Anti-discrimination legislation and the insurance exemption

4.77 The ADA contains an exemption which provides that insurers may discriminate on the grounds of age in offering an insurance policy, or the terms or conditions upon which such a policy is offered, if certain conditions are satisfied.[70] The conditions are satisfied if the discrimination is:

  • based upon actuarial or statistical data on which it is reasonable for the discriminator to rely; and

  • reasonable having regard to the matter of the data and other relevant factors; or

  • in a case where no such actuarial or statistical data is available, and cannot reasonably be obtained, reasonable having regard to any other relevant factors.[71]

4.78 The Australian Government is currently considering exemptions in the course of the consolidation of Commonwealth anti-discrimination legislation. Specifically, the Government has asked whether any consolidated act should include a general limitations clause rather than retaining the existing range of specific exemptions, and whether any particular specific exemptions should be retained.[72] Stakeholders who made submissions to the consolidation process expressed differing views on the merits of introducing a general limitations clause and retaining the insurance exemption.

4.79 In this Discussion Paper, the ALRC proceeds on the basis that the exemption will be retained in its current form for the purposes of age discrimination under any consolidated act. Following the release of the draft consolidated legislation in 2012, the ALRC may need to reconsider its approach to reform in preparing the final Report if there are changes to exemptions under the legislation.

4.80 At this stage, the ALRC is of the view that, in the course of the consolidation process, if a specific insurance exemption is retained, the Government should consider what changes may be needed to the exemption and its associated provisions to address stakeholder concerns. In order to facilitate further discussion of these issues in the final Report, the ALRC asks a range of questions below.

Should the insurance exemption be amended?

4.81 Throughout this Inquiry stakeholders have expressed a range of concerns with respect to the insurance exemption. The key concerns centre on the nature of the exemption itself and the relevancy, accuracy and availability of the actuarial or statistical data relied upon by insurers in invoking the exemption.

4.82 Some of these concerns echo those conveyed to the Productivity Commission in its 2004 review of the Disability Discrimination Act 1992 (Cth) (DDA). The Productivity Commission outlined several concerns about the insurance exemption under the DDA, including: access to insurance; the nature of, and access to, actuarial and statistical data; the nature of ‘any other relevant factors’; and reliance on stereotypes.[73]

The application of the exemption

4.83 A range of stakeholders have suggested amendments to the insurance exemption. Some stakeholders have suggested that the exemption should not apply automatically provided the conditions are satisfied. Instead, stakeholders have suggested that insurers should be required to apply for a specific exemption or show reasonable cause why an applicant over age 65 should not be covered by an insurance policy, or to justify discrimination in the terms or conditions of the policy. The ALRC is interested in stakeholder comments on the application and operation of the exemption as well as review mechanisms.

Disclosure of data to the customer

4.84 Other stakeholders have suggested that actuarial or statistical data relied on by insurers for the purposes of the exemption should be provided to the customer or to an independent regulator.

4.85 The Sex Discrimination Act 1984 (Cth) (SDA) requires insurers to disclose the actuarial or statistical data to the customer, however there is no such requirement under the ADA. However, there are a range of obligations under the Code with respect to the provision of such information.[74]

4.86 In its submission, Suncorp emphasised that actuarial and statistical data is commercially sensitive and expressed the view that

the publication of this data would reduce age-based competition by allowing all insurers access to their competitors internal actuarial and statistical data. Suncorp does not believe reduced age based competition is in the ultimate interests of mature age Australians. In addition, age data is commonly obtained from a variety of sources and is therefore difficult to interpret. Age data is used in conjunction with an insurer’s commercial expertise to determine underwriting and pricing. Presenting data without the underlying knowledge of its meaning or intended use is likely to have limited value for the community.[75]

4.87 However, the ALRC suggests that provision for an individual to request and receive the actuarial or statistical data on which the action or decision was based may address some stakeholder concerns in this area.

Power to require data

4.88 The ADA enables the AHRC and its President to require the production of actuarial or statistical data where a person has acted in a way that would, apart from the stated exemptions, be unlawful. The ADA, SDA and DDA all contain an offence for failing to disclose the source of actuarial or statistical data to the AHRC.[76]

4.89 Other than under the AHRC complaint process, or formal review by a court, the current system offers no independent oversight of whether insurers are basing decisions on reasonable actuarial or statistical data, or whether the decision is otherwise reasonable.[77] In light of this, stakeholders have expressed concerns about the limited nature of these powers.

4.90 However, insurers such as Suncorp submitted that, while ‘it is appropriate for insurers to be required to justify their age-based underwriting and pricing ... Suncorp would encourage use of the existing regulatory framework, where necessary, to achieve this’.[78]

4.91 The ALRC is interested in stakeholder feedback on whether the powers of the AHRC are sufficient, or whether there should there be some other mechanism for requesting or requiring either the actual actuarial information relied upon by insurers seeking to rely on the insurance exemption, or a meaningful explanation for their reliance on that information.

