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COTA
Insurance and Older Australians

Insurance and Older Australians

By Barry Apsey, Member, COTA SA Policy Council, 25 February 2016

Ageism and Age Discrimination

A major impediment for older people in enjoying their lives, pursuing their ambitions and influencing their communities on equal terms is the presence of age discrimination.

Ageism is insidious, pervasive and harmful. It sits beside the other much more famous "isms" that continue to exclude and marginalise, that perpetuate inequality by alienating and overlooking, and that support the congregation of power around a very small sample of our wider, richer human diversity.

Ageism is the process of using stereotyping to describe a whole group of richly diverse and individually interesting people as if they were all the same. It is the habit of using chronological age to discriminate because there isn't time or inclination to use merit. It is the process of seeing not a person but a birth date.

One area where ageism and age discrimination continues to be reported by older people as active and insidious is in insurance.

Age and Insurance

The Age Discrimination Act 2004 (Commonwealth) provides exemptions to determine the premium of a policy or whether a policy is available according to age.

The discrimination is (summarized) to be lawful must be:

  • Based on actuarial or statistical data which is reasonable to rely on and reasonable regarding other factors or
  • If no such data is available is reasonable according to other relevant factors.

A THE INSURANCE INDUSTRY - CODES, REGULATION, and SELF REGULATION

The Insurance Council of Australia has issued a Code of Practice for its members which commits to a number of principles designed to enhance openness and the relationship between customers and suppliers.

The Insurance Council industry has established an independent Code Governance Committee that hears and determines complaints, and the Code itself recognizes the right of approved applicants to approach the Financial Ombudsman Service (CW)

These requirements have been under review by the Australian Law Reform commission for some time.

The problem is that the data used to set premiums and caps is not often publicly available. The possibility of requiring the development of Industry Codes of Practice has been raised.

Members of the Insurance Council of Australia (ICA) offering products covered by the Code must subscribe to the 2014 General Insurance Code of Practice.

Any other industry participants may also subscribe, and the ICA encourages all general insurers to adopt the Code .

The Insurance Council of Australia provides information regarding many topics such as premiums and descriptions of types of insurance and indeed how complaints can be raised as does Moneysmart.

Notwithstanding the plethora of general information there appears to be little information appears to be available about the specific basis on which actual premiums are calculated in individual cases so the individual consumer has simply to rely on comparative costs through insurance comparison websites which purport to focus on policies for older Australians. Age is referred to as one of the ingredients that is taken into account when premiums are calculated.

The Abbott Government abolished the Insurance Reform Advisory Group in its ‘red tape" reforms and this was regarded by the industry as an effective way of bringing together various groups affected by insurance.

COTA SA is unsure what body or mechanism exists to provide such insurance advice to the commonwealth in its absence.

B PERCEPTIONS

A Survey was undertaken by National Seniors Australia and COTA in 2012 entitled "Ageism in Travel Insurance Survey".

Key findings -

  • Those aged 70 and over were more likely to cite difficulties in obtaining travel insurance or affordable travel insurance as a major reason for ceasing to travel overseas.
  • While the vast majority of respondents (88%) usually purchase travel insurance for their overseas travel, half (51%) were unaware that Australia has reciprocal health agreements with a number of countries.
  • Less than half the respondents (44%) shopped around for the best travel insurance deal.
  • More than half the respondents (53%) had received widely differing quotes for the cost of travel insurance, with most reporting a difference of between 11 and 50 per cent.
  • Almost a third of respondents (32%) reported that they have had to pay higher travel insurance premiums because of their age.
  • Five per cent of respondents reported they had been refused travel insurance because of their age, but two-thirds of them (68%) still decided to travel overseas.
  • Almost two-thirds of respondents (63%) have difficulty in understanding how any age restrictions operate after reading through information provided by insurers in Product Disclosure Statements, brochures and websites.
  • One in twenty respondents (5%) reported they had had a travel insurance claim unexpectedly denied.

C COMPLAINTS TO THE SA EQUAL OPPORTUNITY COMMISSION

Complaints are regularly received by the SA Equal Opportunity Commission. Within this group a number raise age as the basis of "unfair' treatment. These suggest a lack of understanding about exemptions and a reluctance to provide actuarial information regarding the basis for the restriction or premium loading because of a disability or age.

