employees in their insurance distribution networks about engaging with mature age people and the range of products available for them. There may also be a need for peak volunteering organisations to ensure employees who manage volunteers are provided with information about insurance and mature age workers, including coverage and available products.
Age limits and the need to redesign insurance products
4.48 Another key component of addressing barriers to workforce participation for mature age persons arising from insurance is the examination of age limits on insurance offerings, as well as the need to redesign insurance products to suit the needs and circumstances of mature age workers.
Reconsidering age limits
4.49 Age limits on insurance products currently offered in the Australian market for mature age workers differ, but tend to range from 65 to 70, and in some cases older. The South Australian Equal Opportunity Commission submitted that age limits in insurance products
hail from a time when the 65 retirement age was ‘set in stone’. With the retirement age due to increase, and the better health of Australians leading to extended participation in the workforce, the 65 age limit imposed is no longer relevant. It prevents capable people from participating fully as a member of society.
4.50 The AHRC has expressed the view that ‘insurance companies should be encouraged to extend their coverage of workers based on health and wellbeing measures and not on age limits’.
4.51 Some insurers ‘have already lifted their age limits’. For example, Suncorp submitted that it is ‘committed to increasing the maximum age of cover as soon as practicable’ and that ‘recent review of Suncorp’s age limits has shown that IP insurance is sustainable in some low risk occupations, and as a result, cover has been extended to age 70’. However, insurers have also emphasised the importance of risk-based underwriting and pricing, including on the basis of age. Many warned that any move to prohibit consideration of age as a factor would have serious consequences for the insurance industry.
4.52 In circumstances where age limits differ between insurers and products, the ALRC suggests that IRAG consider mechanisms for reviewing age-based insurance pricing and underwriting across the industry. In addition, given the effect of increased demand for insurance products on competition and the insurance pool, ‘financial education, increased information provision (both to consumers and insurers) and encouraging insurance uptake’, approaches supported by stakeholders such as the AHRC and Suncorp, may also be worth considering.
4.53 In circumstances where insurers continue to consider age a vital factor in underwriting and pricing processes, there is a need to ensure that decisions considering age are based on relevant and appropriate actuarial and statistical information available to consumers, an approach discussed in more detail below.
Redesign of insurance products
4.54 Throughout the Inquiry the ALRC has heard concerns from stakeholders about the design of insurance products available to mature age workers. For example, the design of travel insurance was raised by stakeholders as problematic where a number of pre-existing medical conditions (common in mature age persons) limit access to travel insurance, necessarily precluding basic cover for luggage and personal effects.
4.55 Insurers have submitted that it is not necessary to resort to regulation with respect to insurance offerings, as
mature age workers represent a significant market opportunity for insurers and Suncorp is confident competition will ensure concerns surrounding age-based limitations and premiums are resolved as soon as practicable.
4.56 The ICA noted that
insurers constantly review the market and reassess opportunities for expansion of their business within their particular business objectives. It is therefore natural in a free market economy that insurers offer policies targeted at particular groups. Even with the best of policy goals in mind, requiring uniform policy offerings, for example in the case of seniors, would distort competition and significantly impact insurers’ prudential requirements.
4.57 The ALRC recognises the nature of the insurance market and the importance of ‘risk appetite’ for insurance offerings. However, in order to ensure there are a range of insurance products available to mature age workers with reasonable premiums, the ALRC suggests that IRAG should discuss appropriate product design and redesign, balancing the need for risk assessment with the potentially discriminatory effects for mature age people of existing insurance offerings and design of products. In particular, IRAG should examine the design and redesign of comprehensive and affordable insurance products tailored to the needs and circumstances of mature age people.
Underwriting and actuarial data
4.58 In order to ‘assess risk factors and determine … risk appetite’, insurers ‘may consider available reliable data (such as the Australian Bureau of Statistics and the Australian Institute of Health and Welfare) and their claims book experience’.
4.59 Aside from complaint processes under anti-discrimination legislation or formal judicial review, the current system offers no independent oversight of whether insurers are basing decisions on reasonable actuarial or statistical data. There are a number of possible approaches to addressing this issue in light of stakeholder concerns.
4.60 For example, IRAG may wish to consider the establishment of some body or mechanism by which this information could be considered independently. This could, for example, involve consideration of whether the Government should establish a body or group responsible for providing advice to the insurance industry on the relevance and use of age in insurance underwriting and pricing. This is an approach similar to the one recommended by the ALRC in Essentially Yours, ALRC Report 96, with respect to insurance and genetic information. The data collection role of any such body could draw upon the existing data collection functions of APRA or the Institute of Actuaries.
