tag:theconversation.com,2011:/au/topics/insurance-sector-40632/articlesInsurance sector – The Conversation2021-12-05T19:09:58Ztag:theconversation.com,2011:article/1688362021-12-05T19:09:58Z2021-12-05T19:09:58ZIs your neighbourhood underinsured? Search our map to find out<figure><img src="https://images.theconversation.com/files/433658/original/file-20211124-21-5gmyeq.png?ixlib=rb-1.1.0&rect=752%2C0%2C1752%2C1120&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Mapbox/The Conversation</span>, <a class="license" href="http://creativecommons.org/licenses/by-nd/4.0/">CC BY-ND</a></span></figcaption></figure><p>Underinsurance is more common than <a href="https://www.abc.net.au/everyday/insurance-how-to-prepare-for-floods-fires-and-other-disasters/100581978">many</a> realise. And if you live in an area where most people don’t have enough home and/or contents insurance, the financial and social catastrophe that follows a disaster can be community-wide. </p>
<p>Even if you’re well covered, your neighbourhood may struggle long after the dust has settled, as houses lie derelict, people struggle to bounce back and social cohesion frays.</p>
<p>So, do you live in one of these “pockets of underinsurance”? </p>
<p>Search our interactive map below by <strong>suburb name</strong> or by <strong>postcode</strong> to find out:</p>
<p><iframe id="tc-infographic-611" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/611/d55046490d81e98ad005b744a24f95b3f38812b5/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The map is based on data reported in our <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">study</a> published in the journal <a href="https://journals.sagepub.com/home/epn">Environment and Planning A: Economy and Space</a>. </p>
<p>Suburb-by-suburb data on actual rates of underinsurance doesn’t exist (yet). But we combined data from the 2015 Australian Survey of Social Attitudes (AuSSA) and the Australian Bureau of Statistics to map predicted rates of underinsurance for each suburb in Australia.</p>
<p>In other words, the map shows whether you live in an area where underinsurance is likely to be more prevalent. </p>
<p>The darker the red, the more likely it is many in your neighbourhood do not have enough house and/or contents insurance.</p>
<p>Underinsurance can compound disadvantage. This dynamic is expected to worsen as home ownership drives more people into long-term renting and climate change makes disasters and extreme weather events more frequent – and more severe.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">Insurance is unaffordable for some, but it's middle Australia that is underinsured</a>
</strong>
</em>
</p>
<hr>
<h2>Renters often don’t have contents insurance</h2>
<p>The data show that a poorer suburb with a high rate of rental properties will likely be the most underinsured. But, perhaps counter-intuitively, some wealthier suburbs are showing up as likely having high rates of underinsurance.</p>
<p>That’s because it is housing tenure (whether someone owns or rents) that contributes most significantly to the patterns seen in the map. </p>
<p>Areas with <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">high levels of renting</a> are more likely to be a “pocket of underinsurance” because while a landlord may buy home insurance, renters often don’t have contents insurance. In fact, around 40% of renting households <a href="https://www.sciencedirect.com/science/article/pii/S0016718519302155">don’t have insurance</a>. </p>
<p>Many suburbs mapped as having higher rates of underinsurance have a high proportion of rental properties. This includes wealthier suburbs. </p>
<p>In fact, poorer suburbs with high rates of home ownership are more likely to appear as adequately insured. </p>
<p>For example, zooming in on the municipalities of Hobart and Glenorchy in Tasmania, reveals the more well-heeled Hobart area contains significant areas of underinsurance, similar to that in the more disadvantaged Glenorchy. </p>
<p><iframe id="tc-infographic-619" class="tc-infographic" height="400px" src="https://cdn.theconversation.com/infographics/619/a2a3f720efb57b9dbe72e9c51b21d7921d6c98c9/site/index.html" width="100%" style="border: none" frameborder="0"></iframe></p>
<p>The take home message is that while income remains a significant indicator of underinsurance risk, renters (both poor or rich) are much more likely to be underinsured than home owners due to a lack of contents insurance.</p>
<h2>What’s driving these trends?</h2>
<p>As property values have climbed, many Australians have been priced out of home ownership and driven into <a href="https://www.aihw.gov.au/reports/australias-welfare/home-ownership-and-housing-tenure#:%7E:text=32%25%20(2.6%20million%20households)%20were%20renters%3B%20where%20landlord,state%20or%20territory%20housing%20authorities">long-term renting</a>. And as rents go up, more of the household budget is spent on rental payments. When households are under financial stress, they are <a href="https://melbourneinstitute.unimelb.edu.au/publications/research-insights/search/result?paper=3769030">more likely to drop insurance</a>. </p>
<p>The end result is a lot of renters don’t have contents insurance.</p>
<p>Climate-exacerbated disasters are also driving changes in the affordability and availability of house and/or contents insurance.</p>
