Insurance

'Financial advisers’ and key informants’ perspectives on the Australian industry-led Moratorium on Genetic Tests in Life Insurance' by Casey Michelle Haining, Jane Tiller, Margaret Otlowski, Penny Gleeson, Carsten Murawski, Kristine Barlow-Stewart, Paul Lacaze, Aideen McInerney-Leog and Louise Anne Keogh in (2023) Public Health Genomics comments 

 Introduction: 

Genetic discrimination (GD) in the context of life insurance is a perennial concern in Australia and internationally. To address such concerns in Australia, an industry self-regulated Moratorium on Genetic Tests in Life Insurance was introduced in 2019 to restrict life insurers from using genetic test results in underwriting for policies under certain limits. Financial advisers (FAs) are sometimes engaged by clients to provide financial advice and assist them to apply for life insurance. They are therefore well-placed to comment on GD and the operation of the Moratorium. Despite this, the financial advising sector in Australia have yet to be studied empirically with regards to GD and the Moratorium. This study aims to capture this perspective by reporting on interviews with the financial advising sector. 

Methods: 

Ten semi-structured qualitative interviews were conducted with FAs and key informants and analysed using thematic analysis. 

Discussion/ conclusion(s): 

Participants’ level of awareness and understanding of the Moratorium varied. Participants reported mixed views on the Moratorium’s effectiveness and how it operates in practice, and perceived industry compliance. Participants also provided reflections on Australia’s current approach to regulating GD, with most participants supporting the concept of industry self-regulation but identifying a need for this to be supplemented with external oversight and meaningful recourse mechanisms for consumers. Our results suggest that there is scope to increase FAs’ awareness of GD, and that further research, consultation and policy consideration are required to identify an optimal regulatory response to GD in Australia.

Insurance

The A-GLIMMER (Australian Genetics & Life Insurance Moratorium: Monitoring the Effectiveness and Response) Final Stakeholder Report – which follows a 2018 Federal Government Joint Parliamentary Committee Inquiry report that recommended a ban on genetic discrimination in life insurance underwriting – has found that genetic discrimination in life insurance occurs in Australia, and deters individuals from having genetic testing and participating in research. 93 percent of health professionals, 88 percent of patients with experience of genetic testing, 78 percent of the general public, and 86 percent of researchers believed legislation was required to regulate the use of genetic test results in life insurance underwriting. 

 The A-GLIMMER Project recommends that: 

1. The Australian Government amend the Disability Discrimination Act 1992 (Cth) to prohibit insurers from using genetic or genomic test results to discriminate between applicants for risk-rated insurance, and consider amendments to the regulation of financial services to ensure insurers are subject to a positive duty to not discriminate. 

2. The Australian Government allocate responsibility and appropriate resources to the Australian Human Rights Commission to enforce, promote, educate and support individuals and all relevant stakeholders to understand and meet the new legal obligations under the Act. The AHRC should consult with a range of genetics and genomics experts and stakeholders to achieve this goal. 

 The A-GLIMMER authors comment 

The field of genetics has great potential to improve medicine and public health, through enabling diagnosis, prevention and early treatment of disease. However, currently in Australia the life insurance industry is legally permitted to use genetic test results in underwriting, which can lead to discrimination. Insurance fears can also act as a barrier, by deterring people from having potentially life-saving genetic testing that could match them to tailored interventions and treatments, as well as from participation in genetic research. 

In 2018, a Joint Parliamentary Committee Inquiry into the Life Insurance Industry recommended that Australia urgently implement a moratorium (or ban) on the use of genetic test results in life insurance underwriting, similar to the moratorium operating in the United Kingdom since 2001. In 2019, the life insurance industry peak body, the Financial Services Council (FSC), introduced a partial moratorium requiring applicants to disclose genetic test results only for policies above certain financial limits. The FSC Moratorium is industry self-regulated, with no government oversight. 

To investigate effectiveness of the FSC Moratorium as a regulatory solution to genetic discrimination in Australian life insurance, the Commonwealth Government funded the Australian Genetics and Life Insurance Moratorium: Monitoring the Effectiveness and Response (A-GLIMMER) Project from 2020- 2023. This funding was awarded through the Genomics Mission of the Medical Research Future Fund. This independent project has gathered evidence to assess the effectiveness of the FSC Moratorium, and report findings to Government and other stakeholders. An Interim Stakeholder Report presented the findings of the A-GLIMMER Project’s research as at August 2022. 

This Final Stakeholder Report sets out the A-GLIMMER Project’s findings – published and unpublished – and makes recommendations to the Australian Government (the Project funder). The studies undertaken as part of the Project investigated the views and experiences of health professionals, consumers, researchers, and financial advisors, to assess the impact of the FSC Moratorium. 

The purpose of this Final Stakeholder Report is to:

• provide a summary of the A-GLIMMER Project’s research findings and an assessment of the FSC Moratorium’s self-regulatory model; 

• make recommendations based on these research findings and analysis; and 

• inform the Australian Government’s assessment of the FSC Moratorium and alternative regulatory mechanisms to prevent genetic discrimination. 

The A-GLIMMER Project’s research findings demonstrate that the FSC Moratorium – either in its current form or as included in the proposed 2023 Life Insurance Code of Conduct – is inadequate to address and prevent genetic discrimination in life insurance. It should be replaced with a legislative model of prohibition.

This is supported by the A-GLIMMER Project’s findings which show that:

• Key stakeholder groups (health professionals, consumers and researchers) are concerned about the life insurance industry’s self-regulation of the FSC Moratorium and express a low level of confidence in the effectiveness of the FSC Moratorium. An overwhelming majority of these stakeholders, as well as many financial advisers that were interviewed, were also concerned about the absence of any Australian Government oversight of the FSC Moratorium.

• A very high proportion of key stakeholders consider that legislation is required to regulate the use of genetic test results in life insurance underwriting (93% of health professionals, 88% of patients with experience of genetic testing, 78% of the general public, and 86% of researchers).

• There are instances of non-compliance with the FSC Moratorium, including where insurance companies have asked insurance applicants about genetic testing, contrary to the terms of the FSC Moratorium. Further, there is a lack of effective mechanisms to enforce the FSC Moratorium or to seek redress.

• Stakeholders are concerned about the uncertainty inherent in the industry-led nature of the FSC Moratorium, and the potential for the use of genetic test results by life insurers in the future.

• Similarly, there is a broad view across stakeholder groups that the FSC Moratorium’s financial limits (i.e. life policies <$500K) are too low to enable individuals to obtain sufficient life insurance.

• Many genomic researchers reported that the potential use of genomic test results by insurers was a barrier to the recruitment of research participants.

• There is poor awareness and knowledge about the FSC Moratorium among stakeholder groups, including differing understandings of how the limits should be applied, even among financial advisers.

Further, industry self-regulation is an ineffective regulatory model to address genetic discrimination in relation to life insurance in Australia. This is in part because of the inherent conflict of interest in industry self-regulation of its own access to genetic information; the risk of harm to individuals through discrimination; and restricted access to preventive healthcare. In addition, there is considerable uncertainty, instability and a lack of cohesion surrounding the current self-regulation of the Australian life insurance industry.

In late 2022, a newly formed body – the Council of Australian Life Insurers (‘CALI’) – declared that it was now the peak representative body of the Australian life insurance industry. According to CALI and media reports, CALI is backed by a significant proportion of the Australian life insurance industry. To our knowledge, the FSC has not made any public statements about CALI’s formation. It is therefore unclear what implications the formation of CALI will have for the self-regulation of the life insurance industry more broadly, or for the FSC Moratorium in particular. This creates further uncertainty for consumers, health professionals and other stakeholders in this area.

Insurance and AI

'Hidden depths: The effects of extrinsic data collection on consumer insurance contracts' by Zofia Bednarz and Kayleen Manwaring in (2022) 45 Computer Law & Security Review comments 

 Commentators have predicted that the insurance industry will soon benefit from technological advancements, such as developments in Artificial Intelligence (‘AI’) and Big Data. The application of AI- and Big Data-powered tools promises cost reduction, the creation of innovative products, and the potential to offer more efficient and tailored services to consumers. However, these new opportunities are mirrored by new legal and regulatory challenges. This article discusses challenges facing Australian data protection law, focusing on (potential) collection of consumers' data by insurers from non-traditional sources. In particular, we examine situations in which consumers may not be aware that the data collected could end up being used to price insurance. In our analysis, we discuss two useful examples of such non-traditional data sources: customer loyalty schemes and social media. These may give rise to several concerning data practices, including a significant increase in the collection of consumers' data by insurers. We argue that datafication of insurer processes may fuel excessive data collection in the context of insurance contracts, generating a substantial risk of harm to consumers, especially in terms of discrimination, exclusion, and unaffordability of insurance. We complement our analysis with the discussion of Australian insurance-specific provisions, asking if, and how, the harms examined could be adequately addressed. 

