The ‘DNA’ of life insurance

Newspaper article by Lesley Parker
March 3, 2010

Delving into your genetic make-up could have serious financial ramifications, writes Lesley Parker.

Key points:

  • You must disclose genetic tests when you apply for, or alter, life insurance.
  • If you withhold information you void the life insurance contract.
  • Once cover is obtained you don’t have to disclose new information.
  • Insurers cannot require you to take a genetic test.
  • The results of a test can’t be used to deny or charge more for health cover.
  • Don’t act without medical advice

When Peter Carroll’s son died suddenly at the age of 11 and muscular dystrophy emerged as a suspect, he and his wife faced the dilemma of whether to have their daughter tested for the mutated gene that causes the disorder.

Doctors were keen but Carroll, who has worked as a consultant to the life insurance industry and reported to the Hawke-Keating Labor government on concerns around HIV-AIDS and insurance, was having none of it.

“The issue for me was simple,” Carroll says. “If she’s clear, well and good. But if she’s not clear one day she’ll have a boyfriend, she’ll think about having a family, she’ll be getting a job, she’ll need life insurance … so we made a choice not to have our child tested because of all the social and financial implications.”

That was in 1991. Years later, as an adult, his daughter made her own decision to be tested for the faulty gene and was pronounced clear.

Today, Carroll is a director of the Ozecover health insurance portal and is watching the controversy over the decision by health insurer NIB to offer cut-price genetic testing to 5,000 customers.

NIB insists its motive is simple – armed with specific information about risks, its customers may be encouraged to improve their “health behaviour”.

However, it has been criticised for not doing more to inform people of the potential implications of having a genetic test should they subsequently seek, or alter, a life insurance policy.

NIB, which sells life insurance in partnership with Tower Australia, merely notes in the letter to its customers that they “may be required to disclose genetic test results … to life insurance or superannuation providers”.

There are also concerns the sort of multi-gene test it promoted is conducted outside the mainstream health-care system, by commercial laboratories based outside Australia, without the guidance of a personal doctor.


In Britain, insurer access to this sort of information is much more limited under a moratorium put in place nearly a decade ago and the US has new non-discrimination legislation in this regard.

In Australia, there are no financial effects from having a genetic test from a purely health-insurance perspective.

“NIB is a health insurer and any health information from genetic testing won’t affect your health-insurance premium, because of community rating,” says Kristine Barlow-Stewart, director of the Centre for Genetics Education and a member of the National Health and Medical Research Council’s human genetics advisory committee, which advises the federal government.

Under Australia’s government-mandated community rating system, everyone pays the same premium for health insurance, rather than being rated individually or grouped by factors such as age. This way the risk and the cost of providing insurance is spread across all policyholders, with the aim of keeping premiums affordable.

However life insurance is “risk rated”, which means how much you’ll pay is determined by your individual risk factors at the time you apply for the insurance. In some cases it may even mean you’re denied insurance, although the Investment and Financial Services Association (IFSA) claims this is rare.


The chief executive of IFSA, John Brogden, cites a survey of association members in 2005 that found eight out of 450,000 applicants were denied life insurance where the stated reason was a genetic test. The results of a new survey are due this year.

Insurance contracts are governed by the legal doctrine of uberrima fides, which translates as “utmost good faith”. This means all parties must make a full declaration of all material facts so the insurance contract accurately reflects the risk being taken.

“The idea is that insurance wouldn’t work if one of the parties had knowledge that the other party didn’t have,” Carroll says.

Under this principle, people applying for insurance, changing their policy or switching insurers must disclose whether they’ve had a genetic test and, if known, the results of the test.

Withhold this information and you void your contract, Carroll says. Of course, what you don’t know you can’t disclose. That means it might pay to secure insurance before you undergo a test (though you must still disclose any family history). Life insurance policies are “guaranteed renewable” – once cover is obtained legitimately it can’t be taken away and you don’t have to provide any new health information.

Some people choose not to have certain tests so there’s nothing to disclose, or to have a test but not be told the results. (A relative might have asked you to take a test so they can have the information.)

However, the medical profession’s concern is that this means some people are forgoing tests that have the potential to save their lives.

“If people are considering having a genetic test, they need to consider all the pros and cons and make an informed choice,” Barlow-Stewart says.

That includes weighing up any financial ramifications and the issue of whether what you’re looking for is treatable anyway. But in the end your health is the most important consideration. Either way you should consult your GP first.


Concerns about the appropriate use of information from genetic testing resulted in a binding insurance industry standard being released in 2005.

Members of the IFSA must comply with Standard No.11, the most important provision of which, Brogden says, is that life insurers are not permitted to ask an individual to have a genetic test.

“That’s critical. A life insurer will not require you to get a genetic test – and that simply isn’t on the agenda,” he says, alluding to speculation that the NIB offer may be the thin end of the wedge.

Nor should life insurers indirectly coerce people to have a test, the standard says – for instance, by offering the inducement of a lower premium.

“Members should respect an applicant’s right not to know,” it says.

Under the standard, written consent is required for the insurer to access the results of genetic tests and the results can’t be used in relatives’ applications.

Likewise, privacy laws bar a health insurer from sharing such information with an allied life insurance business.

Asked how the law would apply, privacy commissioner Karen Curtis says: “Insurers … can only collect personal information, such as genetic test results, where the individual has consented and where the information is necessary for the insurer’s functions or activities. “Insurers should notify the individual about why the information is being collected, who it will be disclosed to … [and] the insurer can only use or disclose the personal information for the purpose for which it was collected, unless the individual has consented to the disclosure.”


One view is concern over genetic testing is overdone because insurers have long asked questions about family history and anyone who has had a genetic test is likely to have done so because of the sort of family history they must disclose anyway.