<p>Together, these trends in housing, renting, climate change and insurance could potentially create new pockets of entrenched disadvantage. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A city is flooded" src="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/433342/original/file-20211123-23-vbpspz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">A lot of renters don’t have contents insurance.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>I’m well insured, so how does this affect me?</h2>
<p>Without sufficient home and/or contents insurance, both renters and homeowners can struggle to recover from a disaster. </p>
<p>Repairs or rebuilds may be delayed (or too expensive) for homeowners and landlords. Renters may be unable to replace their stuff, or face eviction from a damaged property, and <a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">possible homelessness</a>. </p>
<p>In a disaster like a massive bushfire, demand for emergency housing skyrockets. So even if a household can afford insurance and alternative accommodation, demand for housing may outpace supply.</p>
<p>An area dominated by damaged and uninhabitable properties can lose a sense of community. Those who are well insured may find rebuilding in an otherwise derelict area can be tough. </p>
<p>In contributing to homelessness and a loss of community, underinsurance can lead to loss of social connections and cohesion. It can fragment the collective responses so important for recovery. </p>
<p>In other words, people <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">struggle to bounce back</a>. Some may never get back on their feet.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1460718570934087690"}"></div></p>
<h2>What needs to be done?</h2>
<p>There are many different types of insurance aimed at building individual and collective capacity to recover after disaster.</p>
<p>Some of these, like Flood Re in the United Kingdom and the National Flood Insurance Program in the United States, use the market to set premium prices and <a href="https://www.tandfonline.com/doi/full/10.1080/03085147.2018.1547494">manage risk</a>. The idea is if insurance prices are set according to a particular area’s level of risk, this will encourage people to take action to reduce their risk. </p>
<p>Others, for example in Europe, focus on enabling the <a href="https://www.sciencedirect.com/science/article/pii/S2212096314000072">collective good</a> through insurance affordability and availability. These approaches, which aim to make insurance an option for everyone, better reflect the collective predicament underinsurance represents. </p>
<p>If Australia is to build resilience, then our dependence of individual insurance policies must end. Governments must shift their efforts to equitable, social insurance schemes. </p>
<p><hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/underinsurance-is-entrenching-poverty-as-the-vulnerable-are-hit-hardest-by-disasters-152083">Underinsurance is entrenching poverty as the vulnerable are hit hardest by disasters</a>
</strong>
</em>
</p>
<hr>
</p><img src="https://counter.theconversation.com/content/168836/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Isabel Booth receives funding from the Australian Research Council (DP170100096). She is a member of the Planning Institute of Australia and the Institute of Australian Geographers, and contributes to the activist platform, Just Collapse. </span></em></p>Even if you’re well covered, your area may struggle long after a disaster if most locals don’t have enough home and/or contents insurance. Search our map by postcode or suburb name to check your area.Kate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1570572021-03-17T18:56:46Z2021-03-17T18:56:46ZFederal Court rules insurance companies have to behave decently. That’s a big deal<figure><img src="https://images.theconversation.com/files/389711/original/file-20210315-21-jspegn.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C2400%2C1695&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>It almost reads like a John Grisham novel. </p>
<p>Self-employed woman contracts cancer. Claims under her income-protection insurance policy. Insurer cancels the policy after investigation reveals omission of unrelated health condition (depression) on her original application. She is accused of acting in bad faith and threatened with having to repay the money (A$24,000) already received. Her story comes to national attention. A dramatic court battle ensues. Justice is finally served.</p>
<p>Last week just such a narrative concluded in the Federal Court, when chief justice <a href="https://www.fedcourt.gov.au/about/judges/current-judges-appointment/current-judges/allsop-cj">James Allsop</a> found TAL Life, one of Australia’s biggest life insurers, had breached its duty to act with “<a href="https://asic.gov.au/about-asic/news-centre/find-a-media-release/2021-releases/21-042mr-court-finds-that-tal-life-limited-breached-its-duty-of-utmost-good-faith-royal-commission-referral/">utmost good faith</a>” by cancelling a sick woman’s income-protection policy through the questionable practice of “retrospective underwriting”. </p>
<p>The Federal Court case was initiated by the Australian Securities and Investments Commission in December 2019. This followed evidence from the banking royal commission in 2018 showing the lengths TAL went to in seeking to void insurance policies. </p>
<p>Justice Allsop ruled TAL’s actions – including not informing the claimant she was under investigation, reaching a wrong conclusion, failing to give her a chance to respond, and threatening to pursue her for money – lacked “<a href="https://www.insurancenews.com.au/life-insurance/court-rules-tal-breached-duty-of-utmost-good-faith-in-handling-ip-claim">decency and fairness</a>”.</p>