The authors argue

 Commentators have predicted that the insurance industry will soon benefit from technological advancements, particularly developments in Artificial Intelligence (‘AI’) and Big Data. AI- and Big Data-powered tools promise cost reduction, the creation of innovative products, and the potential to offer more efficient and tailored services to consumers. However, new opportunities arising for the insurance industry out of enhanced data analytics trigger new legal and regulatory challenges. This article focuses on the challenges facing the regulation of data collection by insurers. We argue this regulation is problematic in the light of (increasingly more common) processing of data through automated means and its use for the purpose of underwriting of consumer insurance contracts. We focus on individually underwritten policies, where collection of consumers’ data can directly translate into personalised contracts. 

The increasing accessibility of consumers’ data for insurers has the potential to substantially affect the insurance industry. As detailed information about an individual insured becomes more readily available, it can be processed with tools allowing for a (theoretically) accurate prediction of risk a particular individual presents. In consequence, the underlying paradigm of insurance may change, as risk becomes less and less uncertain, and the element of unpredictability disappears. 

Insurance, being a data-driven industry, has long been concerned with collecting data to predict and price risk, well before computers were invented. However, recent developments in AI- and Big Data-powered technological tools have the potential to initiate unprecedented change. These technologies allow for vast amounts of data to be generated, collected, stored and processed, and also provide tools to analyse and learn from that data. Inferences can be generated, and trends predicted, that would be otherwise unobservable to humans. Sophisticated information and insights of commercial value can be efficiently extracted from that data, encouraging data collection, sharing and aggregation. 

It has been predicted that insurers will benefit from applying AI and Big Data tools to contract underwriting processes, and evidence is emerging that they are starting to do so. However, the ways in which insurance firms may collect potential insureds’ data remains relatively unexplored. There are several reasons for this, including competitive motivations for corporate secrecy linked to the commercial value of data, and consumers’ negative perception of invasive data collection by firms, further incentivising firms to make their practices opaque. This lack of transparency about collection of consumers’ data and in consequence digital profiling by insurers may lead to consumer harm in terms of discrimination, exclusion, breach of privacy and unfair pricing. 

In this article we explore potential data collection practices by insurers, analysing current market practices of data collection and sharing, as well as non-traditional sources of consumer data. These practices may bring with them privacy harms, as well as exclusionary conduct by insurers that may detrimentally affect already disadvantaged groups, therefore undermining the social function of insurance. We introduce a concept of ‘extrinsic data’, which is data from non-traditional sources that consumers may be unknowingly sharing with insurers. The use of this type of data has attracted significant attention from researchers in other contexts, such as online advertising. It is especially concerning in the context of insurance contracts for several reasons. Potential consumer harms stemming from data collection and use for profiling of clients and insurance pricing range from cybersecurity risks to collection of intimate and sensitive information, inaccuracy of automated processing and discrimination, exclusion and digital consumer manipulation. Collection of ‘extrinsic data’ by insurers constitutes a particular challenge for privacy protection regimes. Furthermore, the fact that consumers are not expecting their data to be collected and used for the purpose of pricing insurance raises important ethical questions. 

We also explore whether the current legal and regulatory framework in Australia relating to data protection is adequate to address the potential changes in the industry. However, when considering adequacy, a consideration of consumer harm is insufficient, as such changes will bring both benefits and disbenefits. The insurance industry is already highly regulated, and evidence is emerging that the existing framework may be hindering the use of emerging technologies by financial services firms. Therefore, any reform should balance consumer protection considerations with the identification of what initiatives would work to promote, not hinder, beneficial innovation. 

This article proceeds as follows. Part 2.1 considers AI- and Big Data-related technologies and their application in insurance contracts. Part 2.2 outlines the research approach used in this paper to examine and respond to the use of new technologies in the insurance industry. Part 2.3 describes how the use of AI and big data tools may affect the underwriting of consumer insurance. Part 3 provides a brief overview of Australian privacy protection law, underpinning the subsequent analysis. Part 4 focuses on insurers’ potential access to consumers’ data. We discuss non-traditional sources of data, and outline the importance of ‘extrinsic data’ (4.1). We illustrate the potential access insurers may have to consumers’ extrinsic data (4.2) through empirical examples extracted from privacy policies of certain consumer insurance products with links to retail loyalty schemes (4.2.1); and an analysis of social media scraping practices (4.2.2). In Parts 4.2.3 – 4.2.6 we delineate data practices relevant to the insurance context in the light of access to extrinsic data. In Part 5 we turn to the harms which may result from insurers’ data collection and, ultimately, use for the purpose of the composition or acquisition of digital consumer profiles. In Part 6 we focus on insurance-specific rules, asking if sector-specific law and regulation could help address issues arising out of insurers’ potential access to consumers’ extrinsic data. We consider briefly the Privacy Act Review currently underway (6.1), and proceed to distinguish two approaches that policymakers and regulators could adopt to mitigate harm. These are: restricting insurers’ access to external data (6.2); and mandating transparency regarding the use of machine learning models and data (6.3). Part 7 concludes this article.

Autonomous Cars

'Autonomous cars: A driving force for change in motor liability and insurance' by Katie Atkinson in (2020) 17(1)  SCRIPTed 125-151 comments

In this article, I review the legal and regulatory obstacles to the introduction of autonomous vehicles. I provide an overview of the key legislation which is relevant to the introduction of autonomous vehicles in England and Wales. I discuss the motor liability and insurance implications of the introduction of autonomous cars and the legal framework for the testing of autonomous vehicles on public roads. I conclude that there is likely to be significant volume of emerging legislation that car manufacturers and suppliers will be required to navigate as they launch increasingly autonomous driving systems. It is also likely that we will see an increase in the volume and complexity of litigation involving parties such as vehicle manufacturers, software companies, suppliers and mapping agencies.

'Autonomous Vehicles and Liability: What Will Juries Do?' by Gary Marchant and Rida Bazzi in (2020) 26(1) Boston University Journal of Science and Technology Law 67 comments

Autonomous vehicles (‘AVs’) that can be operated without a human driver are now being tested on public roads across America and are soon expected to be commercialized and widely available. One of the greatest roadblocks holding up more rapid deployment of AVs is manufacturers’ concerns about AV liability. This article provides a real-world assessment of AV liability risks, and concludes that manufacturers are indeed rightfully concerned about the extent and impacts of liability on AVs. 

The article first examines the application of product liability doctrine to AVs in various accident scenarios, drawing upon previous vehicle product liability cases. While AV manufacturers will likely and properly be held responsible for most accidents where the vehicle itself is responsible for the crash, the concern is that AV manufacturers may be sued and often held liable even when the AV was not the cause of the collision. This is because AVs have a much greater capability to avoid collisions than does a human-driven vehicle, and thus in almost any crash scenario it may be possible to argue that the AV should have detected and avoided the impending crash. Thus, even though the total number of vehicle accidents should decrease with AV deployment, the share and even net value of liability may go up for AV manufacturers. 

Next, the article considers jury tendencies and psychology, and concludes that jurors will be particularly harsh on AVs that draw on exotic artificial intelligence technology, and which may be involved in accidents that harm people notwithstanding their claims of improving overall vehicle safety. These factors are likely to result in more frequent and larger punitive damages than in past motor vehicle product liability. Given these finding, the article concludes by recognizing the need for some type of public policy intervention to prevent the tort system from having the contradictory effect of harming public safety.

Genetic Discrimination

'Genetic discrimination and life insurance: a systematic review of the evidence' by Yann Joly, Ida Ngueng Feze and Jacques Simard in (2013) 11(25) BMC Medicine comments

Since the late 1980s, genetic discrimination has remained one of the major concerns associated with genetic research and clinical genetics. Europe has adopted a plethora of laws and policies, both at the regional and national levels, to prevent insurers from having access to genetic information for underwriting. Legislators from the United States and the United Kingdom have also felt compelled to adopt protective measures specifically addressing genetics and insurance. But does the available evidence really confirm the popular apprehension about genetic discrimination and the subsequent genetic exceptionalism? ...

This paper presents the results of a systematic, critical review of over 20 years of genetic discrimination studies in the context of life insurance.

The available data clearly document the existence of individual cases of genetic discrimination. The significance of this initial finding is, however, greatly diminished by four observations. First, the methodology used in most of the studies is not sufficiently robust to clearly establish either the prevalence or the impact of discriminatory practices. Second, the current body of evidence was mostly developed around a small number of 'classic' genetic conditions. Third, the heterogeneity and small scope of most of the studies prevents formal statistical analysis of the aggregate results. Fourth, the small number of reported genetic discrimination cases in some studies could indicate that these incidents took place due to occasional errors, rather than the voluntary or planned choice, of the insurers.

