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Guidelines for Providers of Insurance and Superannuation

Guidelines dealing with life, disability and accident insurance and death and disability insurance cover under superannuation arrangements.

Part A: Background and interpretation
Part B: Understanding unlawful disability discrimination
Part C: The insurance and superannuation exemption

Part A: Background and interpretation

1. What are insurance and superannuation guidelines?
2. How do I interpret these guidelines?
3. What is the purpose of these guidelines?
4. Who should comply?
5. Who is a person with a disability?

1. What are insurance and superannuation guidelines?

The Commonwealth Disability Discrimination Act 1992 (the "DDA") aims, as far as possible, to promote the rights of people with a disability to participate equally in all areas of life. It does this by making it generally unlawful to discriminate against a person with a disability.

Section 67(1)(k) of the DDA gives the Human Rights and Equal Opportunity Commission power to make guidelines to assist better understanding of rights and obligations under the Act. These Guidelines are made under that power. They are the Commission's view on how to interpret the exemption under Section 46. If you breach these Guidelines, you may be acting unlawfully under the DDA. If you comply, it may help you in answering a complaint of disability discrimination.

The exemption under Section 46 allows providers of insurance and superannuation to discriminate lawfully against people with a disability in certain circumstances. It applies to all forms of insurance and superannuation. These Guidelines however, deal specifically only with offering or refusing:

We invite comment from industry, people with disabilities and any other interested parties about their experiences in using these Guidelines. If they are shown to be inadequate or unclear we may vary or expand the Guidelines to make them more effective.

Comments may be made to disabdis@hreoc.gov.au , or by mail to Disability Rights Unit, Human Rights and Equal Opportunity Commission, GPO Box 5218, Sydney NSW 1042.

Although these Guidelines have been designed specifically to apply to the life insurance and superannuation industries, they may also assist providers of other types of insurance. At a later stage if necessary, the Commission may consider making guidelines to cover other types of insurance such as travel, credit card or mortgage insurance. We may also make guidelines on general issues such as access to insurance and superannuation products.

2. How do I interpret these guidelines?

The Commission does not have the power to make laws or change the meaning or effect of the DDA. All words and phrases used have the same meaning as in the DDA. If a meaning is unclear, the rules of legal interpretation apply so that it should be interpreted to promote the objects of the DDA.

The word "you" in this document refers to anyone providing insurance or superannuation. The words "we" and "Commission" refer to the Human Rights and Equal Opportunity Commission.

3. What is the purpose of these guidelines?

These guidelines are to assist you in complying with the DDA. They are intended to:

4. Who should comply?

(a) Insurers and trustees of self insured funds

You should comply with these Guidelines if you are an insurance provider or a trustee of a superannuation fund that is partially or fully self-insured. They apply whenever you are offering or refusing to offer a person with a disability:

(b) Trustees of superannuation funds with external insurers

If you are a superannuation fund trustee and are providing death and disability insurance to members through an external insurer (a life office) you should take all reasonable steps to ensure that the external insurer follows these Guidelines.

Whether you have taken all reasonable steps will depend on the circumstances of each case.

For example: Taking all reasonable steps might include obtaining a letter from the insurer confirming that it endeavours to comply with these guidelines.

5. Who is a person with a disability?

"Disability" has a very broad meaning in the DDA and includes:

It includes a person with one disability as well as someone with more than one disability. It applies whether the disability is total or partial and whether the person:

Part B: Understanding unlawful disability discrimination

6.1 Section 24 and unlawful discrimination by service providers
6.2 Types of unlawful discrimination
6.3 When might it occur?

6.1 Section 24 and unlawful discrimination by service providers

Section 24 is a general section that applies to providers of goods, services or facilities, including insurers and providers of superannuation. It makes it generally unlawful for anyone who provides goods, services or facilities to discriminate against a person because he or she has a disability by

As a provider of insurance or superannuation your activities come under this section. For example, it is unlawful for you to fail to make your business premises accessible to people with a disability unless doing so would cause unjustifiable hardship.

You will probably have other legal rights and responsibilities towards people with a disability under the DDA. You might consider adopting an Action Plan to ensure you comply with the Act. Part 3 of the DDA deals with Action Plans and how you may provide one to the Commission. If you register a plan, it will be considered if a person with a disability makes a complaint against you.

6.2 Types of unlawful discrimination

The two types of unlawful disability discrimination are discrimination by disadvantageous or unfair treatment (known as direct disability discrimination) and discrimination by treatment that has a disadvantageous effect on the person with a disability (known as indirect disability discrimination).

(a) Direct discrimination

Direct discrimination occurs where you treat a customer with a disability less favourably than you would treat a customer who does not have a disability, in the same or similar circumstances.

This means treating a person with a disability in a way that is both different from other people and disadvantageous or unfair. It also includes proposing to treat a person with a disability in a way that is disadvantageous or unfair.