<p>However, he did not agree with the corporate regulator that TAL’s actions amounted to false or misleading conduct. Guilt on that charge would have meant a fine. </p>
<p>The ruling carries no financial penalty, apart from TAL having to keep its end of the contract. The judgment is nonetheless significant. It puts insurance companies on notice about the use of retrospective underwriting, scrutinising insurance applications only when a claim is made, and covertly trawling through applicants’ medical and financial records to find any excuse to void the policy.</p>
<h2>What is underwriting</h2>
<p>Let’s briefly recap what insurance underwriting means. </p>
<p>It is the process of assessing an applicant’s risk and pricing a life insurance policy (which includes a policy such as income protection) accordingly. </p>
<p>If you have, for example, a history of hypertension, you have a higher risk of stroke. This is something an underwriter wants to know, to accurately assess your actuarial risk. They may increase the premium you pay, or exclude from the policy claims for strokes, or decline cover altogether.</p>
<p>Insurance application forms typically require you to declare “yes” or “no” to a list of the most common medical conditions or circumstances, with an open-ended question about other “relevant” conditions. </p>
<p>Usually the underwriting process is straightforward. Insurers accept declarations in good faith, and approve applications (and collect the premiums) as quickly as possible. </p>
<figure class="align-center ">
<img alt="Rubber-stamping documents does not happen literally, of course, but it is a powerful visual metaphor for the process of approving an application with insufficient due diligence." src="https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=399&fit=crop&dpr=1 600w, https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=399&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=399&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/390048/original/file-20210317-23-l72c5s.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Rubber-stamping documents does not happen literally, of course, but it is a powerful visual metaphor for the process of approving an application with insufficient due diligence.</span>
<span class="attribution"><span class="source">Shutterstock</span></span>
</figcaption>
</figure>
<h2>Retrospective underwriting</h2>
<p>But that changes when you make a claim.</p>
<p>Then insurers are unwilling to accept anything in good faith. They typically require you to authorise access to your financial and medical records, including records you may not have seen – such as your doctor’s notes. </p>
<p>A doctor might note observations about a patient seeming depressed. It’s not an explicit diagnosis. But an insurer may retrospectively consider this undisclosed evidence of “depression”.</p>
<p>Finding “relevant” information not declared in the original application gives the insurer an excuse to “retrospectively underwrite” the policy – determining what policy it would have offered (if at all) had that information been known. </p>
<p>Retrospective underwriting usually favours insurers as it is done with the knowledge of an existing claim. The federal <a href="https://www.legislation.gov.au/Details/C2019C00115">Insurance Contracts Act</a> allows insurers, under certain conditions, to cancel policies within three years of inception due to relevant non-disclosures or misrepresentations in applications.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/very-risky-business-the-pros-and-cons-of-insurance-companies-embracing-artificial-intelligence-106536">Very risky business: the pros and cons of insurance companies embracing artificial intelligence</a>
</strong>
</em>
</p>
<hr>
<h2>TAL at the royal commission</h2>
<p>Appearing before the banking royal commission in September 2018, TAL senior executive Loraine van Eeden <a href="https://financialservices.royalcommission.gov.au/public-hearings/Documents/transcripts-2018/transcript-14-september-2018.pdf">agreed</a> the company’s approach had lacked empathy. She acknowledged it was wrong to not tell the claimant she was being investigated, and wrong to not give her a chance to respond to the reason for the retrospective underwriting.</p>
<p>TAL had approved the woman’s income protection insurance in October 2013, asking detailed medical questions, including those of mental health. In mid-December she was diagnosed with cervical cancer. She lodged her policy claim on January 3 2014.</p>
<p>TAL accepted the claim on 7 January and made monthly payments until May. In June it cancelled the policy, on the basis her medical records revealed undisclosed mental health issues it said would have changed the initial underwriting. Perhaps, one suspects, not offer cover. TAL did not suggest she was dishonest.</p>
<h2>Practical implications</h2>
<p>In our experiences it is not unusual for insurers to use a claims process to retrospectively underwrite. Often claimants only become aware of this when they’re told there is information giving the insurer the right to cancel the policy. </p>
<p>Under the life insurance industry’s voluntary <a href="https://fsc.org.au/resources/1695-life-insurance-code-of-practice-with-appendix">Code of Practice</a>, insurers are meant to explain why they’re requesting information relevant to a claim.</p>