Important methodological limitations and inconsistencies among the studies considered make it extremely difficult, at the moment, to justify policy action taken on the basis of evidence alone. Nonetheless, other empirical and theoretical factors have emerged (for example, the prevalence and impact of the fear of genetic discrimination among patients and research participants, the (un)importance of genetic information for the commercial viability of the private life insurance industry, and the need to develop more equitable schemes of access to life insurance) that should be considered along with the available evidence of genetic discrimination for a more holistic view of the debate....

The prototypical issue used when discussing the ethical, legal and social issues associated with scientific progress in genetics has been genetic discrimination (GD). Lawyers and ethicists have been quick to point out the risk that uninhibited genetic progress would entice governments and institutions to treat people differently on the basis of their genetic constitution [1]. GD has been defined in many ways, a mark of the influence of divergent sociocultural and scholarly backgrounds. Insurers write of 'rational (actuarial)-irrational discrimination' [2], lawyers write of 'legal-illegal (illicit) discrimination' [3], whereas patients generally adopt a much broader definition encompassing all differential, negative treatments of an individual based on his or her genetic makeup [4]. However defined, widespread GD could potentially result in practices that exclude segments of the population from access to basic social necessities such as healthcare, insurance, housing, reproductive freedom and employment. Mass media has joined the debate, ensuring that the issue of GD is not confined to isolated academic discourse [5].

Among the fields of potential discrimination, one of the most commonly-debated topics has been the use of genetic information by the insurance industry to select applicants and determine insurance premiums. The dual nature of personal insurance, which is partly considered as both a public and private good in most jurisdictions, and the relatively limited amount of public trust in the practices of the private insurance sector might explain some of this attention. Policymakers themselves have entered the arena of debate following substantial pressure from their constituents. In continental Europe, the legislative response has been swift and strong. GD is prohibited by the Convention on Biomedicine (1997), the Charter of Fundamental Rights of the European Union (2000), and the national legislation of many individual countries [6]. In the United States, the much-discussed Genetic Information Nondiscrimination Act of 2008 (GINA) (2008) offers protection mainly in the domains of health insurance and employment [7]. In the United Kingdom, the Association of British Insurers and the British government have agreed on a Concordat and Moratorium on Genetics and Insurance that significantly restricts the capacity of British insurers to request genetic information from insurance applicants [8]. Australian (2008 amendment to the Disability Discrimination Act), Canadian and East Asian policymakers have also been active in this area, although less so than their European counterparts [6,9].

This paper focuses on GD in the field of life insurance. Life insurance facilitates the economic security of the policy holder. It is often described as a quasi-essential social good, a gateway good necessary to have access to important social and economic activities that provide considerable peace of mind to the policyholder [10]. Access to life insurance is far from universal and it must generally be purchased through a contractual agreement with a private insurance company. The majority of life insurance applicants are accepted at a standard rate set by insurance companies. Nevertheless, for the small group of individuals excluded from the common pool, the consequences can be dire [11].

Is the substantial attention given to the question of GD in academic literature, popular media and policymaking circles justified by the empirical evidence currently available? In other words, are the observed concerns and responses based on documented cases of discrimination, anecdotes or other less visible factors? This question prompted us to undertake a study, which to our knowledge is the first attempt to systematically review all available empirical evidence of GD using the life insurance sector as a subject of analysis. This study analyzes actual cases of discrimination, the evidentiary limitations, and the possibility of drawing overarching conclusions from the available evidence.

US Genetic Discrimination and Objectivity

'How Genetics Might Affect Real Property Rights' by Mark and Laura Rothstein in (2016) 44(1) Journal of Law, Medicine and Ethics comments

New developments in genetics could affect a variety of real property rights. Mortgage lenders, mortgage insurers, real estate sellers, senior living centers, retirement communities, or other parties in residential real estate transactions begin requiring predictive genetic information as part of the application process. One likely use would be by retirement communities to learn an individual’s genetic risk for Alzheimer’s disease. The federal Fair Housing Act prohibits discrimination based on disability, but it is not clear that it would apply to genetic risk assessments. Only California law explicitly applies to this situation and there have been no reported cases.

'The Emperor’s New Genes: Science, Public Policy, and the Allure of Objectivity' by Ruha Benjamin in (2015) 661 Annals of the American Academy of Political and Social Science 131-142 addresses

the politics of genomics through three diagnoses: The first, diagnosing objectivity, discusses how researchers involved in a large-scale population mapping initiative distinguish genomics as relatively objective, compared to other forms of knowledge production. The second case, diagnosing nationality, examines an attempt by the UK Border Agency to use genetic ancestry testing to vet asylum claims. The third case, diagnosing indigeneity, considers how indigenous councils in southern Africa engage genomic science in their struggle for state recognition and rights. I argue that genomics’ allure of objectivity lends itself to such diagnostic attempts among both powerful and subaltern social actors and suggest that developing “technologies of humility” may provide one safeguard against the increasing uptake of genomics as the authority on human difference.

 Benjamin comments

The specter of state-sanctioned eugenics can serve as a distraction from more routine, seemingly benign or even beneficent, scientific practices that are taken up in the policy arena. When attention is focused too narrowly on eugenic boogiemen, genomic saviors that seem to tell us a more true and complex story of population history, may elude critical analysis. A moratorium on the binary between good versus bad science as a mode of popular and scholarly critique is necessary, because the distinction sidesteps how much of what we deem as “bad” today was produced by respected researchers based in prominent institutions of the time. The normative distinction causes observers and analysts alike to be wary of practices that appear obviously bad and are often sensationalized (e.g., Tuskegee syphilis experiment), while overlooking normal workaday science produced with the help of multi-million-dollar grants by award-winning researchers vetted through peer-review. Although the critical response by the population genetics community towards A Troublesome Inheritance (2014a) by Nicholas Wade was celebrated by many who have been calling for greater reflexivity in the field, it underscores this binary: a letter signed by more than 130 researchers said that Wade had “misappropriated” their research to “support arguments about human societies” as it relates to IQ, political institutions, and economic development.  Certainly, misuse is an issue, but what also seems to fuel the uptake of genomics in support of such claims is the field’s allure of objectivity.

The hazards of workaday genomics, I suggest, have more to do with this allure than with its potential to construct hierarchies of superior and inferior groups. In this context, focusing on proponents of biological determinism a la Wade may serve as a distraction from the dexterity of genomics, in which different social actors draw on its diagnostic allure to make authoritative claims about group boundaries.

In framing this discussion as a set of interconnected processes of diagnosis, I draw on work that challenges the use of genetic ancestry testing as a diagnostic of group membership. For example, Bolnick et al.’s (2007) caution that

when an allele or haplotype is most common in one population, companies often assume it to be diagnostic of that population. This can be problematic because high genetic diversity exists within populations and gene flow occurs between populations. Very few alleles are therefore diagnostic of membership in a specific population, but companies sometimes fail to mention that an allele could have been inherited from a population in which it is less common. (p. 400, emphasis added)

While the critique above is directed at the private sphere (i.e., companies that capitalize on the willingness of consumers to pay for testing), the discussion here is concerned with how such tests are taken up in public policy where the parameters of political and social inclusion are being established or challenged. In the process of diagnosing group membership, genomic tools are deployed by varied social actors to make competing claims about who belongs and who does not. Extending Pollock’s (2012) application of the Derridean concept of pharmakon to race-based medicine—as both remedy and poison—the discussion here illustrates the normative dexterity of genomic claims in public policy (Benjamin 2015). It draws three examples together through the idiom of diagnosis, to con-ceptualize the connection between the authoritative representation of the field and its political circulation. The first case, diagnosing objectivity, discusses how representations of a large-scale population mapping initiative distinguish the objectivity of genomics from other forms of knowledge production. The second case, diagnosing nationality, examines an attempt by the UK Border Agency to use genetic ancestry testing to vet asylum claims. The third case, diagnosing indigeneity, considers how indigenous councils in southern Africa engage genomic science in their struggle for state recognition and rights. I argue that the field’s allure of objectivity lends itself to such diagnostic attempts by powerful and subaltern social actors alike. Finally, I suggest that developing “technologies of humility” (Jasanoff 2007) may provide one safeguard against the increasing uptake of genomics as a means to arbitrate the parameters of political and social inclusion.

