Life insurance premiums could rise if a Government ban on adverse genetic test results in life insurance underwriting is introduced, says the FAAA.
In its submission to Treasury, as part of the government’s consultation period on the idea, the organisation’s CEO Sarah Abood says the proposed model is not the norm in insurance.
While the FAAA supports the broader use of genetic testing for health purposes, she states a ban on using adverse genetic test results in life insurance will raise premiums across the board.
“If some of the members of the insurance pool are not paying the level of premiums that are warranted by the risks they present, then other members of the insurance pool will ultimately pay more,” she says. “This is an issue of equity.
“This genetic testing ban is likely to result in certain Australians who are aware they have a higher than average risk – after receiving genetic testing results – getting access to life insurance at a lower cost than their risk would warrant, whilst others will ultimately pay more.”
Abood says advocates of a complete ban on the use of genetic testing have compared life insurance with health insurance, “…highlighting that health insurance is community rated”.
…the cost of premiums are determined by the level of risk…
“That model is not the norm in insurance,” she says. “In most forms of insurance, access to cover and the cost of premiums are determined by the level of risk and the insurer’s willingness to accept that category of risk.”
The FAAA favours a model where the existing moratorium on insurers using genetic testing in life insurance below certain caps ($500,000) was legislated (albeit with indexation of the thresholds).
“We think this would provide a sensible balance,” says Abood. “Allowing people with high risk genetic test results to still access life insurance, but not at a level that would unreasonably impact the life insurance pools and increase costs for existing life insurance policyholders.”
Abood says the FAAA does not want to put obstacles in the way of people accessing genetic testing.
“However, neither do we want to see this ban work to the disadvantage of existing and future life insurance policyholders who will potentially pay much more for insurance as a result of the ban,” she says.
Good to see someone in the industry finally pointing out potential outcomes of this move.
The more the government gets involved the more the end consumer pays. Post LIF we have seen massive increases to premiums. This could have one of three out comes: 1. no real change. 2. premium increases 3. insurers leaving or limiting exposure to the Australian market. We saw in the USA where governments got involved with home insurance in some states and as a result a number of insurers refused to insurer home in that state because it was too much for a risk commercially.
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