<p>The corporate regulator and consumer advocates have long held <a href="https://financialservices.royalcommission.gov.au/Submissions/Documents/Round-6-written-submissions/POL.9006.0001.0192.pdf">concerns</a> the three-year window to cancel policies encourages insurers to go on “fishing expeditions”.</p>
<h2>No more spying</h2>
<p>Since January 1 the rules giving insurers three years to cancel a policy have been tightened – one of the <a href="https://www.theguardian.com/australia-news/2021/jan/19/banking-royal-commission-most-recommendations-have-been-abandoned-or-delayed">27 of 76 recommendations</a> from the banking royal commission the federal government has implemented. </p>
<p>Insurers now may only “avoid a contract of life insurance on the basis of non-disclosure or misrepresentation if it can show that it would not have entered into a contract on any terms”.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/ideology-triumphs-over-evidence-morrison-government-drops-the-ball-on-banking-reform-153529">Ideology triumphs over evidence: Morrison government drops the ball on banking reform</a>
</strong>
</em>
</p>
<hr>
<p>The Federal Court ruling puts life insurers on further notice. It clarifies what the “duty of utmost good faith” required by the Insurance Contracts Act means.</p>
<p>They don’t need to behave dishonestly to breach that duty. Not meeting community expectations of decency and fairness is enough. That doesn’t leave much room for lesser signs of excessive suspicion, let alone “deep-dive” operations to dig for dirt. That’s all but been declared illegal.</p><img src="https://counter.theconversation.com/content/157057/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Dr Benjamin Koh was the chief medical officer and whistleblower at Comminsure, the life insurance division of the Commonwealth Bank. He has contributed to the parliamentary inquiries into whistle-blowing protections and life insurance. He has also assisted financial advisors and insureds in claims dispute resolutions and is currently on a short paralegal contract with Maurice Blackburn Lawyers, but not in its insurance division.
This article was cowritten by Liam Hanlon who is a lawyer working in Maurice Blackburn’s superannuation and insurance practice. He acts on behalf of claimants in total and permanent disablement, income protection and general insurance claims and litigation, as well as on behalf of consumers in financial advice disputes.
Liam Hanlon does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article beyond his role at Maurice Blackburn Lawyers. He is a member of the Australian Lawyers Alliance.
</span></em></p>The Federal Court has all but made it illegal for insurance companies to dig for dirt and exploit the practice of retrospective underwriting.Benjamin Koh, Honorary Associate, Faculty of Business, School of Management, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1520832021-02-04T01:59:13Z2021-02-04T01:59:13ZUnderinsurance is entrenching poverty as the vulnerable are hit hardest by disasters<p>More than 70 homes were <a href="https://www.theguardian.com/australia-news/2021/feb/02/fierce-bushfire-in-perth-hills-is-a-threat-to-lives-and-homes-warns-wa-premier">destroyed by bushfires</a> in Western Australia this week, leaving those affected facing enormous costs. After disasters like these, insurance is not always there as needed — or as expected. </p>
<p>In Australia, <a href="https://www.sbs.com.au/news/one-in-eight-australian-adults-one-in-six-kids-are-living-in-poverty">where one in six children live in poverty</a>, significant rates of underinsurance entrench disadvantage and hardship. This dynamic will worsen as the consequences of <a href="https://www.bbc.com/news/science-environment-55147647">unmitigated climate change</a> unfold. </p>
<p><a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">Up to 10% of homeowners</a> or mortgagees are without home insurance and about <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">40% of renters</a> are without contents insurance. Underinsurance can make a bad situation worse, and make it harder <a href="https://onlinelibrary.wiley.com/doi/10.1111/1745-5871.12451">to get back to normal after a disaster</a>. </p>
<p>Our national research suggests simply telling people to get <a href="https://journals.sagepub.com/doi/full/10.1177/0042098017736257">more insurance is not necessarily the answer</a>. To understand that, we need ask <em>why</em> people are underinsured.</p>
<h2>Why are so many underinsured?</h2>
<p>A lot of underinsurance is by accident rather than design. After being burnt out by Victoria’s Black Saturday bushfires in 2009, one of our interviewees, Bridget*, told us: </p>
<blockquote>
<p>You think okay, this is what I paid for the property […] I reckon I could rebuild it for X […] I think we had about A$550,000 on the house, and the contents was maybe $120,000 […] You think sure, yeah I can rebuild my life with that much money. But nowhere near. Not even close. We wound up with a $700,000 mortgage at the end of rebuilding.</p>
</blockquote>
<p>It is hard for people to <a href="https://www.tandfonline.com/doi/full/10.1080/00049182.2019.1691436">accurately calculate repair or rebuild costs</a>. Risks are uncertain, insurers have their own complex rules, and <a href="https://understandinsurance.com.au/calculator/building-calculator">online calculators come with their own fine print</a>. </p>
<p>Renters are at risk of underinsurance as they tend to <a href="https://journals.sagepub.com/doi/full/10.1177/0308518X19879165">forego contents insurance</a>, though the building itself will probably be insured by the landlord. </p>