In discussing the 'diagnosis of nationality' [p 134] Benjamin states

In 2009, the UK Border Agency (UKBA) initiated the Human Provenance Pilot Project (HPPP), with the aim of using genetic ancestry testing and isotope analysis to vet asylum claims. If, over the course of a standard interview, caseworkers grew suspicious of an applicant’s story, they would request samples of saliva, nails, and hair. The primary targets of the project were East Africans. Somali applicants escaping persecution were eligible for asylum, so if the tests indicated someone was from Kenya—a phenomenon dubbed “nationality swapping”—he or she was scheduled for deportation. The entire process was essentially an experiment. Yet over the course of the project, actual cases were vetted using these methods. A letter from the deputy director of the project, Phil Douglas, stated that “all samples will be provided voluntarily,” but caseworkers were encouraged to regard refusal to submit samples with suspicion. The official protocol instructed:

If an asylum applicant refused to provide samples for the isotope analysis and DNA testing the case owner could draw a negative inference as to the applicant’s credibility. … There must be other compelling evidence which also clearly demonstrates that the applicant has attempted to conceal information or mislead the UK Border Agency. It must not be stated within the RFRL [Reasons for Refusal Letter] in isolation and must certainly not be stated as a primary reason for refusing the applicant’s asylum claim.

Following the protests of refugee advocates and the work of journalist John Travis—and not through any regulatory or oversight governing body—the project came under widespread scrutiny. In the process, academic scientists expressed shock and disgust, insisting that the techniques used could not diagnose nationality in the way that the project assumed. David Balding, a population geneticist at Imperial College London, noted that “genes don’t respect national borders, as many legitimate citizens are migrants or direct descendants of migrants, and many national borders split ethnic groups” (Travis 2009).

Mark Thomas, a geneticist of University College London, who called the HPPP “horrifying,” contended that determining a person’s ancestry—as distinct from nationality—is more problematic than many believe. “[Mitochondrial] DNA will never have the resolution to specify a country of origin. Many DNA ancestry testing companies have sprung up over the last 10 years, often based on mtDNA, but what they are selling is little better than genetic astrology,” he said. “Dense genomic SNP data does have some resolution … but not at a very local scale, and with considerable errors” (Travis 2009). Likewise, Alec Jeffries, one of the pioneers of human DNA fingerprinting, wrote,

The Borders Agency is clearly making huge and unwarranted assumptions about population structure in Africa; the extensive research needed to determine population structure and the ability or otherwise of DNA to pinpoint ethnic origin in this region simply has not been done. Even if it did work (which I doubt), assigning a person to a population does not establish nationality—people move! The whole proposal is naive and scientifically flawed. (Travis 2009)

An isotope specialist at Durham University, Janet Montgomery, explained that “unless the border between Somalia and Kenya represented some major geological or hydrological division, I cannot see how isotopes will discriminate between people living there let alone living at/on the border” (Silverstein 2011). Montgomery specified, “Isotopes do not respect national borders or convey some inherent national attribute. They are not passports” (Silverstein 2011).

Despite such severe criticism from the scientific community, the HPPP did not initially shut down; nor did it rule out the possibility that it would reintroduce a similar initiative in the future. In their own defense, representatives of the Border Agency insisted that only asylum-seekers who had already failed linguistic tests (another contested method of determining nationality) would be asked to provide mouth swabs, hair, and nail samples. It also released the following written response to scientific criticisms:

Ancestral DNA testing will not be used alone but will combine with language analysis, investigative interviewing techniques and other recognized forensic disciplines. The results of the combination of these procedures may indicate a person’s possible origin and enable the UKBA to make further enquiries leading to the return of those intending on abusing the U.K.’s asylum system. This project is working with a number of leading scientists in this field who have studied differences in the genetic backgrounds of various population groups. (Travis 2009, emphasis added)

Several prominent scientists, who had been interviewed by Travis, said they suspected that private labs that were under much less regulatory oversight had been involved in the project. And while the UKBA has since tried to downplay the significance of the project, in the words of Pearson, “It’s peoples’ lives we’re dealing with.”

The idea that the HPPP was voluntary conceals the threat of deportation if applicants did not consent to testing. It is coercive to say one has a choice, when one of those choices is automatically penalized. As Tutton, Hauskeller, and Sturdy (2014) explain, “In the UK, official and popular attitudes to those who request sanctuary have become dominated by a hermeneutic of suspicion. Public and policy discourses portray asylum seekers as mostly ‘bogus’ refugees seeking admission to the country for economic, not humanitarian, reasons” (p. 739).

The quest for scientific tools to determine ancestry and arbitrate group mem-bership continues apace toward a variety of political and biomedical ends. The near uniform criticism on the part of scientists toward the UK project serves to highlight a key feature of the underlying science—its refusal to adhere to “terms of use” in so far as the UKBA was unwilling to completely shut down the project. Furthermore, essential for this discussion is that

such technologies of identity do not simply offer more objective means of confirming or disconfirming conventional identity claims. They actually redefine the social categories of identity on which immigration and asylum decisions are based. … The HPPP stands as a salutary warning of the ways in which supposedly objective technologies of identifi-cation are increasingly being used at international borders as a way of further disempow-ering the already vulnerable. (Tutton, Hauskeller, and Sturdy 2014, 749)

But due to the dexterity of the field, supporting as it does competing ideas about peoplehood and belonging, it has also been enrolled in initiatives that seek to empower groups that have been historically dispossessed, as the next section illustrates. The latter, as I argue, should attract as much careful analysis as the HPPP, because of the way that the authority of genomics may displace other forms of group-making and political mobilization.

Consumer protection and health insurance

The Australian Competition and Consumer Commission has released Information and informed decision-making in private health insurance - A report to the Australian Senate on anti-competitive and other practices by health insurers and providers in relation to private health insurance For the period of 1 July 2013 to 30 June 2014, its 16th Private Health Insurance report on the private health insurance industry, reflecting a requirement that the Commission report to the Senate on "any anti-competitive practices by health insurers or providers, which reduce the extent of health cover for consumers and increase their out-of-pocket medical and other expenses".

The report is described as "highlighting concerns about the impact of complex information on consumers and the market" and revealing "the increasing challenges facing consumers in choosing between a large number of policies with greater exclusions".

The ACCC draws three conclusions:

• There are market failures in the private health insurance industry which reduce consumers’ ability to compare policies and make informed choices about their future medical needs. 
• Existing regulatory settings can change consumers’ incentives in purchasing health insurance. As insurers respond to market demands for affordable policies there are greater risks of unexpected out-of-pocket costs for consumers. 
• Current practices by some insurers are at risk of breaching the consumer laws. 

The ACCC comments

the complexity of private health insurance policies can affect consumers’ ability to make informed decisions about the policy that best suits their needs. Whether a consumer is purchasing health insurance for the first time, or reviewing and renewing a policy after many years, they have to navigate through a range of issues to make an informed decision.

Consumers may encounter significant difficulty in determining what a procedure will cost and how the relationship between their insurer and the relevant practitioner or hospital will affect this cost. It is in the interests of both consumers and industry to be as clear and transparent as possible so that consumers who are purchasing insurance can make the best decisions about their level of coverage.”

It states

While the report addresses issues specific to the reporting period, it also gives broader consideration to the enduring impact of these issues on consumers. This approach aligns with the ACCC’s 2015 Compliance and Enforcement Policy, which identifies competition and consumer issues in the health and medical sectors as a priority.

Almost one in two Australians hold a private health insurance policy for all or part of their hospital treatment costs. It represents a significant financial investment for many consumers and their families. The ACCC has previously found that the industry is characterised by information asymmetry and complexity. These findings have been replicated in this report.

Competition, complexity and consumer engagement

In general, competition delivers efficient market outcomes where consumers engage with the market and reward suppliers who deliver goods and services that meet their needs. This drives lower prices, better quality products, greater innovation and increased efficiency. However, where there is market failure, competition may not deliver the most efficient outcomes.

It appears there are a number of market failures in the private health insurance industry. In particular, imperfect and asymmetric information impede consumers’ ability to make choices that are likely in their best interests. These problems mean that consumers experience difficulty in determining the effectiveness of various policies given their uncertain future health needs, which makes it difficult for consumers to choose the appropriate level of cover. This in turn affects competition in the industry.

The complexity of the private health insurance system, and its impact on consumers, was a frequent theme of submissions to the ACCC from both consumer and industry bodies. A range of factors contribute to this complexity, including regulatory settings, the sheer number of policies available, the range of potential policy benefits and exclusions, preferred provider arrangements, policy variations and differing terminology between funds which makes comparison difficult.

When faced with such complexity consumer decision-making is affected and consumers are less inclined to review and change policies; that is, consumers become less engaged market participants. Reduced consumer engagement impacts competition, as the incentives for suppliers to offer better policies are reduced, and increases the likelihood of decreasing confidence in the perceived value of policies.