4.61 Another possible approach may involve the quarterly publication of a report by insurers outlining their claims experience based on age and other relevant data upon which their ongoing reliance on the exemption is based. Any such requirement would need to ensure commercially sensitive data was protected. By way of example, the Association of British Insurers (ABI) and the British Insurance Brokers’ Association have entered into a non-statutory agreement with the UK government which requires ABI to publish aggregate data for the industry as a whole indicating how age is used when assessing risk and pricing travel and motor insurance products. The ALRC suggests that IRAG could consider a similar agreement and requirement in Australia. A number of alternative approaches are discussed below in the context of the insurance exemption, however the ALRC would be interested in stakeholder feedback on these potential approaches.
4.62 There are a range of developments, specifically in Europe, with respect to insurance that may increasingly be of relevance in an Australian insurance context. In light of this, in addition to its consideration of the matters outlined in Proposal 4–1, the ALRC proposes that IRAG should keep a watching brief on developments in the insurance industry in relation to age, both in Australia and overseas, with a view to reviewing Australian insurance practices as the need arises. The ALRC also considers that bodies such as the ICA and FSC and individual insurers should be aware of, and respond to, such developments as necessary.
Proposal 4–1 In April 2011, the Australian Government established an Insurance Reform Advisory Group. The group should examine:
(a) options for the development of a central information portal or source in order to provide mature age persons with clear and simple information about available insurance products;
(b) the design and redesign of comprehensive and affordable insurance products tailored to the needs and circumstances of mature age persons;
(c) mechanisms for reviewing age-based insurance pricing and underwriting across the industry;
(d) mechanisms for ensuring that the insurance industry utilises relevant and appropriate actuarial and statistical data upon which to make decisions about insurance offerings, based on age; and
(e) training of insurance distributers in order to facilitate the provision of clear and simple information about available insurance products.
Proposal 4–2 The Insurance Reform Advisory Group should keep a watching brief on developments in the insurance industry in relation to age, both in Australia and overseas, with a view to reviewing Australian insurance practices as the need arises.
 Suncorp Group, Submission 39; Insurance Council of Australia, Submission 21.
 Insurance Council of Australia, Submission 21.
 Suncorp Group, Submission 39.
 COTA, Submission 51; National Seniors Australia, Submission 27; The 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).
 See, eg, Insurance Council of Australia, Correspondence, 29 August 2012 which provided an overview of some insurance products available for mature age people.
 National Seniors Australia and COTA, Ageism in Travel Insurance 2012 Survey Report (2012), 24.
 ASIC, Moneysmart website <www.moneysmart.gov.au> at 30 August 2012.
 Insurance Council of Australia, Find an Insurer <www.findaninsurer.com.au> at 13 September 2012. The service is similar to the British Insurance Brokers’ Association ‘Find a Broker’ service and website: British Insurance Brokers’ Association, Find a Broker <www.biba.org.uk/ConsumerHome.aspx> at 13 September 2012.
 Insurance Council of Australia, Submission 21.
 Insurance Council of Australia, Correspondence, 29 August 2012.
 The South Australian Equal Opportunity Commission, Submission 11.
 Australian Human Rights Commission, Working Past Our 60s: Reforming Law and Policies for the Older Worker (June 2012).
 Suncorp Group, Submission 39.
 Insurance Council of Australia, Submission 21.
 Australian Law Reform Commission, Essentially Yours: The Protection of Human Genetic Information in Australia, ALRC Report 96 (2003).
 Association of British Insurers, British Insurance Brokers’ Association and HM Government, Transparency and Access in Motor and Travel Insurance for Older People: An Agreement on Age in Insurance (2012). The first data was made available in June 2012: Association of British Insurers, Data by Age and Gender <www.abi.org.uk/Facts_and_Figures/Data_by_Age_and_Gender.aspx> at 13
 The Council of the European Union, Council Directive 2004/113/EC, 13 December 2004 prohibits all discrimination based on sex in the access to and supply of goods and services. However, there is an exemption (similar to the Australian exemption) on the basis of actuarial and statistical data provided it is reliable, regularly updated and available to the public. The European Court of Justice held that in the insurance services sector, reliance on the exemption (that is, derogation from the general rule of unisex premiums and benefits) is invalid with effect from 21 December 2012: Association belge des Consommateurs Test-Achats ASBL v Conseil des ministres (Test Achats) (Unreported, ECJ, 1 March 2011). In light of this, the ALRC understands that there may be potential challenges to exemptions from anti-discrimination directives which discriminate on the grounds of age.