<p>Following the Hobart floods in 2018, one of our interviewees, John, was without contents insurance when his rented home was flooded. He told us:</p>
<blockquote>
<p>We were wondering about temporary accommodation, whether they would put us up until we found a new place to live […] They said that that was under contents insurance, which was our responsibility, and the house insurance just covers the house.</p>
</blockquote>
<h2>Lack of trust</h2>
<p>If you are on a lower income, you are more likely to be underinsured. Sandra, who lives in a bushfire-prone area, described to us her <a href="https://www.sciencedirect.com/science/article/pii/S0016718515302207">decision-making when buying insurance on a limited budget</a> by saying:</p>
<blockquote>
<p>The contents is insured to $20,000 … We’ve got a lot of irreplaceable stuff here … and a lot of equipment of value … the value is going to be far more than that. But I just hope that we’d have like a small kitty that would be like $20,000. I figured would be enough to replace just the essential items.</p>
</blockquote>
<p>Rosalie and her family live <a href="https://journals.sagepub.com/doi/full/10.1177/2514848620921859">without any house and contents insurance</a>, and illustrate another reason for underinsurance:</p>
<blockquote>
<p>Just the way they (insurers) word things […] they’re trying to make sure they exclude certain things, and while we sort of fall within the parameters of what’s included, I have a feeling that they’ll go, ‘oh no, you’ve got a dingle on your dangle and it’s just not included’.</p>
</blockquote>
<p>A <a href="https://www.sciencedirect.com/science/article/pii/S0016718519302155">lack of trust in insurers</a> may be based on previous experience of an insurance claim not coming through as expected, or in political perspectives questioning the power of large corporations. </p>
<h2>More insurance is not a straightforward solution</h2>
<p>More insurance may help renters and home owners. But to decide <em>how much more</em>, you need access to accurate rebuild or valuation costs. Accessing, understanding and keeping up to date with complex knowledge about risk and construction is beyond the capacities of many who already live busy lives. And to make decisions about contents insurance, renters need capacity and time to understand the risks of being an underinsured renter.</p>
<p>Simply encouraging people to get more insurance doesn’t help people like Sandra, who are on a limited budget, nor will it address distrust of insurers. </p>
<p>Instead of telling people to buy more of the right type of insurance, we should be asking how insurance can work better for people. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/insurance-is-unaffordable-for-some-but-its-middle-australia-that-is-underinsured-105662">Insurance is unaffordable for some, but it's middle Australia that is underinsured</a>
</strong>
</em>
</p>
<hr>
<h2>Making insurance work</h2>
<p>Insurance spreads costs and risks across populations; it recognises shared interests can create shared benefits. Maintaining the public benefit of insurance includes making it more equitable through government regulation and consumer demand.</p>
<p>Insurance should remain about the equitable distribution of costs and risks so everyone has a safety net if disaster strikes. </p>
<p>We must resist the trend towards <a href="https://www.investopedia.com/terms/i/insurtech.asp">insurance products that are tailored</a> in response to individual characteristics and risks. This individualisation favours those with higher incomes and lower levels of risk, and marginalises disadvantaged populations living with higher risk. In other words, it puts insurance out of reach for those most likely to need it.</p>
<p>Governments should not view insurance as <em>the</em> key disaster recovery tool, and must not rely on individuals to manage their own risks with insurance. </p>
<p><a href="https://knowledge.aidr.org.au/resources/ajem-october-2020-why-insurance-matters-insights-from-research-post-disaster/">Insurance is only one tool</a> in disaster preparedness and recovery. Others — including building code reform, effective land-use planning, and a well-funded social safety net — require strong government leadership. </p>
<p>In a changing climate, governments must recognise we are all in this together. Telling people “Well, you should have been insured” when there are so many reasons why someone might be underinsured is unhelpful, unfair, divisive and allows governments to shirk their responsibilities toward all citizens.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/a-crisis-of-underinsurance-threatens-to-scar-rural-australia-permanently-129343">A crisis of underinsurance threatens to scar rural Australia permanently</a>
</strong>
</em>
</p>
<hr>
<p><em>* All names have been changed to protect identities.</em></p>
<p><em>This story is part of a series The Conversation is running on the nexus between disaster, disadvantage and resilience. It is supported by a philanthropic grant from the Paul Ramsay foundation. You can read the rest of the stories <a href="https://theconversation.com/au/topics/disaster-and-resilience-series-97537">here</a>.</em></p><img src="https://counter.theconversation.com/content/152083/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kate Isabel Booth has received funding from the Australian Research Council for the research reported in this article. She is a member of the Planning Institute of Australia and the Institute of Australian Geographers.
