How your health (and genetic results) affects your life, travel and health insurance

The Australian parliament is set to pass legislation today to ban life insurers from using genetic test results to discriminate against people applying for life insurance.

Once the law comes into effect in about six months, it will apply to all new life insurance contracts. These include for death cover, income protection, disability and trauma/critical illness cover.

So what does the new legislation mean for people taking out life insurance later this year? How about travel insurance or health insurance?

Here’s what we know, don’t know and need to clarify.

What’s changing with life insurance?

The new law will prohibit life insurers from using “protected genetic information” in underwriting.

Protected genetic information includes all health information that predicts or infers someone’s risk of future disease based on the results of genetic testing. In other words, life insurers cannot deny you cover or charge you higher premiums if you took a genetic test that predicted a higher risk of cancer, for example.

The definition does not include someone’s actual diagnosis (even if that was via a genetic test). The same goes for someone’s family history of disease, which can still be used by life insurers when underwriting. So if you or your sibling have been diagnosed with cancer, that could still be legally taken into account.

Underwriting is the process some insurers undertake when assessing the risk you bring as an insured person. They ask many questions when you apply for cover to gather information for underwriting.

Life insurance is usually risk-rated (except with some group insurance through superannuation). This means people with different risk profiles can receive different terms – including different premium costs, having things excluded from their cover, or having insurance rejected altogether.

Life insurers can ask about the medical history of an applicant or their first-degree relatives (parents, siblings or children). This isn’t restricted to conditions that still have symptoms. Any medical history at any stage is relevant.

You must answer in “good faith” when you apply for cover. This includes a requirement to “not make a misrepresentation” about matters relevant to your life insurance application.

If you conceal health information from a life insurer, or deliberately mislead them about your health history, this is “fraudulent nondisclosure”. This can lead to policies being voided, meaning they have no effect at all, and all premiums paid over time are forfeited.

How about travel insurance?

Travel insurance is also risk-rated, and travel insurers can ask for health information in deciding whether to offer cover, its cost and/or exclusions.

Travel insurance will not be subject to the new laws, which are restricted to life insurance. This means travel insurers are legally allowed to consider genetic test results to assess your future risk of disease as part of their underwriting.

When you apply for cover, travel insurers will mainly ask about your personal medical history (including pre-existing conditions and procedures you’ve had). Your family history may become relevant in certain circumstances (such as where you have a hereditary medical condition).

Is health insurance the same?

Health insurance in Australia is community-rated, meaning it pools risk across groups of people, rather than underwriting individuals.

So health insurers cannot deny cover or charge a higher premium based on personal or family history of disease, or other health risk factors.

But they can vary premiums based on where you live, and depending on the level of your cover (gold, silver or bronze).

Health insurers can take risk into account by applying waiting periods. This doesn’t affect the cost of premiums, but if you have an existing medical condition, a health insurer can offer you a policy but not cover any treatment for that condition until you have been insured for no more than 12 months. For psychiatric, rehabilitative or palliative care, the period is no more than two months, even for pre-existing conditions.

For health insurance, a pre-existing condition is defined as:

an ailment, illness or condition; and in the opinion of a medical practitioner appointed by the insurer […], the signs or symptoms of that ailment, illness or condition existed at any time in the period of 6 months ending on the day on which the person became insured under the policy.

This means you must disclose any condition for which signs or symptoms existed in the six months before your application. This doesn’t include childhood conditions that no longer have signs or symptoms.

However, it is the medical adviser appointed by the health insurer who ultimately decides this, not you or your doctor. The best advice is to answer questions honestly, and provide letters of evidence from your doctor if any potential uncertainty arises.

One aspect that does need clarification, though, is genetic testing. If you’ve had a genetic test to diagnose a condition with signs or symptoms, you must disclose this to a health insurer and they can apply a waiting period.

However, if the genetic test indicates a risk of future disease – such as the BRCA1 gene variant which increases the risk of breast, ovarian and prostate cancer – the situation is murkier.

While medically, a person with a BRCA1 variant does not have any signs or symptoms of cancer, health insurers could categorise this as a pre-existing condition and apply a 12-month waiting period for preventive care. This might include a preventive mastectomy, for example. Regulatory clarification on this issue would be helpful.

If you have a dispute about premiums or cover, and your insurer has not adequately addressed them, you can complain to the Australian Financial Complaints Authority about life or travel insurance, and to the Commonwealth Ombudsman about health insurance.