Stakeholders raised a number of concerns about industry practices that impact consumer decision-making, including: • a lack of sufficient and comparable information before purchase • information or terminology that is ambiguous or difficult to interpret • inconsistent information • difficulty locating relevant information • consumer uncertainty about what questions to ask.

As a result, some consumers find it difficult to understand the extent of their cover, the costs they are likely to incur if they use a health service and determining who to seek information from (insurer or health provider), which can exacerbate the problem of information asymmetry.

This may be leading to disengaged consumers. The ACCC’s research indicates that consumers are engaged at the commencement of the purchasing process. However, significant numbers of consumers who contemplate changing their insurance arrangements fail to do so. The reasons for this are varied, but the research suggests that one significant reason is the complexity faced by consumers when undertaking a meaningful comparison process.

Price is a critical factor in many consumers’ decision-making, particularly as premiums are increasing with rising health care costs. The regulatory incentives alongside uncertainties about future health care needs, as well as policy complexities may drive consumers towards lower priced policies than they would otherwise prefer. While price is a legitimate means for consumer decision-making, there are concerns that some consumers are not fully considering the trade-offs between the costs and benefits of the various policies on offer. This is leading to some consumers facing detriment when they come to subsequently claim under the policy and find their procedure is not covered. This is of concern given recent reports that suggest that insurers are encouraging consumers more broadly to downgrade their cover to secure cheaper premiums. As a result, consumers are finding themselves more often without the cover they expected.

The majority of consumers surveyed as part of the quantitative research commissioned by the ACCC indicated general satisfaction with their private health insurance. However, the research highlighted that most consumers do not frequently access their private health insurance and consumer satisfaction is often based on the overall cost of the policy. For some consumers this may mean that their understanding of the relevant inclusions and exclusions of their policy will only be tested when the time comes to make a claim. This is of particular concern given our research indicates that insurers can often change the coverage of their policies or make other changes that impact the benefits available and do not always communicate changes effectively to consumers.

The submissions identified a significant disconnect between consumers’ expectations of the services and rebates they are entitled to receive under their policy, and the reality of the benefits their policy provides. Complaints to regulatory and complaint bodies about unexpected out-of-pocket expenses and ‘bill shock’ are also rising. The ACCC has also received submissions about certain conduct by insurers that may potentially breach the Australian Consumer Law (ACL). For example, some of the conduct may be at risk of misleading consumers. Such conduct has the ability to harm consumers and also competition.  ...

The role of the ACCC 

The ACCC is committed to increasing awareness among consumers about the protections offered by Australia’s consumer laws. We consider it is in the interests of both consumers and insurers to be as clear and transparent as possible so that consumers purchasing insurance can make informed decisions about their level of cover. It is also important that insurers do not assume that compliance with specific private health laws and regulations alone will satisfy obligations that arise under the ACL.

Current trends in the private health insurance industry warrant a closer examination of the conduct of private health insurers and health providers/practitioners. It also warrants consideration of these issues by policy makers to ensure greater transparency and decreased information asymmetry. While the ACCC has an overarching consumer protection role that encompasses the private health insurance sector, we do not have policy responsibility for many of the issues raised in this report.

In line with the ACCC’s current focus on the health and medical sector, we will be closely reviewing some practices in the health insurance industry. The ACCC will consider any issues identified in accordance with the ACCC’s Compliance and Enforcement Policy.

Some of the issues that we are currently considering include:

• bold headline claims that are heavily qualified in fine print, for example: ‘no gap’ or ‘100% cover’, when significant qualifications apply 

• misleading conduct through the use of industry terms or phrases that are inconsistent with plain language or consumers’ understanding of commonly used words 

• the provision of incomplete information that creates the representation that there is broader insurance cover than the consumer has 

• use of complicated terms and conditions, exclusions and practices that inhibit a consumer’s capacity to make appropriate comparisons and which risk misleading consumers or exposing them to unfair claims assessments.

The ACCC recognises that a number of efforts have been made by industry and government over recent years to address these issues. However, as this report makes clear, further work to enhance consumer engagement is needed.

In response it suggests that -

there to be three key concerns arising from its research on the private health insurance industry:

• First, there are market failures due to asymmetric and imperfect information. This leads to complexity in private health insurance policies, which reduce consumers’ ability to compare policies and make informed choices. Further, consumers have limited information about their likely future health needs, which may lead to consumers underestimating their future medical needs and instead focusing on the immediate costs and benefits of private health insurance. 

• Second, existing regulatory settings can change consumers’ incentives in purchasing private health insurance and drive insurers to offer products to primarily reduce consumers’ tax liabilities, rather than also focussing on consumers’ current and future medical needs (which are difficult to predict). As funds respond to market demand for affordable policies, there are increasing policy limitations and exclusions leading to higher numbers of consumers having policies with less cover than they expected. This leads to an increased risk of consumers facing unexpected out-of-pocket expenses and general dissatisfaction with the system. We accept that some consumers in purchasing private health insurance may only be seeking to reduce their tax burden and/or the risk of the LHC loading. However, they still expect basic cover from their purchase. 

• Third, while health insurers may be strictly compliant with the requirements of the Private Health Insurance Act and the Code, the research has revealed examples where representations by insurers to consumers, including when entwined with policy variations, may be at risk of breaching the consumer laws.

The ACCC enforces competition and consumer law; it is for others to ensure that the regulatory settings are fit for purpose. This report shows though, that there is a market failure in the private health insurance sector and, while many attempts have been made to address this in the past, more is needed if consumers are to have the information they need to make informed choices and allow for effective competition between health insurers.

As is clear from the report, the regulation of the private health insurance sector involves a complex array of legislation and co- and self-regulation. This report has aimed to highlight consumer and stakeholder concerns with the current system; it does not provide a road map for reform (which could be approached by industry driven changes, such as through the Private Health Insurance Code or by changes to private health insurance legislation). Nevertheless, stakeholders repeatedly made a number of suggestions that should be highlighted. They include:

• Review of the SIS requirements to ensure they serve their purpose as an effective information and comparison tool, with a focus on balancing comparability and thoroughness without overwhelming consumers. Modern technology may help here. 

• If reform of the SIS is to occur the ACCC would recommend that any proposed reforms be consumer tested through a pilot study before being finalised. Such a review should also look at the best means of providing the SIS to encourage consumers to read it. 

• Standardisation of terminology used in promoting policies and describing levels of coverage and specific procedures. For example, standardisation around terms such as ‘known gap’ and ‘no gap’ policies, top, medium or low cover and a consistent definition of procedures such as ‘plastic and reconstructive surgery’ so it is clear what the inclusions and exclusions of policies are. 

• Review of the requirements for minimum policy coverage given the growth of restrictions and exclusions. 

• The functionality and promotion of www.privatehealth.gov.au. This is a valuable and independent site and the one place where all private health insurance policies can be compared. With the Commonwealth Ombudsman recently taking over responsibility for the site, an investment in improving its functionality to enable consumers to compare on factors beyond price would be beneficial. Benefits would also flow from better promotion of the site to consumers. 

• Review of the triggers for requiring insurers to inform consumers about any changes that may affect their out-of-pocket expenses or choice of hospital or practitioner and how these changes are communicated. As with any changes to the SIS, the ACCC would recommend that any review should also look at the most effective ways of communicating this information and run a pilot to test effectiveness prior to making formal changes. 

• Considering how consumers can more easily calculate their likely out-of-pocket expenses before committing to a policy and/or procedure. Intelligent, interactive tools should be considered to assist with this. Stakeholder submissions raised suggestions that could be explored to advance this goal, including:

• health providers/practitioners providing standardised cost estimates to consumers that include specific information such as MBS item numbers for each part of the procedure 

• health providers/practitioners providing average or maximum rates for all procedures for the MBS item numbers covered 

• insurers providing a detailed and easily searchable schedule of benefits and services they cover, including specific details about MBS item numbers, eligible aids/appliance, inclusions and exclusions, health practitioners eligible to provide services and referral requirements and item limits.

Fake Deaths By Drowning

Having got rid of a book chapter on financial crime, inc insurance fraud, I was amused to see reports of the reappearance of former US banker and 'dead person' Aubrey Lee Price, the latest in a long line of people who supposedly died in boating accidents, swimming accidents or by watery suicide. (The Sanchez fraud is noted here.)

British MP and former Aviation Minister John Stonehouse (1926-1988) shed his clothes and his identity in 1974, faking his own death by drowning off the beach in Miami as his business group collapsed and investigators were about to discover that a fund for Bangladeshi hurricane victims was missing £600,000.