</span></em></p><p class="fine-print"><em><span>Chloe Lucas received funding from the Australian Research Council for the research reported in this article. She is a member of the Institute of Australian Geographers and the International Environment Communication Association.</span></em></p><p class="fine-print"><em><span>Christine Eriksen received funding from the Australian Research Council for the research reported in this article. She is affiliated with the Center for Security Studies at ETH Zürich and a fellow of the Royal Geographical Society with the Institute of British Geographers. </span></em></p>Instead of telling people to buy more of the right type of insurance, we should be asking how insurance can work better for people.Kate Booth, Senior Lecturer in Human Geography and Planning, University of TasmaniaChloe Lucas, Research Fellow, Geography, Planning, and Spatial Sciences, University of TasmaniaChristine Eriksen, Senior Researcher, Swiss Federal Institute of Technology ZurichLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1290682020-01-15T19:08:18Z2020-01-15T19:08:18ZDon’t die wondering: apps may soon be able to predict your life expectancy, but do you want to know?<figure><img src="https://images.theconversation.com/files/310160/original/file-20200115-151844-1ole8rh.jpg?ixlib=rb-1.1.0&rect=46%2C23%2C3833%2C2681&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Monaco and Japan have some of the highest life expectancies in the world. But calculating an individual's life expectancy will require taking data analysis several steps further.</span> <span class="attribution"><span class="source">SHUTTERSTOCK</span></span></figcaption></figure><p><em>When will I die?</em></p>
<p>This question has endured across cultures and civilisations. It has given rise to a plethora of religions and spiritual paths over thousands of years, and more recently, <a href="https://apps.apple.com/us/app/when-will-i-die/id1236569653">some highly amusing apps</a>. </p>
<p>But this question now prompts a different response, as technology slowly brings us closer to accurately predicting the answer. </p>
<p>Predicting the lifespan of people, or their “Personal Life Expectancy” (PLE) would greatly alter our lives. </p>
<p>On one hand, it may have benefits for policy making, and help optimise an individual’s health, or the services they receive. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/were-not-just-living-for-longer-were-staying-healthier-for-longer-too-118588">We're not just living for longer – we're staying healthier for longer, too</a>
</strong>
</em>
</p>
<hr>
<p>But the potential misuse of this information by the government or private sector poses major risks to our rights and privacy.</p>
<p>Although generating an accurate life expectancy is currently difficult, due to the complexity of factors underpinning lifespan, emerging technologies could make this a reality in the future.</p>
<h2>How do you calculate life expectancy?</h2>
<p>Predicting life expectancy is not a new concept. <a href="http://www.bbc.com/travel/story/20170807-living-in-places-where-people-live-the-longest">Experts do this</a> at a population level by classifying people into groups, often based on region or ethnicity. </p>
<p>Also, tools such as <a href="https://www.nature.com/articles/s41598-018-23534-9">deep learning</a> and <a href="https://mipt.ru/english/news/scientists_use_ai_to_predict_biological_age_based_on_smartphone_and_wearables_data">artificial intelligence</a> can be used to consider complex variables, such as biomedical data, to predict someone’s biological age. </p>
<p>Biological age refers to how “old” their body is, rather than when they were born. A 30-year-old who smokes heavily may have a biological age closer to 40.</p>
<p><a href="https://www.mdpi.com/2227-7080/6/3/74/htm">Calculating a life expectancy reliably</a> would require a sophisticated system that considers a breadth of environmental, geographic, genetic and lifestyle factors – <a href="https://www1.health.gov.au/internet/publications/publishing.nsf/Content/oatsih-hpf-2012-toc%7Etier1%7Elife-exp-wellb%7E119">all of which have influence</a>.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=389&fit=crop&dpr=1 600w, https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=389&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=389&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=489&fit=crop&dpr=1 754w, https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=489&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/310166/original/file-20200115-151848-pc2cam.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=489&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The use of devices such as fitness trackers will become crucial in predicting personal life expectancy in the future.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-vector/healthy-lady-run-away-angel-death-329261456">Shutterstock</a></span>
</figcaption>
</figure>
<p>With <a href="https://builtin.com/artificial-intelligence/machine-learning-healthcare">machine learning</a> and artificial intelligence, it’s becoming feasible to analyse larger quantities of data. The use of deep learning and cognitive computing, such as with <a href="https://www.ibm.com/watson-health">IBM Watson</a>, helps doctors make more accurate diagnoses than using human judgement alone. </p>
<p>This, coupled with <a href="https://www.cio.com/article/3273114/what-is-predictive-analytics-transforming-data-into-future-insights.html">predictive analytics</a> and increasing computational power, means we may soon have systems, or even apps, that can calculate life expectancy.</p>
<h2>There’s an app for that</h2>
