Ban on use of genetic test results in life insurance underwriting — 2024 announcement

The 2024 Government announcement

The Government announced on 11 September 2024 that it will introduce a total ban on the use of adverse predictive genetic test results in life insurance underwriting. This prohibition will cover a range of life insurance products, including life cover, total and permanent disability cover, trauma cover, and income protection.

The intention of this ban is to remove a potential barrier preventing Australians from undertaking genetic testing for health management and research purposes. Currently, some individuals may be hesitant to pursue testing due to concerns about potential impacts on their ability to obtain life insurance.

Legislation to formally enact this ban will be developed. This process will involve consultation with industry representatives and other stakeholders.

The FSC moratorium — interim position

The Financial Services Council's (FSC) industry-wide Moratorium on Genetic Tests in Life Insurance remained in effect while legislation addressing the use of genetic test results in life insurance underwriting is pending. This Moratorium applies to life insurers who are members of the FSC.

Under the Moratorium, consumers applying for life insurance are not required to disclose adverse genetic test results. This applies where the cover sought falls below certain financial limits.

These limits are: up to $500,000 of lump-sum death cover, up to $500,000 of Total and Permanent Disability (TPD) cover, up to $200,000 of trauma cover, and up to $4,000 per month of income protection.

What is and isn't covered

The ban on using genetic test results in life insurance underwriting, alongside the Life Insurance Code of Practice (FSC) Moratorium, specifically applies to predictive genetic tests. These are tests that predict an individual’s future risk of developing a disease. This means that information from these tests cannot be considered when assessing an application for a life insurance product.

Diagnostic genetic tests, which confirm the presence of an existing medical condition, are treated in the same way as any other medical diagnosis. Insurers can consider this information as part of the underwriting process.

Importantly, the changes do not affect existing obligations relating to family history disclosure. Furthermore, insurers retain the right to request information about other risk factors, as permitted under the Insurance Contracts Act 1984 (Cth), and applicants have a duty to take reasonable care not to make a misrepresentation.

What advisers and applicants should do now

Advisers and applicants should be aware that until the legislation is in force, the Financial Services Council (FSC) Moratorium provides the main consumer protection. This means that for life insurance applications within the Moratorium limits, genetic test results will not be considered.

For applications exceeding the Moratorium limits, FSC member companies currently retain the obligation to request disclosure of adverse predictive genetic test results. This requirement will continue until the legislation takes effect.

Applicants who have undertaken adverse predictive genetic testing should seek advice from their financial adviser regarding the optimal timing of their life insurance application in relation to the legislative transition. This will help ensure they understand how the new rules will apply to their situation.