Stonehouse disappeared to Australia on a false passport in the name of Joseph Markham, a dead constituent. He was discovered in Melbourne, happily living with his mistress and masquerading as Clive Mildoon, another dead constituent. In 1976 he was sentenced to seven years in prison for theft, forgery and conspiracy to commit insurance fraud. An account is provided in his autobiography Death of an Idealist (WH Allen, 1975) and My Trial (Star Books, 1976).

In 1981 former US state official Robert Granberg supposedly drowned after falling off a boat while on a fishing trip with friends. Although no body was recovered he was officially pronounced dead. His grieving widow sought payouts from several life insurers, one of which balked because Granberg had been "grossly overinsured" (for an aggregate US$6m on an annual income of around US$18,000). 

Investigation revealed that Granberg wasn't sleeping with the fishes; instead he was using several fake identities (including a fake passport, used to travel to London) and periodically meeting with the newly-wealthy merry widow. Granberg was convicted of fraud. His associates were convicted on other charges, including conspiracy and mail fraud.

Ivan Manson was more fortunate, disappearing on a fishing trip in New Zealand during 1975. He apparently fled to Australia, reportedly being identified from fingerprints as one of the victims in a 1995 car accident in Caboolture.

UK businessman Carl Hilderbrandt appears to have emulated Stonehouse in 1990. He skipped bail on fraud charges and faked his death by drowning. He assumed false identities by obtaining passports in the name of dead children - ie a 'rebirthing' scam - and moved to the US where he lived until detected in 1997.

US businessman Phil Champagne 'died' in a boating accident in 1982, his family's sorrow presumably assuaged by a US$700,000 insurance payout (on a US$1.5m policy).

A decade later Champagne was arrested for counterfeiting US currency in an Idaho shed. He had appropriated the persona of Harold Stegeman, an 8 year old who died in 1945. Champagne pleaded guilty to false statements in a bankruptcy hearing, loan application and passport application. His life after death is profiled in Man Overboard: The Counterfeit Resurrection of Phil Champagne (Northwest Publishing, 1995) by Burl Barer.

Bennie Wint supposedly drowned off Daytona Beach, Florida, in 1989. He was about to be married and reportedly feared prosecution in connection with illicit drug activity. His bride-to-be saw him go into the surf for a swim; he emerged unscathed and undetected from those treacherous waters, moved to a new life in Alabama under the name of William Sweet, found a new partner, fathered a son and was identified in 2009 after his fingerprints matched those of the 'dead' Mr Wint.

Florent Terrassin of Les Coteaux, Quebec supposedly downed while fishing in the St. Lawrence River, where he left his wallet, fishing kit and a shoe. His grieving widow Josette sought to collect C$300,000 insurance. The couple were charged with conspiracy and mischief after the dead man was found alive in his bed in the US after a phone call to his son.

Jenaro Jiménez Hernández of Cádiz supposedly died while spearfishing off Spain's Atlantic coast, leaving his BMW parked at Los Alemanes beach, a grieving and pregnant widow, and some uncomfortable debt. A four-day search by air-sea was unavailing, apart from discovery of a flipper by a police diver. Moroccan authorities were contacted in case the body washed up on their shores. He appears to have cycled to Gibraltar, then flown to South America on a false passport, along with a large sum in cash with him. On his return from Paraguay he was reportedly charged with fraud, unlawful appropriation and using false documents.

Anthony Angell also swam away from his inconvenient old identity and pressing debts, supposedly drowning off Beachy Head and being reborn as Anthony John Allen. In that guise he murdered his new wife Patricia and her two children, who disappeared (apparently dumped at sea). Angell/Allen was convicted of the murder over 25 years later. The incident is discussed in Presumed Dead: The True Story of an Unsolved Mystery (Time Warner, 1992) by Eunice Chapman, Allen's sometime partner.

Beachy Head was also the site for the supposed demise of Fiona Mont in 2000, of interest to the UK police over alleged involvement in a £300,000 computer fraud in 1999. She skipped bail, according to some newspaper reports faked her own death at the popular suicide spot and allegedly left Britain the next day in a light aircraft piloted by her boyfriend, a convicted drug smuggler. She was identified in Spain and extradition began a year later, with critics claiming that the two-day police helicopter and coastguard search at Beachy Head cost taxpayers over £30,000. (Mont and associates have contested particular claims; readers should undertake their own research before drawing any conclusions.)

Australian Harry Gordon faked his own death in a boating accident in 2000, with the expectation that his wife could benefit from his life insurance. Using a new identity he lived in Spain, the UK, South Africa and New Zealand and remarried. He explained discrepancies by claiming he was under witness protection. Gordon's deception was discovered in 2005; he went on to write The Harry Gordon story: how I faked my own death (New Holland, 2007).

John and Anne Darwin were jailed for six years in the UK in 2008 for fraudulently claiming £250,000 in insurance payouts after faking John's death. She convinced insurers, the police, the coroner and her own sons that John had drowned through a canoeing accident in 2002. He was discovered five years later, reportedly claiming that he had no memory of the intervening years. He had been in close contact with his wife during that time and apparently fraudulently obtained a passport, using the name of a dead child.

One of his sons commented

Dad told one nasty lie and disappeared and said he was dead but she lied for six years. She was the face of the lies and she kept lying, even when the evidence was so overwhelmingly against her. She dragged us through hell by forcing a court case.

The same year saw conviction in New Zealand of Bruce Dale, who staged his drowning at Port Waikato (abandoning a wife and three children) in 2002, moved to Christchurch with a new identity as Michael Francis Peach, acquired a house and business, and found a new partner under the Peach identity. His first family claimed NZ$1.12 million in insurance in 2007. Dale's reinvention was discovered when he applied for a passport in his real name. He pleaded guilty to four charges of fraud.

Price allegedly embezzled several million dollars from his bank before leaving a suicide note in June 2012 indicating that he was going to jump off a ferry from Key West to Fort Myers, Florida. He was found alive and well in Georgia after being stopped for driving 'suspiciously slowly' in a pickup with tinted windows - gold tinted windows in some reports.

In 2008 Minnesota IT entrepreneur Travis Scott collected US$11.5m after his Prairie supercomputer business was struck by lightning. In September 2011, after pleading guilty to fraud, he left a suicide note indicating that he'd drowned in Lake Mille Lacs. In reality he'd flown to Manitoba, where he was eventually arrested for trying to pass forged prescriptions at a Winnipeg pharmacy.

In 2008 hedge fund manager Samuel Israel III - accused of a US$450m fraud - supposedly leapt off a Hudson River bridge, leaving his SUV with the words “suicide is painless” written in the dust on the hood. A month later he turned himself in, apparently having spent the time at a Massachusetts campground. His fraud is discussed in 'Portraits of five hedge fund fraud cases' by Majed Muhtaseb and Chun Yang in (2008) 15(2) Journal of Financial Crime 179-213 and in Octopus: Sam Israel, the Secret Market, and Wall Street's Wildest Con (Broadway Books, 2012) by Guy Lawson.

Fake death by drowning being a cultural meme - and more convenient than being supposedly devoured by lions, crocodiles, wild pigs or bears - Price's supposed demise had precedents elsewhere in Florida.

Tampa restaurateur H.E. 'Gene' Holloway - deeply in debt and with a US$16m insurance policy - for example supposedly came to a watery end by falling overboard from a yacht at night near Key West. Associates claimed they had unavailingly thrown life jackets. He was discovered in Toronto during a drug bust two months later - perhaps the fishes threw him back - with a new girlfriend and cosmetic surgery.

Kerry Scheele sought to evade child support and collect a US$1m insurance policy by drowning during a lobster diving trip near Big Pine Key. Scheele swam ashore, hid his rented diving kit in the mangroves and then travelled to his girlfriend in Wisconsin.

Further afield Louisiana resident Milton Harris disappeared off a ferry in South Australia, being sprung when an intrepid 70-year-old dived in to save him only to discover Harris sitting on the seabed breathing from an oxygen tank. In 1985 Harris vanished off a Cook Strait ferry in New Zealand. Prudential Insurance and Lloyds made payments to his family on the assumption that Harris was dead, with Lloyd’s stopping payment on two NZ$2.9m life insurance polices after discovering that Harris had previously jumped. He was found four years later, living in New Zealand with a new wife on some US$60,000 of Prudential's insurance money generously provided by his first wife. Harris was extradited to the US and Prudential took action against his first wife and son for fraud. Three years after release from prison, Harris was missing again.

