INVESTMENT AND FINANCIALSERVICES ASSOCIATION LIMITED
Introduction
IFSA is the national not-for-profit organisation representing the
life insurance industry to Government, regulatory agencies,
This fact sheet explains how life insurance works in Australia and
includes information on the implications of being hepatitis C
positive for future applications you may make for Life, Disabilityor Trauma Insurance.
Who has life insurance? The life insurance industry in Australia has operated for over 120 years, providing financial security for individuals and families.
Currently about 6.3 million Australians are protected by individuallife, disability and trauma policies. Australians purchase lifeinsurance because it provides an affordable way of collectivelysharing the financial burden due to unexpected death,disablement or sickness that are too great for them to bear asindividuals. Each of these unexpected events, if not covered bysome form of insurance, could cause severe financial hardship,the depletion of savings, and ultimately reliance on thegovernment’s social security safety net. A survey of 15 lifeinsurers in 2003 showed that over $1.2 billion is paid out inclaims each year. How does my age and health affect the cost of my How does life insurance work? insurance?
A life insurance policy is a contract that sets out the
When you apply for insurance, the insurance company may ask
responsibilities of the life insurance company and the person
you to complete an application form and medical questionnaire
who is taking out the insurance. The consumer, known as the
The medical questionnaire asks for details about your personal
insured, agrees to pay premium/s, and the insurance company
medical history, as well as information about any disease or
agrees to pay out an agreed amount/s in the event of a certain
disorders that are likely to increase the probability of a claim. It
event/s occurring. Please refer to the Glossary for the details of
also asks basic questions about your family medical history as
this can indicate whether you may be at an increased risk ofdeveloping a hereditary disease.
In Australia, life insurance is voluntary. People choose whether or not to purchase life insurance and how much to insure for. The
• Age is one of the main factors used to determine how likely it is
main exception to this relates to members of some
that you will make a claim. For example, older people are
superannuation funds who automatically obtain life insurance via
generally at a higher risk of death than younger people. Within
group life insurance while they are working and a member of the
any age group, the probability of claiming may be greater for
• Gender (women tend to live longer than men), smoker status
All premiums are paid into a ‘risk-sharing’ pool. Claims are paid
and occupation are factors that also affect the chances that you
Under the law it is the duty of the life insurance company to give
• Personal medical history (past and current) as well as family
potential customers all necessary details about the products you
may wish to purchase. In turn it is your responsibility to provide
The insurance company takes into account all the information on
the life insurer with all information about you that may affect the
your application form and medical questionnaire to assess your
The process of assessing the risk of the insured making a claim
Act states that you are entitled to be given an explanation of the
is known as underwriting. The purpose of underwriting is to
decision either directly or through your doctor.
ensure that the cost of insurance is proportional to the risk
Universal Cover – What would it cost?
involved, and that people with the same or similar risk pay the
It is sometimes suggested that life insurance companies should
same premium rates. Underwriting relies on the extensive use of
provide universal insurance coverage. Under this arrangement,
statistical data and actuarial estimates.
insurance coverage would be made available to all persons who
Unlike car or house insurance, once a life insurance policy has
seek it, regardless of their age or health. It is also sometimes
been issued, the insurance company cannot cancel or increase
suggested that everyone should pay the same price, regardless
the price of just your policy because of deterioration in your
health. Insurance companies only get one chance to fully assess
Under a voluntary system of universal coverage (where
the risk – that is why so much emphasis is placed on assessing
individuals decide whether to have the insurance or not),
your risk at the beginning of the policy. Generally in Australia
healthier people will be less inclined to purchase this insurance.
premium rates are not guaranteed and a life insurance company
This is because in effect, their premiums would be helping cover
can increase or decrease the premium rates applying to all
the claims of those people with a higher likelihood of claiming.
Premium costs would then increase over time as the proportion
In Australia, approximately 93 per cent of all applicants for life
of healthier people insured reduces.
insurance obtain policies at standard prices. A further 5 per cent
Depending on the degree of ‘anti-selection’ experiences, average
are classified as having additional risk, and therefore may pay
premiums would have to rise as high as $382 per annum in
either higher premiums or have some conditions excluded from
order to provide $100,000 of life cover. Compare this to the
their policy. The 2 per cent who are refused cover have serious
average premium of about $255 per annum per policy and you
health impairments, extremely hazardous jobs, or other high-risk
will see that the proposed premium is 50% higher. What about my privacy?
To insure someone who is already quite ill or knows they have a
Life Insurance companies treat hepatitis C test results with the
terminal illness would be equivalent to selling home insurance to
same level of care and confidentiality as any other medical
someone whose house is already on fire. The cost of paying
their claim would inequitably fall on the rest of the people in thepool, without the ill person having contributed their fair share to
When applying for insurance as part of your medical history any
details or knowledge about your health should be disclosed andthis includes hepatitis C. The life insurance industry has a long-
The percentage of applications accepted for disability insurance
standing tradition of safeguarding the privacy of its customers
is somewhat lower than for death insurance as the likelihood of a
and their medical information, which is reflected by the lack of
claim is related to a wider range of factors and more people may
complaints against life insurance companies for breaches of
be excluded from cover due to non-medical risks (eg occupational
An individual’s right to privacy has been reinforced with the
Life insurance is very competitive, so it is advisable to shop
introduction of national privacy legislation – the Privacy
around for the best price. If one company declines to offer you
Amendment Act (Private Sector) 2000 – which sets down 10
insurance, another company may be willing to grant cover.