<p>Much like <a href="https://www.mdanderson.org/for-physicians/clinical-tools-resources/clinical-calculators.html">existing tools</a> that predict cancer survival rates, in the coming years we may see apps attempting to analyse data to predict life expectancy.</p>
<p>However, they will not be able to provide a “death date”, or even a year of death.</p>
<p>Human behaviour and activities are so unpredictable, it’s almost impossible to measure, classify and predict lifespan. A personal life expectancy, even a carefully calculated one, would only provide a “natural life expectancy” based on generic data optimised with personal data.</p>
<p>The key to accuracy would be the quality and quantity of data available. Much of this would be taken directly from the user, including gender, age, weight, height and ethnicity.</p>
<p>Access to real-time sensor data through fitness trackers and smart watches could also monitor activity levels, heart rate and blood pressure. This could then be coupled with lifestyle information such as occupation, socioeconomic status, exercise, diet and family medical history. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/your-local-train-station-can-predict-health-and-death-54946">Your local train station can predict health and death</a>
</strong>
</em>
</p>
<hr>
<p>All of the above could be used to classify an individual into a generic group to calculate life expectancy. This result would then be refined over time through the analysis of personal data, updating a user’s life expectancy and letting them monitor it.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=176&fit=crop&dpr=1 600w, https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=176&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=176&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=221&fit=crop&dpr=1 754w, https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=221&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/308303/original/file-20191230-11891-nswi58.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=221&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">This figure shows how an individual’s life expectancy might change between two points in time (F and H) following a lifestyle improvement, such as weight loss.</span>
</figcaption>
</figure>
<h2>Two sides of a coin</h2>
<p>Life expectancy predictions have the potential to be beneficial to individuals, health service providers and governments.</p>
<p>For instance, they would make people more aware of their general health, and its improvement or deterioration over time. This may motivate them to make healthier lifestyle choices.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/faster-more-accurate-diagnoses-healthcare-applications-of-ai-research-114000">Faster, more accurate diagnoses: Healthcare applications of AI research</a>
</strong>
</em>
</p>
<hr>
<p>They could also be used by insurance companies to provide individualised services, such as how some car insurance companies use <a href="https://www.theguardian.com/money/2017/dec/16/motoring-myths-black-boxes-telematics-insurance">black-box technology</a> to reduce premiums for more cautious drivers.</p>
<p>Governments may be able to use predictions to more efficiently allocate limited resources, such as social welfare assistance and health care funding, to individuals and areas of greater need.</p>
<p>That said, there’s a likely downside. </p>
<p>People <a href="https://www.theatlantic.com/health/archive/2017/11/the-existential-slap/544790/">may become distressed</a> if their life expectancy is unexpectedly low, or at the thought of having one at all. This raises concerns about how such predictions could impact those who experience or are at risk of mental health problems. </p>
<p>Having people’s detailed health data could also let insurance companies more accurately profile applicants, <a href="https://www.abc.net.au/news/2019-07-08/fitness-tracker-used-to-set-health-insurance-premiums/11287126">leading to discrimination against groups or individuals</a>. </p>
<p>Also, pharmaceutical companies could coordinate targeted medical campaigns based on people’s life expectancy. And governments could choose to tax individuals differently, or restrict services for certain people.</p>
<h2>When will it happen?</h2>
<p>Scientists have been working on ways to <a href="https://towardsdatascience.com/what-really-drives-higher-life-expectancy-e1c1ec22f6e1">predict human life expectancy</a> for many years. </p>
<p>The solution would require input from specialists including demographers, health scientists, data scientists, IT specialists, programmers, medical professionals and statisticians.</p>
<p>While the collection of enough data will be challenging, we can likely expect to see advances in this area in the coming years.</p>
<p>If so, issues related to data compliance, as well and collaboration with government and state agencies will need to be carefully managed. Any system predicting life expectancy would handle highly sensitive data, raising ethical and privacy concerns.</p>
<p>It would also attract cybercriminals, and various other security threats.</p>
<p>Moving forward, the words of Jurassic Park’s Dr Ian Malcolm spring to mind:</p>
<blockquote>
<p>Your scientists were so preoccupied with whether or not they could, they didn’t stop to think if they should.</p>