For example: It would be direct discrimination to refuse to insure someone because he or she is blind. This will be unlawful discrimination except in circumstances where the exemption in section 46 applies.

(b) Indirect discrimination

Indirect discrimination occurs where you require a person with a disability to comply with a requirement or condition that most people without a disability can comply with but:

It is "indirect" because even though you may apply the same requirement or condition to all customers it has the effect of disadvantaging the person with a disability.

For example: Requiring all applicants to show a driver's licence for identification indirectly discriminates against anyone who is unable to drive because of a disability.

6.3 When might it occur?

Discrimination in insurance and superannuation happens at the time you discriminate or propose to discriminate against a person with a disability. The date of an insurance contract, insurance policy or superannuation policy will not necessarily be relevant. It will depend on the circumstances of each case.

For example: A customer signed a contact of insurance in 1990 containing a HIV/AIDS exclusion clause. If an insurer refuses a claim in 1997 on the basis of the exclusion, this refusal will be covered by the DDA even though the contract was signed before the act came into force.

Part C: The insurance and superannuation exemption

7.1 Section 46 exemption
7.2 What is reasonable?
7.3 Using statistics and actuarial data
7.4 Other relevant factors
8 What is unreasonable?
9 How can I discriminate lawfully?

7.1 Section 46 exemption

Section 46 of the DDA contains an exemption for the insurance and superannuation industry in recognition that some discrimination is necessary for the insurance business. You may lawfully discriminate against a person with a disability by:

You must show you are complying with section 46 if you claim exemption from liability under section 24. This will involve you considering each of the following questions:

7.2 What is reasonable?

The circumstances of each case will determine whether it is reasonable for you to use particular information and then whether your decision to discriminate is reasonably based on that information . Matters taken into account include:

Relevant factors include both those that may increase risk and those that may reduce it.

For example: When taking into account the risks of a person with a family history of bowel cancer it should be taken into account that regular screening programs and colonoscopy reduce risk.

When assessing the risk associated with certain disabilities, insurers may have to rely on imperfect data. Insurers should make every effort to manage the assessment of these risks in a comparable manner to the assessment of other risks they insure.

7.3 Using statistics and actuarial data

You should consider actuarial or statistical data if it is available or reasonably obtainable. This includes data that you may have at hand and data from sources that the industry uses domestically and internationally.

The following are some of the more common types of actuarial and statistical data on which you may reasonably rely.

(a) Underwriting manuals

You may use appropriate manuals that include detailed information about the nature and degree of extra risk associated with insuring people with the disability. Manuals should be based on relevant actuarial or statistical data or medical opinion and updated as necessary to take into account the latest advances in medicine, adaptive technology or other areas affecting the level of risk or loss associated with a particular disability.

For example: People with a disability which in the past was totally or substantially disabling, may now be able to continue working.

(b) Local data

You may use relevant domestic population or insurance studies that include specific data collected from a reliable source, about people with the disability. This may include government studies such as census statistics, studies reported in major medical journals, and experience studies conducted by individual insurance companies, and insurance studies produced by the Institute of Actuaries of Australia.

(c) Relevant overseas studies

Where local data are unavailable or insufficient you may rely on relevant international population or medical studies that include data collected about people with the disability from a reliable source and modified for local conditions if necessary.

For example: Studies conducted in the United States or the United Kingdom will generally be relevant to Australia because of similarity in lifestyles and population statistics between countries.

(d) Relevant domestic and international insurance experience

It is reasonable to take into account the relevant claims experience of other insurance companies that may provide cover to people with disabilities within Australia or in other countries.

For example: If assessing the risks of offering disability income protection insurance, it may be reasonable to consider the experience of companies that (in some cases) have been offering individual disability income insurance to people with disabilities since the 1980's.

7.4 Other relevant factors

If there are no relevant statistics or actuarial data available, then your decision to discriminate needs to be shown to be reasonable because of other relevant factors. The following are some examples.

(a) Medical opinion

If relying on medical opinion, it must be on a medical matter.

For example: As population and insurance studies usually only cover single disabilities in isolation you may require a specialist medical opinion to assess the risks of someone who has more than one disability to assess the combined effect of the disabilities.

The opinion must also be from a recognised medical practitioner specialising either in insurance medicine or the particular disability.

For example: An area of medicine in which knowledge is constantly developing such as HIV/AIDS may require a medical practitioner with detailed knowledge in the disease.

(b) Opinions from other professional groups

It may be reasonable to rely on the opinion of other professionals with relevant experience, for example occupational therapists, physiotherapists, clinical psychologists or mobility trainers.

(c) Actuarial advice or opinion

You may use actuarial advice or opinion to assist in quantifying the risk of insuring someone with a particular disability if there is no other data available and the opinion is from a relevant source.

For example: Actuarial opinion may be helpful in interpreting medical studies or making allowances for differences in degree of disability between an individual applying for insurance and the study population.