National Privacy Principles. These Principles came into effect on
Insurer’s decision on underwriting
21 December 2001 and regulate the collection, handling, use,
The terms your life insurer may offer you can vary, and may
disclosure, transfer and management of ‘personal information’,
This legislation, supported by the life insurance industry, provides
• Increase the standard premium rate by either a percentage or a
the added protection for consumers in respect of their own
personal information across all industries and provides an
• A shorter period for the insurance contract
additional avenue to lodge a complaint. For more information on
• An exclusion for one or more medical conditions
privacy, visit the Privacy Commissioner’s website at www.
In a small number of cases, however, the insurance company
How does hepatitis C influence health?
may decide it is unable to offer cover at all.
Many people with hepatitis C are completely well and unaware ofany infection. Other people have symptoms including tiredness,
When a policy has been issued, any subsequent changes in
fatigue or depression. These symptoms may interfere with their
your health will not impact on the coverage or the price you pay
for your existing insurance contract whilst it remains in force.
With advancements in medical knowledge and treatment, the
The Insurance Contracts Act 1984 provides legislative protection
prognosis or outcome following hepatitis C infection has
to you as a policy owner. If any application for insurance is
improved considerably. About 25%1 of those infected clear the
declined, or accepted at higher than standard premium rates, the
infection (virus) at the time of the initial attack. The hepatitis C
Applicants with active hepatitis C infection are generally also
virus can be eradicated in up to 65%2 of patients, using antiviral
insurable for life insurance cover subject to a premium loading.
The risk to life is considerably less than first thought 10 yearsago. For life insurance this has meant a continuing improvement
Untreated, a small percentage (less than 7%) will go onto to
in terms able to be offered. Acceptance terms range quite widely
develop cirrhosis of the liver over 20-30 years. In this group there and are dependent on a number of factors such as age, gender,
is an additional small risk of hepatocellular cancer. Of those who
duration of infection, liver function and alcohol intake.
go onto cirrhosis the exact natural history and expected survivalis still not fully understood.
The most common symptom for people with chronic hepatitis Cis fatigue.3 Clinically it is very difficult to predict who will be
For additional information on hepatitis C contact the Australian
symptomatic. Even for people successfully treated and who
Hepatitis Council - phone 02 6232 4257.
become HCV RNA negative, fatigue continues in a substantialpercentage. It is for this reason that acceptance terms (where
What is the test for hepatitis C?
available) for disability income insurance policies are generally
There are basically two diagnostic blood tests for hepatitis C,
very strict. Applications that represent less risk to the life
complemented by liver function tests.
insurance conpany (in terms of benefits and features) tend to be
An antibody test of blood became available in Australia in 1990.
If confirmed positive, the result indicates exposure to hepatitis C
Glossary of Life insurance products
virus. The presence of the antibody only confirms an infection
Accidental death
has occurred, not whether it has past, or if the hepatitis C virus is
Accidental death provides a lump sum benefit on the death of
active or resolved. A confirmed positive antibody test will remain
the life insured due to an accident caused solely by violent,
visible and external means, which occurs within a specified
A PCR (polymerase chain reaction) test can determine if
someone has hepatitis C virus or just antibodies from a past
Disability Income Insurance/ Income Protection
infection. The PCR test looks for the actual virus (hepatitis C
Disability Income Insurance or Income Protection cover provides
RNA) in the blood, as opposed to the antibodies. A positive PCR
for the payment of a monthly benefit, usually up to a maximum of
indicates the virus is still present.
75% of the insured person’s income, while the insured is
A negative PCR test indicates the virus is no longer present, or
prevented from working due to sickness or injury.
at least not present in sufficient quantities to cause future
The benefit is usually payable after an initial waiting period which
concern, due to spontaneous clearance or antiviral treatment.
is selected by the policy owner and which can vary from 1 week
Two negative PCR results, 6-12 months apart, are required to
confirm this result. This is because as viral levels can fluctuate,the second test is needed to confirm the initial negative test did
Benefits are payable whilst you continue to be disabled for up to
not coincide with a very low titre (level) of virus.
the policy term which again is selected by the policyowner. Generally benefit terms range from 2 years through to lifetime
Liver function tests, in particular the ALT (aminotransferase)
although the most common is to age 65.
enzyme, are used as an indication of liver function. About onehalf of PCR positive people will have some alteration to liver
Group Life Insurance
enzymes. Liver enzymes can fluctuate hence the need to repeat
Group life insurance is designed to provide death cover for
the tests. Again there is a need to repeat the tests because of
groups of people who are linked together through employment or
the known fluctuation in liver enzymes in hepatitis C.
superannuation. ‘Group Life’ is a product purchased byemployers or trustees of superannuation funds to provide
The definitive test to assess liver damage is a liver biopsy. This is coverage on an agreed basis, usually a multiple of salary, for
a usual requirement before the commencement of antiviral
their employees or superannuation fund members.
therapy. It is not done routinely in other patients, nor is it a testrequested by insurers.