Examples:

  • A customer with a medical condition denied insurance for lost or stolen property during travel (this was appealed successfully through the courts demonstrating the need for greater clarity regarding exemptions).
  • Blanket refusals based on one medical condition
  • Income protection denied because of type 2 diabetes
  • Cases where mental health issues have prevented health, life and income protection insurance.
  • Some insurers linking physical injuries to possible future mental health conditions
  • The issues identified arising from the complaints include -
  • Age perceived as a barrier because of presumed disabilities of older people rather than being based on actual existing disabilities (insurers can discriminate on the basis of age but only if there is actuarial or statistical evidence on which it is reasonable to rely).
  • Tendency to treat people over 65 as a homogenous group despite greater longevity, more active lives for many. Examples include travel, income protection, reduction of accident insurance for workers over certain ages.
  • Evidence that in some instances insurers change their practices when individual cases are examined more closely but the SA EOC considers that there is a case for more systematic change to current approaches and suggests:

D CONCLUSIONS

  • It is clear from the survey and from work done last year for the SA Government by John Spoehr , that many older Australians are frequent travellers, particularly to overseas destinations, and they are travelling, and expecting to continue to travel, well into their 80s and 90s.
  • They see their ability to travel as a right, and expect to be able to obtain appropriate and affordable insurance cover, including for pre-existing medical conditions and for return to Australia in the event of the illness or death of an elderly close relative.
  • The age loading built into travel insurance premiums is seen by many, but not all, respondents as discriminatory. This is not necessarily the case, however, because insurance premiums of any kind are risk-based and age is one of the risk factors travel insurers usually explicitly identify in their Product Disclosure Statements.
  • Indeed they are also within their legal rights to do so according to exemptions available under Commonwealth and State Equal Opportunity legislation.
  • The wide variability in pricing and insurance coverage between insurers is likely to be contributing to the perceived arbitrariness in premiums and discrimination that respondents reported. This variability also suggests that the travel insurance market is not efficient and that risk is not being priced appropriately by all insurers. In the interests of consumers, insurers should be encouraged to provide greater transparency about claims experience and the actuarial data that underlie the setting of their travel insurance premiums.
  • It is also clear that considerable scope exists for product innovation in the travel insurance market. Those insurers who provide comprehensive and affordable cover tailored to the needs and circumstances of older travellers (especially for a wide range of pre-existing medical conditions)

E POSSIBLE STRATEGIES

  • Insurers providing greater information regarding information for refusal.
  • Greater transparency in insurance policies requiring full public disclosure of products, exclusions and data relied on to justify these exclusion
  • Possible changes to insurance exemptions within anti-discrimination legislation or explanatory material
  • Development of an anti-discrimination code for the industry and identification of an agency to enforce/monitor code
  • Age based assessments should reflect the risk factors associated with age cohorts beyond 65 and be more reflective of the current health/longevity of Australia's population
  • Reverse the current burden of proof i.e. adverse decisions based on age or disability should be assumed to be discrimination unless the insurer provides evidence to rebut the presumption.

F WHAT COULD COTA SA DO?

  • We should and we do support the specific suggestions made by the SA EOC in regard to transparency, and possible legislative and code reform (State and Federal) - their resource base is tiny however and we recognise the limitations of this
  • Continue to put pressure on the Insurance Council of Australia and its advisory bodies to strengthen the Codes of Practice to address discrimination from the perspective of transparency and justifiable evidence;
  • Look at ways of improving information for older people about where they can get appropriate information, quotations from more sympathetic insurers, and greater clarity regarding conditions. It is noted that there are a number of web sites that purport to focus on older people for travel insurance and undertake to obtain competitive prices.
  • Literacy levels on a wide range of financial matters - study in 2013 by Hazel Bateman (University of NSW) found that higher levels of literacy and literacy strongly associated with a tendency to plan - some groups fared poorly - poorly educated, young, those not working.
  • Keep focusing on pension adequacy and control of cost of living - underpinning any discussion of travel or other insurance are the concerns of affordability and eligibility and that the issue one of many areas where older people are facing increased costs and that the underlying consideration is that they should have appropriate pension and financial support to provide for their requirements. COTA has consistently addressed this issue with its focus on pensions and holistic approach being taken to retirement/superannuation/aged care
  • Request a consumer body such as Choice to undertake a comparative study of travel insurance from an age perspective.

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