Brogden says insurers don’t automatically reject people simply because a genetic test indicates they’re predisposed to a certain condition.

“Insurers in most cases do look at the grey, rather than being black and white,” he says. “They look at what the predisposition is, what you’re doing about it, what treatment you’re receiving – what are the mitigating factors that may make you insurable?” though perhaps with an exclusion for a particular condition.

But medical professionals say that while insurers are experienced in assessing the impact of family history and certain single-gene tests, there are still question marks over the interpretation of results.

NIB’s arrangement is with US-based Navigenics, a business that allows individuals to order saliva testing kits via its website and to collect password-protected genetic results online. (The cost of tests may or may not be covered by your health insurance. A spokesman for MBF says it has no rebates for genetic testing, whereas Medibank Private does on some plans.)

Barlow-Stewart says commercial laboratories can look at variations within hundreds or even thousands of genes scattered throughout your genome to come up with a computer-generated calculation of risk based on changes in multiple genes.

“The contribution of each of the changes is tiny but when you add them up it can become bigger,” she says. “The problem is the science behind it is still open to question. The test itself is probably quite accurate but what it means, is where we are very much at the beginning.”

People should think “very carefully” before relying on information from tests marketed over the internet, she says.


The chairman of the genetics advisory committee of the Royal College of Pathologists of Australasia, Graeme Suthers, says: “We’re not suggesting these companies are dodgy operators in terms of the technology but we do think it’s very premature to be doing this.”

Asked if that also means it would be premature for an insurance company to give such results weight, he says insurers shouldn’t discriminate, in terms of cover or premium, unless there is “clear, actuarial evidence that discrimination is justified … and we are nowhere near actuarial level on this sort of stuff”.

Brogden says the industry would need to be “satisfied with the strength” of genetic test data to rely on it.

What are your options if you think you may have trouble obtaining insurance because of an existing genetic test?

The Centre for Genetics Education ( says the cost of insurance and the ability to obtain cover can vary. “You may wish to apply to a range of companies at the same time, perhaps with the help of a broker,” it says.

You could involve the family doctor, a specialist or geneticist, if necessary, in negotiations with the insurer and document your screening and prevention strategies, it says. If you’re turned down, you can ask to know the basis of the decision and dispute it.

Another option is to take up group insurance through your employer or superannuation fund.

With group insurance, applications are automatically approved up to a certain level of cover without having to provide personal information, says a risk specialist at Centric Wealth, Roy Agranat.

“These plans do offer you cover if you have a situation where [other] insurance companies won’t give you cover because you have a genetic test that’s brought up something,” Agranat says. Up to the automatic acceptance level, “that would be irrespective of what medical condition you bring in”.

And if a genetic test comes out in your favour – a feared mutation isn’t present – Barlow-Stewart suggests this: Go back to your insurer and say: “You loaded me because of my family history – that doesn’t apply any more.” Then ask for your premium to be reduced.


Overseas, the rules around insurer access to personal genetic information have been tightened and in Britain , in particular, are much stricter than here.

In Britain, insurers abide by a voluntary ban on access to predictive genetic tests that was agreed with the government in 2001.

The moratorium applies to policies of up to £500,000 ($858,400) of life insurance, £300,000 of critical illness insurance and income protection insurance paying annual benefits of up to £30,000 a year.

“Above these levels, you only need to tell insurers the results of those predictive genetic tests that an independent government committee has approved as relevant to insurance companies,” an Association of British Insurers spokesman says.

So far, Huntington’s Disease is the only condition listed, for life insurance.

In the US, health insurance is still risk rated (see main) but the 2008 Genetic Nondiscrimination Act now states health insurers can’t deny coverage or charge higher premiums on the basis of genetic test results.

An American Council of Life Insurers spokesman says the law doesn’t cover life insurers, who are regulated at a state level.

However, “in virtually every state, insurers are prohibited from engaging in ‘unfair discrimination’ in underwriting on any basis”, he says.

He adds: “In general, insurers are not quick to embrace new technologies such as genetic testing.”

In Australia, the IFSA’s Brogden rejects the idea of a moratorium on the use of genetic test results.


After being diagnosed with the BRCA gene, which suggests an increased risk of breast cancer, Dianne Fisher found it difficult to secure life insurance.

Eventually, she was able to obtain cover but at the cost of a high premium. “I [subsequently] had both my breasts removed and my ovaries removed,” Perth-based Fisher says. “But I still had difficulty getting my insurance dropped down to a normal rate, even though I now have no risk whatsoever of getting breast cancer or ovarian cancer.”

Fisher says she also had to face the possibility that her daughter had inherited the gene.

“Tests have since shown that she doesn’t have it but the insurance issue did make me reconsider testing her for a period of time.”

The research director of the Queensland Centre for Gynaecological Cancer Research, Andreas Obermair, says his experience is also that women with the BRCA1 or BRCA2 gene are having difficulty securing life insurance.

This is yet another barrier to women proceeding with an “absolutely vital” genetic test that potentially could save their lives, says Obermair, who is setting up meetings with life insurance executives to discuss the issue.

“I am looking for life insurers to partner with; I want to help life insurers to be able to provide life insurance to women who test positive for BRCA,” he says.

The insurance industry standard on genetic testing says that, as well as assessing the overall risk associated with a particular genetic make-up, insurers should also take into account the benefits of special medical surveillance, early medical intervention and the likelihood of successful treatment.

The director of the Centre for Genetics Education, Kristine Barlow-Stewart, says people who uncover a faulty gene can then take steps “so they perhaps have a better chance of surviving than someone” diagnosed at a later stage.