Insurance

'The Anatomy of Insurance Anti-Discrimination Laws' (U of Michigan Law & Econ Research Paper No. 12-017) by Ronen Avraham, Kyle Logue & Daniel Schwarcz notes that

Insurance companies are in the business of discrimination. Insurers attempt to classify insureds into separate risk pools based on their differences in risk profiles, first, so that they can charge different premiums to the different groups based on their risk and, second, to incentivize risk reduction by insureds. This is why we let insurers discriminate. There are, however, limits to how much discrimination, or the types of discrimination, we will allow even insurers to engage in. But what exactly are those limits, and how are they justified? To answer this question, rather than starting with top-down grand normative theories, this Article takes a bottom-up approach and explores the state laws that govern this question in the first place. The Article makes use of a unique hand-collected dataset of laws regulating insurer risk classification in all 51 jurisdictions. Among our findings are that state insurance anti-discrimination laws vary a great deal, in substance and in the intensity of regulation, across lines of insurance, across policyholder characteristics, and across states. The Article also finds that, contrary to expectations, a surprising number of jurisdictions do not have any laws restricting insurers’ ability to discriminate on the basis of race, ethnicity, or religion. In addition, the Article finds that much of the cross-line variation in state insurance regulations can be explained in terms of adverse selection. Specifically, we show that in the lines of insurance where concerns about adverse selection are strong, states allow insurers more leeway in discriminating among insureds. The Article’s primary contribution is descriptive; however, it has potential normative implications as well.

The authors comment that

This article takes a different approach to exploring insurance discrimination. Rather than starting with top-down grand normative theories, it takes a bottom-up approach and explores the state laws that govern this question in the first place. This is much harder than it initially sounds, which may be why we are the first to undertake the task. States’ regulation of insurers’ risk classification practices is remarkably multi-faceted and variable. In fact, it varies along at least four core dimensions. First, risk classification regulation often varies across insurance lines. For instance, a state may prohibit automobile insurers from taking into account age in discriminating among policyholders, while explicitly permit life insurers to do so. Second, state laws may vary across different policyholder characteristics: whereas automobile insurers may be permitted to take into account gender in classifying policyholders, they may be prohibited from taking into account race or national origin. Third, the intensity of state risk classification regulation is quite heterogeneous: such laws may simply require an actuarial justification for discriminating on the basis of a characteristic, or it might categorically prohibit insurers from using that characteristic. Finally, risk classification laws differ dramatically by state. To capture these details, we use a unique hand-collected dataset of state laws on the regulation of insurer risk classification. Since the law in this area is determined primarily at the state level, we identified and analyzed the relevant state statutes and regulations in all 50 states (and Washington DC) and coded those laws for five different lines of insurance and for nine different characteristics. Once we had completed a thorough search and coding of the existing state statutory and regulatory law, we went back to every state and looked for any court decision or administrative ruling that interpreted the relevant statutory or regulatory language to determine whether the initial code assigned to that law, for a given line or characteristic, should be adjusted. The result is the first ever database of insurance anti-discrimination laws in the U.S. 

We then investigate the laws. Our empirical results are summarized below through numerous graphs and pictures that are hard to distill in just few words. But they show, for example, that state laws regulating risk-classification practices in the auto and property/casualty insurance lines are the most restrictive. By contrast, the least restrictive state regulations apply to disability andlife insurance, which means that they permit the highest amount of discrimination or risk- classification for those lines of insurance. We also document more specific cross-line variations. For example, forty-eight of the fifty-one jurisdictions (as well as the federal government) completely prohibit the use of genetic endowment for health insurance, even though in the other four lines of insurance genetic endowment is among the least restricted characteristics. And while race, ethnicity, and religion are the most intensely restricted characteristics in every line of insurance, we find, contrary to conventional wisdom, that a surprising number of jurisdictions do not, in fact, have any laws restricting insurers’ capacity to discriminate on the basis of these characteristics. 

Having mapped out these complexities, we analyze the results based on the various explanatory factors that are emphasized in the extant theoretical literature. Our goal in doing so is to provide a descriptive, bottom-up understanding, of the reasons and possible justification for the pattern of state laws that we observe. By doing so, we are able to solve several puzzles regarding variations in anti-discrimination insurance laws which look initially as unsolvable. Why is gender more strongly restricted in auto, disability, and property/casualty insurance than it is in health and life insurance? Or, as was just mentioned above, why do states prohibit the use of genetic endowment for health insurance, but permit it in the other four lines of insurance? 

Surprisingly, we find that concerns about adverse selection can explain and justify a large part of the cross-line variations that are embedded in state insurance regulation. In particular, we show that in lines where concerns about adverse selection are strong, states allow insurers to discriminate (in fact, to classify) among the insureds. By contrast, where concerns about adverse selection are weak, insurers are more like to be prohibited from engaging in such discrimination. A more diverse set of factors is needed to explain cross-characteristic variation in state laws. 

While the article’s contribution is primarily descriptive, it also has various potential normative implications as well. Among other things, it reveals potentially troubling cross-state variation in the regulation of insurance discrimination. For instance, twenty-one jurisdictions permit using gender in life insurance compared with twenty jurisdictions that strongly limit it; one state, North Carolina, goes as far as to prohibit it. And, as was mentioned above, state laws are also inconsistent about seemingly settled questions, such as the use of race, national origin, and religion. Yet, one would expect to see all states following roughly the same normative commitment. Discrimination is such a loaded and litigated concept in the U.S., as reflected in various landmark Supreme Court cases and federal antidiscrimination laws, that one would expect to see all states striking the balance between permissive classification and prohibited discrimination at roughly the same point. But they don’t. Perhaps this suggests that a federal legal response may in some cases be called for. Or, alternatively, perhaps it suggests that norms are doing some of the work that state insurance anti-discrimination statutes are not—especially in such areas as race, ethnicity, and religion. 

The Article proceeds as follows. Part I describes the various factors we extracted from the voluminous literature on discrimination. This literature review is the first to systematically integrate scholarship published in insurance economics journals with the insights of legal academics. It distills from these literatures twelve different factors that may shape the normative case for laws restricting insurers’ capacity to discriminate among different policyholders. Part II presents our empirical results, documenting fifty-one anti-discrimination insurance law regimes with respect to nine different characteristics (race, ethnicity, religion, gender, age, credit score, sexual orientation, genetic endowment and zip code) in five difference insurance lines (life, health, homeowners, automobile and disability). Finally, Part III attempts to explain cross-line and cross-characteristic variations using the factors we identified in Part I.

Trams

It's interesting to watch responses to the Victorian student-led initiative for 'tramsurance', promoted as letting "you fare protest worry free".

It appears that the idea was that people who were worried about penalties for evading fares on Melbourne public transport - particularly those lovely trams - would be able to contribute money ($19 per month) to an 'insurance' scheme, which would pay the fine for evaders who were caught by fare inspectors under the Transport (Compliance and Miscellaneous) Act 1983 (Vic).

One enthusiast claimed that "It's cheaper than buying tickets and has attracted around 1000 members since launching a couple of weeks ago". A proponent characterised the scheme as a fighting fund rather than insurance, with the comment "We will pay out all fines up to the limits of Tramsurance's income. Everyone has basically put money into a pool and then people claim their money out of it" and that "“We’re considering $19 per month. (But) to compare that, it’s $120 a month if you’re buying [the standard monthly ticket]”.

The state public transport authority (Public Transport Victoria) was unimpressed, arguing that the scheme was illegal because it incited consumers to break the law and that there were questions about whether the scheme could be made to work (eg would contributions be safeguarded and what would happen if the detection of a few evaders absorbed all of the contributions?).

There are arguably better ways to express discontent with ticket prices or the management of the public transport system than what seems to have initially promoted as an insurance scheme. One reason is that insurance in favour of an illegal act is in itself unviable. Australian law does not for example endorse insurance against loss of illegal drugs, failure of an assassination or an unsuccessful bank robbery. As a corollary it does not welcome insurance against imprisonment or fines imposed for criminal behaviour, eg if you are convicted for burglary you get to cash in at your insurer's expense.

Another reason is that the operation of insurance schemes and financial services schemes involves compliance with national law, notably the Insurance Act 1983 (Cth). It is highly unlikely that APRA, the national regulator, is going to be enthusiastic about a scheme that centres on illegality and would be persuasively claimed by the Victorian Government as contrary to the public interest. There is no indication that the students have the expertise required for compliance with regulatory requirements for offering an 'insurance product' or more fundamentally that they would satisfy the capital requirements regarding insurance. The likelihood of gaining a licence under the Financial Services Reform Act 2001 (Cth) for Tramsurance as a financial service is equally dim. The Dario Fo financial model, however well-meant and irrespective of whether it was promoted at an entrepreneurship event, simply won't fly.