(d) Relevant information about the individual seeking insurance

You should use information about the person seeking insurance where it is available. This would include the person's individual medical records and work history.

For example: It would be relevant to consider information about a person's work attendance record when assessing the effect of a disability.

(e) Commercial judgement

Assessing the likelihood of an insurance claim can sometimes go beyond medical and statistical probability. You may take into account other relevant factors so long as it is reasonable to do so. There may be circumstances where it is reasonable for an insurer to consider an individual's propensity or incentive to make a fraudulent claim at the time that it is assessing the overall risk of insuring someone with a particular disability. This does not, however, entitle you to rely on untested discriminatory assumptions.

8. What is unreasonable?

It is not reasonable and therefore it is unlawful for you

 

For example: While it may be reasonable to make certain assumptions if data reasonably links a particular type of disability with someone being predisposed to future complications or the possibility of secondary disabilities, it is not reasonable to assume that someone who is blind in one eye because of an injury is more likely than anyone else to become blind in the other eye than anyone else.

It is not reasonable to assume without evidence that people with one disability are more accident prone and more likely to incur a workplace injury than co-workers without a disability, or that people with a disability have poor work records.

9. How can I discriminate lawfully?

Section 7 of these guidelines explains how you may decide to discriminate lawfully against a person with a disability provided that you are acting reasonably in relying on data and other relevant factors. This part looks at common ways that insurers can discriminate lawfully against people with disabilities. In each case whether you will be acting lawfully will depend on whether you are acting reasonably.

(a) Deferring approval

Unnecessary delays can result in severe hardship to people with disabilities. In many circumstances delaying a decision will not mean that you will be better able to assess risk. It is not lawful to defer approval as an excuse to refuse insurance to someone with a disability.

However, it may be reasonable for you to defer deciding the terms upon which you offer a policy to a person with a disability if

For example: If the person applying for insurance has been diagnosed with a heart condition, but is still undergoing tests to determine its severity at the time of the application, it would be reasonable to defer approving an application for insurance until a prognosis has been given.

It would not be reasonable to delay making a decision indefinitely on the pretext of searching for data to assist in quantifying risk.

A delay might be reasonable where a high risk is likely to reduce over period of time to insurable levels, such as where someone has just had an operation to remove a cancer and there is data indicating the risk reduces over time.

(b) Limiting cover or requiring additional premiums

You may vary the terms upon which you offer a policy by:

For example: It may be possible to offer a disability income policy to allow for an increased risk of claim by increasing the premium, reducing the term for payment or increasing the waiting period or a combination of any of these.

(c) Using exclusion clauses

Exclusion clauses may often be a useful way of offering a policy to a person with a disability but reducing risk. It is reasonable to use an exclusion clause in a policy if a person applying for insurance

The clause must be relevant to the effects of the particular condition. It is not reasonable to use excessively general exclusions to limit liability.

For example: It would be lawful for you to offer an applicant with a progressive eye disease a policy with an exclusion that has the intent and purpose of excluding blindness due to the pre-existing condition.

(d) Denying cover

It would be prudent, before declining to offer insurance to a person with a disability, to consider whether you can reasonably reduce risks by restricting the cover or using an exclusion clause or some other means. You will not be able to show that discrimination is reasonable if you have not limited the consequences of the discrimination as far as reasonably possible.

If there is no less restrictive alternative reasonably available, you can deny the policy outright if you are able to show that the risk of claim is significantly in excess of what you would normally accept.

For example: the company's appointed actuary will generally set a limit above which the risk of claim is considered too high taking into account the company's overall financial circumstances.

(e) Unjustifiable hardship

Most issues about limitation and exclusion of insurance or superannuation will be dealt with under Section 46. For that reason, these Guidelines deal mainly with the exemption under that section. The DDA , however, also contains a more general exception to unlawful discrimination in providing, goods, services or facilities under Section 24. This is known as the defence of unjustifiable hardship.

It is not unlawful for you as a provider of insurance or superannuation to discriminate against a person with a disability if you can show that providing cover would cause you unjustifiable hardship. It is important to note that, even if providing insurance or superannuation to a person with a disability might involve some costs and effort, it will not necessarily amount to unjustifiable hardship. To understand the term "unjustifiable hardship", you must have regard to the objectives of the DDA. The DDA states that all relevant circumstances of a particular case are to be taken into account in determining unjustifiable hardship.

This includes:

If you have developed an Action Plan under the DDA, you should also consider whether there are any terms of the action plan that are relevant.

For example: You may be able to rely on the defence of unjustifiable hardship and refuse a policy to an individual with a disability where the costs of medical examinations necessary to reasonably determine risk are disproportionate to the level of premium concerned.

You will be less likely to have success in claiming that the costs of gathering data and statistics about people with disabilities amount to unjustifiable hardship. This is because it may be possible to refer to other relevant industry experience or it might be possible to make reasonable judgments without gathering specific data.