COMMENT: The New Zealand life insurance industry on display in a report this week clearly cannot be trusted to deal with a difficult ethical challenge that has crept up on it.
That challenge is how to deal appropriately with genetic information relevant to the kinds of risk life insurance is designed to cover.
While it might not have reached the level of wrongdoing evident across the Tasman, the picture of the local industry that emerges from the review by the Reserve Bank and the Financial Markets Authority is one of greed, complacency, inertia and lax governance.
It seems to be more focused on the sale of policies and the earning of commissions than providing financial support well-tailored to the needs of people at especially difficult times in their lives.
On the Reserve Bank's data, in the year to September 2018 the industry earned $2.4 billion in gross premiums and paid out $456 million in commissions, not to mention another $221m in "other acquisition expenses". That is an egregiously large bite out of the policyholder's dollar.
The Government has promised "a strong response to internal sales incentives and soft commissions" and "an appropriately resourced regulator to monitor the conduct of banks and insurance companies, with strong penalties for breaching duties."
Commerce Minister Kris Faafoi also tells us work is already under way to update insurance contract law.
"Current contract law is based on legislation that was written more than 100 years ago and there are a number of improvements that need to be made," he said.
"These include better disclosure protections for consumers, to address situations where insurers can completely [void] a policy when a policy holder does not disclose something, even if it was an unintentional non-disclosure or one unrelated to the claim a policy holder is making."
One emerging issue an update to the law needs to address is about rights to genetic information.
As scientists learn more and more about genetic influences on diseases, including the potentially fatal or incapacitating ones life insurance exists to cover, and as it gets cheaper to test for markers indicating elevated risk of developing those diseases, difficult ethical questions arise about who has rights to that information.
The risk is genetic discrimination, where insurers decline (or prohibitively price) cover to those who need it most.
That has to be balanced against the risk of "adverse selection", where the people most likely to make a claim can exploit an information advantage over the insurers.
Should insurers have the right to require genetic testing? Should applicants for cover have a duty to disclose the results of testing that has been done — even if it was in the course of public-good medical research and not as a result of any concerns they had as individuals?
Is the science advanced enough to give actuarially robust estimates of risk?
And who should get to decide these things?
A committee of the Australian Parliament which undertook an inquiry into the life insurance industry devoted a chapter of the hefty report it delivered last year to the issues around genetic information.
They note that 10 European countries have already legislated to forbid insurers from using genetic information when setting premiums, or from asking consumers to take a test.
The United States has a federal Genetic Information Non-Discrimination Act which prevents health insurers from using genetic information in decisions about eligibility, coverage or premium setting.
Canadian legislation passed in 2017 prohibits insurers from requesting that a person undergo a genetic test or from requiring disclosure of previous or future genetic test results.
Closer to home, the Human Genetics Society of Australasia, in a position statement released a year ago, says genetic discrimination has occurred in Australia and remains a significant concern of those seeking testing.
"Even if genetic testing confirms an individual is at higher risk, it will usually be impossible to predict accurately the age of onset of the condition, its rate of progression, its severity, life expectancy, or whether the person will ever develop the condition," it says.
"While genetic testing may reveal an increase in an individual's risk of developing a genetic condition, it can also serve to reduce or negate an individual's risk compared to family history alone. This occurs when testing shows that the individual has not inherited a genetic variant present in other family members," adding that the onset or severity of symptoms of many genetic conditions can be avoided or mitigated by changing health or lifestyle behaviours.
It also worries about the potential impact on research if people are deterred from taking part by fears about insurance implications.
The Australian MPs evidently agree. They concluded the evidence put to them indicated that genetic data is not yet sufficiently accurate or reliable, particularly the increasingly popular direct-to-consumer genetic testing, for a duty to disclose to be appropriate.
They heard evidence that an individual's genetic information could be used to deny cover or charge more for it, even in instances where people had taken steps to reduce their likelihood of developing the condition concerned.
And they considered that "fears that adverse selection as a consequence of consumers not having to disclose would make the life insurance market unsustainable may be overstated." They concluded that the Australian industry's code of conduct needed to be tightened and that the Government should maintain a watching brief.
In New Zealand, all there seems to be is a code of conduct adopted by the Financial Services Council late last year, when regulators were already snapping at the industry's heels and which is of such vacuous generality it barely rises to the status of waffle.
For example: "Members must design and distribute products responsibly" and "Members must treat customers fairly".
Reassured? Nor am I.
They might as well have just solemnly declared, "From now on we are all going to be decent jokers, right?" and left it at that.