Recent changes to when insurers can ask for applicants to disclose results of a genetic test took place on July 1 this year. One of our trusted Doctors asked me to illustrate what this all means and how it might affect their patients and even themselves if they were to change or reapply for cover. After having been though a government based screening program myself this is something I take a special interest in.
As of July 1 if you if you are applying for insurance benefits in excess of:
Life and TPD cover over $400,000
Trauma or Critical illness over $200,000
Income protection over $4,000pm
When completing an insurance application an insurer will ask any questions that they deem relevant in determining the “risk” of you making a claim so that they can price accordingly. This is the core purpose of underwriting as ensuring that only acceptable levels of risk are taken on board protects the “pool” of funds (premiums paid by policy holders) protects existing members from higher than expected claims which would increase their premiums in turn. Increases in premiums then often lead to higher “lapse” rates where people cancel or move their cover elsewhere.
Insurance premiums are based on not only population risk but also the claims and lapse experience of those insured under the “book” itself. As newer “books” are created healthy and younger clients “shop” for a lower premium and leave the book for better alternatives while those unable to move due to ill health etc have no choice but to stay. This creates a problem and managing this is a constant battle and predicting the future, sometimes 30+ years ahead, is very difficult indeed. So it is understandable that insurers would be interested in genetic information.
A common question used during an insurance application is “Have you had a genetic test or considering having one in future”. Like many questions in this litigious society we live in, this is very carefully worded. If you have had genetic test and are applying for cover over the limits you would naturally answer this question. However, what does “considering” mean? Does this mean if you have ever had a thought about swabbing your cheek and send it off to 23andME you need to disclose this? and then consequently you would be given unfavourable terms? Well…not really.
Forgoing the fact that 23andME doesn’t really look for specific faults rather increased probabilities based on general traits Insurers can not apply unfavourable terms for you being curious. If you are awaiting results they might postpone a decision until they get these back as a precaution. What they will ask is WHY? Historically people don’t get Genetic testing for no reason. Putting aside the specific genetic test question for a moment allows to focus on the broader picture. A good example of this is “catch all” questions. My personal favourite “have you ever experienced and pain strain or disorder of the back or neck”. My 2 year old said “daddy my neck hurts” the other day. Is this to say that she should get a C Spine exclusion, not at all. Follow up questions on this then determine context and therefore real risk. My personal belief is that nobody can answer no to this question. Any genetic conditions are interwoven with any past medical investigations and family history. When considered in the broader context a question about genetic testing is ultimately irrelevant.
An insurer can not ask for a genetic test, full stop. They can request, pathology such as an MBA20 if there is call for it due to high levels of cover or other risk factors but this is time consuming and expensive for the insurer so while this does happen regularly, is not routine. Section 21 of the Insurance Contracts Act requires the applicant to disclose every matter that they know, or could reasonably be expected to know, is relevant to an insurer's decision to enter into a contract of insurance with them. This is a fluid concept as, for example, a Geneticist might have a deeper understanding of their family history and the consequent risk factors than say an apprentice electrician. This is what is known as the “reasonable person” test.
Putting aside the specific genetic test question there are also “catch all” questions. My personal favourite “have you ever experienced and pain strain or disorder of the back or neck”. My 2 year old said “daddy my neck hurts” the other day. Is this to say that she should get a C Spine exclusion, not at all. Follow up questions on this then determine context and therefore real risk. My personal belief is that nobody can answer no to this question. Any genetic conditions are interwoven with any past medical investigations and family history.
Loading, exclusion or decline
If the insurer identifies an increased risk in terms of a genetic test they will increase cost, not cover that eventuality or not offer cover at all. A good rule of thumb here is the 3 strikes policy. If you had, for example, a loading based on family history of heart problems (whether or not you experience symptoms yourself) an exclusion to past a knee issue and then results of a genetic test which identified a fault in BRCA1 (with no personal or family history) this would be a third strike and a full decline. However, if you then undertook preventative measures such as a full hysterectomy and mastectomy this would bring you back in line with population risk and cover would be offered with only the heart loading and knee exclusion.
Let’s be clear here, insurers need and want customers, this is their product and core business. They have massive amounts of historical data that helps them determine risk based on all kinds of factors. If for example you applied for $10,000pm of Income Protection and had no other factors other than a positive BRCA2 fault test that warrants a loading(let’s ignore that a family history would have been why you went for that test) some insurers would offer a loading over the full amount, some would offer it only on the amount over the $4,000 moratorium. Changing the application would likely not remove the “knowledge” of this risk to the insurer so you can’t simply apply for $10,000, get a bad decision based on genetic test, and then alter to $4,000 to work around. You can however “blind underwrite” or pre assess with multiple insurers. A good insurance adviser should be able to not only know which insurers are more favourable to certain conditions but also which questions to ask so an application can proceed smoothly. Just a quick plug for NoR, we pre assess all insurance applications.
Never let financial doubt stand in the way of your health
If you feel the need to seek medical treatment or investigations but are considering postponing this for an insurance application DON’T. Early diagnosis and treatment is in most cases the best chance you have at living a long and healthy life. The catch all questions above will catch you out anyway. Look after yourself, act honestly, you have a contract with an insurer that says they need to do the same. If you are declined or excluded you have other options and an adviser can help with this.
Disclaimer: The information in this article is general in nature and doesn’t take into account your personal circumstances so should not be relied upon as personalised advice.