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23 May 2013
Age discrimination in insurance policies is emerging as the next major government policy issue for the industry.
Financial Services Minister Bill Shorten fired the first shot last December with a complaint that older Australians find it hard to get travel insurance.
Now the Australian Law Reform Commission (ALRC) is looking at how insurance issues may prevent older people remaining in the workforce.
An ALRC issues paper canvasses whether insurance codes of practice should be amended to encourage or mandate removal of age limits in insurance policies.
The Insurance Council of Australia (ICA) says this would interfere with insurers’ risk management and ability to price for risk, which could make companies unwilling to offer some types of cover or increase their risk profiles under prudential regulations.
The Federal Government has commissioned the ALRC to report on Commonwealth legal barriers to older people participating in the workforce or other productive work. The commission says the Government’s over-arching objective “is to keep people in work, and paying taxes, longer – rather than being in receipt of old age pensions – and to support people into self-funded retirement”.
The ALRC notes that workers’ compensation and income protection policies mostly cut out at the age of 65, when it has been assumed people will retire and start living on their superannuation or the age pension.
It notes that workers older than 65 usually have to cover themselves in case of illness or injury.
“This may necessitate reliance upon retirement savings and/or the age pension and consequently can act as a ‘push factor’ out of paid employment.
“The difficulty the ALRC faces here is that such age limits in insurance policies are determined by private insurance companies,” it says, noting insurers can set age limits because of their exemption from the provisions of the Age Discrimination Act.
ICA says insurance works effectively because companies can write and price cover based on risk.
It says the ability to differentiate on the basis of risk “is essential to the provision of affordable general insurance for the community”.
ICA argues the exemptions under the Age Discrimination Act “provide a means to manage risks lawfully and differentiate on the basis of risk”.
It notes there are no blanket exemptions and insurance may only be declined using actuarial or statistical data on which it is reasonable to rely.
The ALRC’s paper asks whether age-based restrictions should be removed from workers’ compensation, and while ICA sees this is a matter for the states and territories that run workcover schemes, it says any changes must be assessed carefully for the impact on premiums.
States have begun to move on the age issue, with the WA Government last October removing the age limit for which injured workers may claim weekly benefit payments.
SA’s workcover scheme provides up to two years of income payments to workers who are within two years or above their retirement age, being either 65 or the standard in their industry. After that they are still covered for ongoing medical expenses.
WorkCover SA CEO Rob Thomson says the scheme protects workers and employers in the event of a workplace injury, regardless of the worker’s age.
The NT has amended its workcover legislation to dovetail benefits to the rise in the qualifying age for the age pension to 67 years.
Despite insurers’ concerns, there is some dispute about how risky older people really are.
A 2008 study by the University of Adelaide for WorkCover SA found workers aged 60 to 64 had the largest rate of decline in claims of all age groups.
The highest proportion of claims came from people aged 40-49.
Age Discrimination Commissioner Susan Ryan says there is evidence that older workers get sick less frequently and take fewer “sickies”.
As the demands for older workers increase in an environment where people are working and living longer, the insurance industry has little choice other than to heed the calls for a change of attitude.
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