Tramsurance initially put on a brave face after receiving a 'cease & desist' letter from Public Transport Victoria. It stated that -

we're coming against some very strongly worded letters. Never fear - it'll take more than words to stop us. There is too much momentum and support behind us now. All we have at this stage is an idea, an idea that has become very popular very quickly for one reason. The Melbourne public is dissatisfied with with how public transport and Myki have been handled. Public Transport Victoria is threatening to litigate against us rather than address the concerns of those it represents.

We will not take down the site. That would be a little silly given that we haven't operated anything yet. Tramsurance started off as a simple experiment, but we can all agree that it's much more than that now. We are currently seeking legal advice to better understand the options open to us. Rest assured, the final version of Tramsurance will operate fully within the law. We will announce our decision tomorrow, when we are better informed. In the meantime, please don't fare evade. That's against the law.

The organisers subsequently released an Open Letter that states

Tramsurance started only as an idea. Most people I know evade the fares every now and then. Why? Some didn’t want to endorse a system that didn’t represent them, but most just couldn’t afford to. It’s cheaper for them to pay the occasional fine than to pay for the fares. I understood that mathematically at least, Tramsurance could exist.

It is not just an idea any more. We were not surprised at the support for Tramsurance, though we didn’t expect it to explode like it did. This indicates how poorly the transport system has served its users. There would be no demand for Tramsurance if we were satisfied with the public transport in Melbourne. Demand has, of course, been explosive.

To address Public Transport Victoria’s statement we’ve publicized, we have no intention of breaking the law. Nor have we ever. We do not advocate fare evasion, even of a system whose fares are unaffordable to the more vulnerable members of society. It’s against the law. Don’t do it. We’ve outlined with our idea a simple possibility, and with that the failure of our government to meet the needs of its people.

Public Transport Victoria claims we are encouraging fare evasion. We have said we do not, repeatedly. Whether the proposed fund would encourage it is moot, but all we have is the proposal. We have not facilitated any transactions or written any code to do so. We don’t plan to either. Tramsurance is an idea that has simply illustrated the failings of our public transport system. It’s reprehensible that the government would rather threaten two 19 year olds than address the concerns of those it is supposed to represent.

In May this year the PTV announced [PDF] that there had been a 16% increase in the number of tickets being checked, with 154,000 fines for ticketing offences (up 47% on the previous year) - "no longer a case of if you get caught, but rather when” - and "a substantial decrease in the tram fare evasion rate, down from 20.3 per cent in May 2011 to 13.3 per cent in May 2012".

Resurrection

Another 'fake death' insurance fraud for my collection, this time involving media reports that UK geek Hugo Sanchez has been convicted in the Oxford Crown Court after faking his own death and starting a new life in Australia, assisted by $2m insurance payouts.

Sanchez was a web developer with HMV. He is reported to have faked his death - this time a fatal heart attack in Ecuador, rather than the more usual drowning used by scammers such as John Stonehouse MP and canoeist John Darwin - with the assistance of his grieving widow Sophie (currently on parole after two years in custody for fraudulently claiming £115,000 of the money from HMV, life insurers and credit card companies in 2005 and 2006). Sanchez' body was supposedly cremated. He ended up with his children in Sydney, operating a tattoo parlour operator (firebombed twice, supposedly by bikies), before being extradited to the UK in March this year.

His fingerprints had inconveniently been found on his death certificate, he'd posthumously used his HMV discount card and members of his extended family had apparently questioned whether he was dead. The relocation of his children, and the fact that the family was in debt before he holidayed in Ecuador, may have alerted the insurance companies.

The London Daily Mail last year emoted that

Sanchez, 47, whose fingerprints were found on his own death certificate, had been surviving on takeaway chicken and chips under the alias of Hugo Sanchez. ...

When challenged about the alleged fraud, Sanchez said he was aware of reports in the UK claiming that he and his wife had defrauded an insurance company, but he issued a denial. ...

"I know, I know (about the article)", he said, adding "not true". He insisted his wife was not serving a jail sentence but was in England "visiting family" and would be back in Australia next year.

"Sophie is not in jail, she is with family, that’s all", he declared. Ecuador-born Sanchez shrugged when asked how he could have the same surname as the wanted man, look the same, share the same date of birth and have a wife with the same name, yet deny he was the fugitive.

"Excuse me, I am innocent until proven guilty", he said. "I have not done anything. If they want me, they can come and get me."

Apparently they did.

The Guardian eschewed the "takeaway chicken and chips" and OMG, reporting that -

The record company paid for [Sophie] to travel to South America from the couple's home in Farnham, Surrey, so she could attend his funeral. 

She provided a death and cremation certificate and received a death benefit payment of £112,000. She also began claiming on life insurance policies he had taken out and received a large sum of money as part of his pension package before fleeing the country. 

In April 2005, she returned to the UK in order to appoint a solicitor to obtain probate on the estate. She provided the firm with the death certificates and went on to complete claim forms in respect of the other insurance policies, some of which settled that year. 

But an insurance investigator appointed by the larger companies later established that friends and relatives believed Sanchez to be alive and well and living in Costa Rica. The remaining claims were refused. 

HMV wrote to the Sanchez family requesting return of their monies but did not receive a response and reported the matter to police in 2007.

Conviction of Sanchez is a reminder that Australian and UK courts have not embraced parapsychology, contrary to the enthusiasm of exponents of what has been dubbed 'quantum holism'. Don't blame the ghost or a visitor from another dimension if the deceased person's paw marks appear on the death certificate or the dead man and kids are seen tucking into takeaway chicken.

Out of mind, out of insurance

Mental health discrimination and insurance: a survey of consumer experiences [PDF], a 33 page report by the Mental Health Council of Australia, considers "the experiences of Australians living with mental illness when accessing insurance products and making claims against their policies". The news isn't good and is alas unlikely to get better.

The report is founded on a survey involving the mental health, insurance and financial services sectors, aimed at improving "life insurance and income protection outcomes for Australians experiencing mental illness".

In contrast to the flippant heading of this blog post, 'mental illness' does not exclusively mean what one of my less positive colleagues refers to as "baying" (at the moon or otherwise). It might involve short term or ongoing depression. The report reinforces past claims that Australians with experience of mental illness face substantial difficulties when seeking insurance products that are otherwise readily available to people without a history of mental illness but who might, for example, be grossly obese.

Survey respondents reported significant difficulty and discrimination when applying for insurance products, particularly life insurance and income protection products, and when making claims against their policies. Mental health consumers often face higher premiums and exclusions on their policies and in many cases are refused coverage outright. Moreover, survey respondents stressed that insurance companies did not take into consideration their personal circumstances and instead made broad assumptions about their ability to maintain employment and their general level of function, and this in turn had negative implications for their application or claim.

Survey respondents revealed a lack of awareness of their rights and responsibilities in relation to insurance applications, including their duty of disclosure, or their right to appeal a decision. Moreover, the matter-of-fact nature of some sales, underwriting and/or call centre staff in obtaining information about suicide attempts and/or ideation, for instance, was viewed as humiliating, embarrassing or undignified.

Given that one in five Australians will be affected by mental illness in any twelve month period, and one in two will be affected across the span of a lifetime, it is of great concern that Australians living with mental illness are still not able to access or maintain insurance policies at the same rate as other Australians.

The authors comment that -

The results of this survey highlight the work that still needs to done in educating not only the insurance and financial sector workforce, but all Australians about the real-world experiences of mental illness, to break down the stigma and stereotypes that are so frequently applied to mental health consumers, and to minimise the disadvantage they experience as a result of misinformation and misconception. Moreover, considerable work needs to be done to increase knowledge and awareness of the insurance and financial services industries, how they work, and what products are better suited to people with mental health conditions etc., amongst Australians living with mental illness. This publication recommends that the mental health and broad ranging insurance, financial and superannuation sectors continue to work towards better understanding and addressing these gaps.

They note that -

Being proactive and seeking treatment was experienced as a disadvantage for consumers who applied for insurance. Consumers who had sought treatment experienced higher premiums and exclusions, which were viewed as unfair.

and that

Participants also believed that insurers encouraged self-exclusion by trying to wear people down on purpose so they would just give up; this was specifically mentioned with regard to the claims process. Not being granted insurance or having to endure lengthy claims processes and just general day-to-day dealings with insurers were often described as having a significant impact on the person’s life. This was experienced in terms of the impact on the respondent’s mental health but also, as in the aforementioned example, in terms of financial strain and stress, and the flow on effects. In this way, some respondents drew on the significant impacts of the incompatibility of mental illness and insurance that were seen to perpetuate a cycle of exclusion. Many respondents mentioned their gratitude at being given a voice on this issue, suggesting that they had been excluded from having a voice about this in the past.