Group Disability InsuranceGroup disability insurance is designed to provide ‘income
How does hepatitis C affect your insurance?
protection’ benefits to groups of people who are linked together
The terms offered by different life insurers may vary depending
through employment or superannuation. While they are unable
on each company’s premium rate and product features as well
to work, insured members receive an income stream, being a
percentage of their normal salary. The payment of the benefit is
Applicants who have made a successful recovery through
usually limited to a maximum of 2 years.
antiviral treatment, or who have spontaneously cleared thehepatitis C virus (confirmed by two negative PCR tests at 12months interval) with no other health problems are generallyacceptable at standard rates or a small premium loading for lifeinsurance and trauma products.
Life Cover Some Common Misunderstandings about Insurance
Life Cover provides for payment of an agreed amount in the
Myth: An insurance company can cancel your life insurance
event of the death of the life insured. In today’s market the most
policy if you come down with a serious illness
common form for providing this cover is through guaranteed
The fact is that a life insurance policy is a contract between the
company and the policyholder. It is a long-term contract and inrecognition of this, the law stipulates that as long as the
Total and Permanent Disablement
policyholder pays his or her premium, the company cannot
Total and Permanent Disablement (TPD) provides for the
payment of a benefit if the life insured meets the definition ofTotal and Permanent Disability under the policy. The TPD benefit
Myth: Once I am denied insurance, I will never be able to get it.
is normally only available as an extra option to a policy providing
The fact is that different insurance companies use different
Life Cover and the standard version provides for prepayment of
criteria when determining who to insure and what price to
the Life Cover agreed amount in the event of becoming totally
charge. Insurance is very competitive and consumers should
always shop around. Also, if a company declines your applicationas a result of a current health problem that improves or goes
There are 3 variations to the conditions under which a benefit is
away, the company may reconsider your application. Myth: It would be fairer for us all to pay a little more to allow
Own Occupation Definition – this definition requires the insured
everyone, even sick people, to get insurance at the same price.
to be disabled through injury or sickness and as a result
The fact is the additional cost to provide insurance to everyone
completely unable to work at their own occupation ever again.
could be as much as a 50% increase, probably well in excess of
Own/any occupation definition – this definition requires the
what most people are prepared to pay.
insured to be disabled through injury or sickness and as a resultcompletely unable to work in their own or any other occupationwhich they are reasonably suited by way of education,experience and training and unable to do so again.
Any occupation definition – this definition requires the insured tobe disabled through injury or sickness and as a result completelyunable to work at any occupation ever again.
In all cases, the circumstances as outlined above must haveexisted for a period of (usually) 6 months. Trauma Insurance/Crisis Cover/Critical Illness Trauma insurance provides for the payment of a lump sum benefit if the insured person is diagnosed with one of a list of specified trauma conditions, such as heart attack, stroke, cancer or a chronic disease like kidney failure. Most insurers do not provide cover for the major critical illnesses if they occur within 3 months of commencement of the policy.
Reference sources:1 Dore GJ, Freeman AJ, Law M, Kaldor JM. Is severe liver disease a common outcome
for people with chronic hepatitis C? J Gastroenterol Hepatol. 2002 Apr v17(4):423-30.
2 Poynard T, Marcellin P, Lee SS, Niederau C, Minuk GS, Ideo G, Bain V, Heathcote J,
Zeuzem S, Trepo C, Albrecht J, for the International Hepatitis Interventional TherapyGroup (IHIT) Randomised trial of interferon 2b plus ribavirin for 48 weeks or for 24weeks versus interferon 2b plus placebo for 48 weeks for treatment of chronic infectionwith hepatitis C virus Lancet 1998 v.352 (9138): 1426-1432
McHutchison JG, Gordon SC, Schiff ER, Shiffman ML, Lee WM, Rustgi VK, GoodmanZD, Ling MH, Cort S., Albrecht JK, The Hepatitis Interventional Therapy GroupInterferon Alfa-2b Alone or in Combination with Ribavirin as Initial Treatment for ChronicHepatitis C N Engl J Med Nov 19, 1998 v339:1485-1492.
3 Hoofnagle JH. Hepatitis C: clinical spectrum of disease. Hepatology 1997; 26 (Suppl 1):
The Isotype-Selective HDAC Inhibitor MGCD0103 Decreases Plasma TARC Concentrations and Produces Clinical Responses in Heavily Pretreated Patients With Relapsed Classical Hodgkin’s Lymphoma Anas Younes1, John Kuruvil a2, Barbara Pro1, Michel e Fanale1, Peter McLaughlin1, Sattva Neelapu1, Luis Fayad1, Amanda Wedgwood1, Daniela Buglio1, Marja Dubay3, Tracy-Ann Patterson3, André Karam3, Ren�
INVESTMENT AND FINANCIALSERVICES ASSOCIATION LIMITED
Introduction