Any ‘other relevant factors’

4.92 The insurance exemption provides that in a case where no actuarial or statistical data is available, and cannot reasonably be obtained, the condition is satisfied if the discrimination is reasonable having regard to any ‘other relevant factors’.[79]

4.93 The meaning of ‘other relevant factors’ has been partly considered by the Federal Court in the context of the DDA in QBE Travel Insurance v Bassanelli,[80] in which Mansfield J held that an insurer cannot pick and choose which material it considers in the context of any ‘other relevant factors’. Instead, it must consider ‘any matter which is rationally capable of bearing upon whether the discrimination is reasonable’ and must not rely on stereotypes in doing so.[81] The Federal Court also confirmed that the onus of proof is on an insurer to qualify for an exemption under the equivalent section under the DDA.

4.94 The ALRC welcomes stakeholder feedback on whether it is necessary to amend the insurance exemption to provide greater clarity as to what constitutes any ‘other relevant factors’ or whether this is best left for judicial interpretation and guidance material.

4.95 The ALRC does not suggest that insurers routinely make decisions without sufficient actuarial, statistical or other reasonable basis such that they fall outside the terms of the insurance exemption. However, given the preliminary concerns expressed by stakeholders, in addition to the mechanisms the ALRC suggests should be examined by IRAG, the ALRC welcomes stakeholder feedback on a range of potential reform options aimed at addressing these concerns.

The development of guidance material

4.96 Regardless of the form the exemption that covers insurance takes, it is necessary to develop guidance material for insurers about the application of any exemption.

4.97 The AHRC developed Guidelines for Providers of Insurance and Superannuation with respect to the insurance and superannuation exemptions under the DDA. Last revised in 2005, the guidelines are not binding but provide the AHRC’s view on the interpretation of the exemption under the Act and relevant case law. The Guidelines are intended to:

  • clarify the difference between lawful and unlawful disability discrimination in providing insurance and superannuation; and

  • help providers of insurance and superannuation in complying with the DDA, in making decisions in individual cases and in developing broader policies and procedures; and

  • explain what distinctions or exclusions may be reasonable in offering insurances to people with a disability, and

  • explain factors that courts may take into account in deciding a complaint about disability discrimination.[82]

4.98 The ALRC proposes that the AHRC develop such guidance material for the purposes of age, in consultation with the insurance industry. In particular, such guidelines could: outline what is reasonable;[83] list sources of actuarial or statistical data that are acceptable for the purposes of the exemption; summarise recent case law; outline what are ‘other relevant factors’; and provide case studies.

Question 4–2 In the course of the consolidation of federal anti-discrimination legislation, the Australian Government is considering the operation of the insurance exemption under the Age Discrimination Act 2004 (Cth). If the specific exemption is retained, what changes, if any, should be made? For example, should:

(a) the application of the exemption be limited in some way;

(b) there be provision for an individual to request and receive the actuarial or statistical data on which the action or decision was based; or

(c) clarification be provided as to what are ‘other relevant factors’?

Question 4–3 Is the power of the Australian Human Rights Commission under s 54 of the Age Discrimination Act 2004 (Cth) sufficient, or should there be some other mechanism for requesting or requiring the actuarial or statistical information relied upon by insurers seeking to invoke the insurance exemption?

Proposal 4–4 The Australian Human Rights Commission, in consultation with the Insurance Council of Australia and the Financial Services Council, should develop guidance material about the application of any insurance exemption under the Age Discrimination Act 2004 (Cth) or consolidated anti-discrimination legislation.

[70] Age Discrimination Act 2004 (Cth) s 37.

[71] Ibid s 37(3).

[72] Australian Government Attorney-General’s Department, Consolidation of Commonwealth Anti-Discrimination Laws: Discussion Paper (September 2011), 37.

[73] Productivity Commission, Review of the Disability Discrimination Act 1992 (2004).

[74] Insurance Council of Australia, General Insurance Code of Practice.

[75] Suncorp Group, Submission 39.

[76] For example, it is a strict liability offence not to provide the source of any such actuarial or statistical data if required to do so and attracts a penalty of 10 penalty units: Age Discrimination Act 2004 (Cth) s 52.

[77] This concern was also expressed by the ALRC in Essentially Yours, in which the ALRC outlined concerns about the need for a mechanism to evaluate the reliability and relevance of actuarial data relied upon by insurers in relation to genetic information: Australian Law Reform Commission, Essentially Yours: The Protection of Human Genetic Information in Australia, ALRC Report 96 (2003).

[78] Suncorp Group, Submission 39.

[79]Age Discrimination Act 2004 (Cth) s 37(3).

[80] QBE Travel Insurance v Bassanelli [2004] FCA 396.

[81] Ibid.

[82] Australian Human Rights Commission, Guidelines for Providers of Insurance and Superannuation <www.humanrights.gov.au/disability_rights/standards/Insurance/insurance_adv.html> at 13 September 2012.

[83] For example, Mansfield J in QBE Travel Insurance v Bassanelli [2004] FCA 396 outlined instances where data would not be reliable.