FAAA backs life insurer self-regulation on genetic testing
The Financial Advice Association of Australia (FAAA) is recommending that the life insurance industry be allowed to self-regulate on the question of genetic testing.
The FAAA, while acknowledging the complexities of the issue, has said that the self-regulation by the life insurers should be via the Life Insurance Code of Practice with Australian Securities and Investments Commission (ASIC) review and approval over the continuing moratorium on genetic testing every three years.
In doing so, the FAAA has suggested that, thus far, genetic testing has not emerged as a major issue for life/risk specialist financial advisers.
“…very few of our risk specialist members noted any experience or history of their clients ever asking about genetic testing, being asked for genetic testing information or having their premiums affected by either the availability or lack of a genetic test,” it said.
“For example, one member identified 6 instances of providing genetic test results to the life insurer on behalf of the clients of his business related to over 1,290 applications over an 18-month period. Two other members both had only 1 instance each in 20+ years of assisting clients exclusively in life insurance advice,” the FAAA said.
It has told a Parliamentary committee that it believes that a self-regulatory approach offers “the most flexibility to ensure thresholds in relation to financial limits and genetic test types remain appropriate”.
“Any failure to comply with or appropriately adapt the Moratorium in the Life Code over time will lead to justifiable criticism of the industry and pressure from consumers, the regulators, and Parliament to improve the Moratorium or justifiably, at that point, lead to a legislative ban,” it said.
“The FAAA notes the recent transition of the Life Code from the Financial Services Council to the Council of Australian Life Insurers. The industry should be given the time in good faith to consult on, amend, and seek ASIC approval over the Moratorium, given the limitations and adverse outcomes either on the medical and research community, existing life insurance customers, or the sustainability of the industry that other proposed solutions entail.”
“However, should the Government seek to implement a legislative solution, as noted, the FAAA recommends that it be implemented through disallowable instruments with 3-year review cycles to encourage review and update of financial thresholds, consideration of technology advances and a review of consumer outcomes,” the FAAA said.
“Of the two proposed legislative models, the FAAA considers Option 3 (legislating a financial limit) the more appropriate model for implementation today.”
At least someone is standing up to this orchestrated push to outright ban the use of genetic testing in underwriting. If the individual advised life insurance market is structured around underwriting on the basis of known risk, someone who knows they have a genetic condition, that will result in an insurance claim, should not be able to seek $10m of cover without disclosing their health issue. This is totally inconsistent with the interests of the other policy holders. Financial advisers are key stakeholders in this and need to argue for the best interests of their existing clients.
The examples that have been rolled out in the media, all seem to relate to a family history of a serious health condition. This is already disclosable. So how does a ban on genetic testing change this.
I wouldn’t trust the Life Co’s to self regulate on this issue, they have consistently failed their own codes.
As for FAAAAAAA, seems like their back on the insto side of advocating in a flash
It’s interesting that the FAAA is better advocating for life insurers than this new “council” the life insurers have set up!
You can change the name, but it seems the FPA will forever be aligned with the product providers.
“…very few of our risk specialist members noted any experience or history of their clients ever asking about genetic testing, being asked for genetic testing information or having their premiums affected by either the availability or lack of a genetic test,” it said. That’s an interesting comment given that most applications have a specific question along the lines of “have you ever had any genetic tests”. Pre-the innovation of tele-underwriting, and the end of paper applications, that question generally invoked a response in my clients along the lines of “what business is a genetic test of an insurer “. The mere fact that there is not many queries by customers at application time does not provide an argument against retaining the genetic testing, status quo. Insurers have a long record of twisting the rules and betraying trust.
One of the reasons I didn’t transition to FAAA is because I’ve never been convinced that the new combined organisation (AFA plus FPA) is still not receiving, directly or indirectly, “contributions or donations” from product manufacturers such as life insurers. The organisation should only ever be about advisers and their capacity to run a business. If those contributions are no longer being received, and the obvious conflict has been resolved, then let’s have a strong clarifying statement to that effect. Until then, scepticism abounds
Every 3 years or so, whoever represents the life insurers winds up the lobbying on genetic testing. It’s been going on now for almost 30 years. What the insurers are seeking is to be able to force people to take genetic testing merely because there is some hint that three generations before someone had some serious illness or disease. What’s next: will insurers then ask to see the results of the DNA tests done by the likes of the genealogical companies
The rule has always been if you have had genetic testing it must be declared and disclosed. No problems with that. In my experience people seek genetic testing when a close relative has suffered from a serious illness that might have been passed on down the generations, and doctors suggest. that it might be better for the descendants to “know the score”. But anyone who has studied genetics can tell you that there is no guarantee that an illness such as MND is passed on to every generation or indeed every second generation. And many people of my acquaintance in that situation have taken a conscious decision not to have genetic testing, particularly when the particular illness has no cures. They should not be forced to have those tests just to add a bit more profit than the hands of the life insurer.
And the proposed self-regulation of life insurers on the matters of genetic testing should never be seriously considered now that all but one of our life insurers is driven by shareholder value and CEO bonuses. You could argue that the older mutuals were there for their policyholders but you cannot say that about any of the other current lot of life insurers
But frankly what has this got to do with a body that is supposed to be representing advisers. This is a matter for the insurers and their lobby group CALI. I had hopes for CALI initially, but they have swiftly morphed into an organisation that looks exactly like the FSC, from whence they sprung. Folks should remember that the idea of LIF sprang out of a bank dominated FSC nearly 15 years ago and certain life insurer CEOs were on the board of the FSC at that time, and from appearances so far, may be involved with CALI. Don’t expect any representations to government from CALI seeking a repeal of LIF any time in the near future.
It would appear FAAA has also gone quiet about LIF and its obvious serious impacts on new business