The issue of age discrimination and insurance will not disappear
so insurers should be exploring how they can access market opportunities through product innovation that challenges this stereotype.
Age discrimination is emerging as a major government policy issue and it has both life and general insurance squarely in its sights as being one of the inhibitors to aged workers’ participation in the labour market. Whether or not this is a fair criticism is moot but together with the recent focus on the proposed amalgamation of Commonwealth anti-discrimination Acts1 and the European gender neutral premiums decision2, insurers should be on notice.
The ALRC Report
The Australian Law Reform Commission (ALRC) has issued its report: Access all Ages - Older Workers and Commonwealth Laws3 (Report). It makes 36 recommendations addressing areas of recruitment and employment, work, health and safety, worker’s compensation, insurance, social security and superannuation. The keystone recommendation in the Report is to provide a coordinated policy response to address barriers to participation by aged people in the Australian labour market.
The Report looks at the role that insurance plays to inhibit participation in the work place. It also references the recent Investigation Report by the Tasmanian Anti-Discrimination Commissioner - Volunteers, Age and Insurance, released in May 2013 (Investigation Report).
The Insurance Barriers
The two key criticisms about insurance were:
- availability of, and information about, insurance products for older people
- relevance, transparency and accessibility of the actuarial and statistical data on which underwriting and pricing decisions are made referable to age.
Availability of Insurance
The Report recognised that insurance innovation is a market based issue and there must be a “risk appetite” to write insurance for this segment. The Report urges relevant stakeholder groups to continue discussions about this issue and explore opportunities for innovation.4
Are Australian insurers failing to challenge the stereotypes surrounding mature aged workers? For example, many life and income protection policies assume that people will retire at 65 and start living on their superannuation or their aged pension at this age.
Do these assumptions hold true anymore?
It is estimated that over the next 16 years, the aged share of the Australian population is projected to increase by 4 times the long term average and by 2044, 1 in 4 Australians will be 65 years and over5. Is enough really being done in researching future product opportunities with regard to the increasing proportion of aged workers choosing to remain in the work force for longer? Or developing risk products to assist the transition from accumulation to retirement phase in the superannuation sector as the proportion of the population that will be moving through this phase is only going to increase?
The Report recommended a central information source be developed to improve the availability of information and level of awareness about insurance products for mature aged people.
The Report highlighted concerns about the accuracy, relevance and currency of data relied upon by insurers in making decisions about insurance based on age7. Stakeholders are concerned about the lack of transparency in decision making based on statistics and the reluctance of insurers to disclose their data for reasons of commercial sensitivity.
The Report drew on the Investigation Report where, in reviewing the data and statistics supplied by a number of insurers, the Tasmanian Anti-Discrimination Commissioner found that the data was not of sufficient detail or relevance to support claims that older volunteers posed a greater insurance risk because of age. The findings are quite damning and suggest that some insurers are using statistics about age and mortality in a fairly blunt and unsophisticated way without real regard to the risk and cost of claims associated with age.
The Report recommends that the Australian government and insurers look to the UK model developed by the Association of British Insurers (ABI) and British Insurance Brokers’ Association with the UK government to address similar concerns raised about the use of statistical data by insurers. The agreement provides for the ABI to publish aggregated data for the industry that demonstrates how age is used when assessing risk and pricing travel and motor insurance products.8 The intention is to increase the transparency of decision making.
This issue of age discrimination and insurance will not disappear. Insurers should be challenging the old stereotypes, if they continue to exist in their business decision making, taking a serious look at product innovation and market opportunities. They must proactively engage in the debate if they want to be instrumental in shaping acceptable solutions to these problems for the future.
1 In 2012, the Federal Attorney General’s Department proposed a consolidated Human Rights and Anti- Discrimination Bill to replace the Age Discrimination Act 2004, Disability Discrimination Act 1992, Racial Discrimination Act 1975, Sex Discrimination Act 1984 and Australian Human Rights Commission Act 1986. The intention was to reduce the complexity and inconsistency between the Acts and reform the anti-discrimination legislation by implementing many of the recommendations of the 2008 inquiry of the Senate Standing Committee on Legal and Constitutional Affairs into the Sex Discrimination Act 1984. One of the issues for the consolidated Bill was whether to allow the insurance specific exemptions to remain or have all exemptions rolled up into one. The outcome was to allow the insurance specific exemption to remain but with a review to be conducted 3 years after the Bill was enacted. The Bill was introduced into Parliament in March 2013 however as a result of the Senate Legal and Constitutional Affairs Committee’s report on the draft Bill that recommended a number of policy, definitional and technical amendments, the Bill was removed for further consideration and review.
2 In 2011, the European Court of Justice ruled that the use of gender as a rating factor in the pricing of insurance premiums and benefits is contrary to the principles of gender equality. As a consequence insurers operating in the European Union are not allowed to use gender as a factor in the calculation of premiums and benefits for new contracts after 1 December 2012.
3 Released 30 May 2013.
4 See paragraphs 6.15 to 6.16 of the Report
5 Productivity Commission Report: Economic Implications of an Ageing Australia (2005) as referenced in the Report at paragraph 2.1
6 The phrase is attributed to Mark Twain and is used to describe the persuasive power of numbers, particularly the use of statistics to bolster weak arguments.
7 The Report also recommends that greater guidance be provided on how the insurance exceptions should be applied under the anti-discrimination legislation in Australia.
8 The agreement appears to be limited to these 2 types of insurance products only.