</blockquote><img src="https://counter.theconversation.com/content/129068/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Predicting life expectancy remains in the realm of science fiction, but it may soon be possible. Are we prepared for such information? And who else would benefit from this knowledge?James Jin Kang, Lecturer, Edith Cowan UniversityPaul Haskell-Dowland, Associate Dean (Computing and Security), Edith Cowan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1219482019-11-17T05:30:38Z2019-11-17T05:30:38ZFinancial services need to wake up to fact that treating customers well is good business<figure><img src="https://images.theconversation.com/files/295600/original/file-20191004-118252-1g90i81.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption"></span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>South Africa’s regulatory regime for the financial services sector is going through major changes. The question is whether companies can adapt to a principles-based approach. Or will they default back to rules-based compliance during the implementation of the <a href="https://www.moonstone.co.za/cofi-bill-aims-to-strengthen-regulation-customer-treatment-and-general-market-conduct/">Conduct of Financial Institutions Act</a>? The aim of the new law is to improve financial sector conduct and ensure fairer outcomes, particularly for customers.</p>
<p>There are strong arguments that a business that prioritises the values of good <a href="https://group30.org/images/uploads/publications/aaG30_Culture2018.pdf">conduct</a> will be rewarded with loyal <a href="https://customersguide.cgap.org/sites/customersguide.cgap.org/files/resource/2018/07/CGAP%20C-CGuide-FinalLowRes_Web.pdf">customers</a>. They, in turn, have a high degree of trust in the business, and are more likely to source products and services from it. There are also indications that more loyal customers are less concerned about marginal differences in the price of a product or service, when compared to those of <a href="https://www.researchgate.net/publication/306009341_Do_loyal_customers_really_pay_more_for_services">competitors</a>. </p>
<p>In a wider social context, the South African government has made it clear that it expects financial services companies to take seriously the idea of a <a href="https://heinonline.org/HOL/LandingPage?handle=hein.journals/tndl89&div=34&id=&page=">social contract</a>. And that this, is essentially, their licence to operate in the financial industry. </p>
<p>From the industry’s perspective this means that treating customers well and pursuing greater financial inclusion are a <a href="http://www.treasury.gov.za/public%20comments/FSR2014/Treating%20Customers%20Fairly%20in%20the%20Financial%20Sector%20Draft%20MCP%20Framework%20Amended%20Jan2015%20WithAp6.pdf">legal requirement</a>, as well as necessary to mitigate risk.</p>
<p>These developments reflect changed and changing expectations by wider society of the <a href="https://group30.org/images/uploads/publications/aaG30_Culture2018.pdf">role</a> financial service providers should play in contributing to South Africa’s future.</p>
<p>For all these reasons, compliance with new conduct standards should be regarded as an opportunity to embed <a href="https://group30.org/images/uploads/publications/aaG30_Culture2018.pdf">resilience</a>.</p>
<h2>Benefits</h2>
<p>But these kinds of changes are often met with anxiety. Rules-based compliance is straightforward. Principles-based systems are less clear. </p>
<p>In my view anxiety is unnecessary, as compliance with new conduct standards serves a practical purpose. </p>
<p>If done in conjunction with deep reflection, compliance will steer the business towards better conduct. Moreover, a principles-based approach allows for flexibility by eschewing a tick-a-box mentality, which leaves the firm at <a href="https://www.huffpost.com/entry/principlesbased-regulaton_b_7204110">risk</a>. In some entities, good conduct already runs deep in the organisation. What will change, even for them, is the introduction of a more structured framework, more finely targeted, and set against ideational principles, not prescriptive rules.</p>
<p>Put simply, the new conduct regime produces an unexpected additional benefit: through compliance with the principles of good conduct and the assurance of good consumer outcomes, firms may expect to gain greater resilience.</p>
<h2>Achieving authenticity</h2>
<p>In practical terms, compliance that is founded in ethics and integrity brings authenticity. </p>
<p>To achieve this, three issues should be addressed.</p>
<p>The role and perception of compliance: It is important that businesses understand that compliance is not the “business prevention department” but the “business sustainability department”. Put simply, compliance should be regarded as a protector of the business and its place in society. An excellent compliance department, operating in a principles-based regime, is the vector by which the business transmits good outcomes for customers in future. </p>
<p>Implementation: By structuring the business around core principles, the entire organisation is brought along, and helps strengthen the underlying sub-set of narrow compliance. For this process, the compliance department must deploy a framework across the business, under the rubric that it is everyone’s job to act ethically. This envisages leveraging the existing skills, and especially in the case of highly compliant firms, long-standing expertise that is embedded within compliance. </p>
<p>Conduct review: Interrogating the life cycle of a product or service starts with product or service conception. This is more extensive than the customer journey. By spending time with stakeholders – including customers – to help understand why a product or service process works or does not work, these enquiries deliver significant understanding to the firm, and will deliver monetary benefits. Put differently, product performance information intelligible only to a highly educated customer will not be adequate for customers who are low income. Therefore, it would fail to comport with the underlying <a href="http://pmg-assets.s3-website-eu-west-1.amazonaws.com/181211Conduct_of_Financial_Institutions_Bill.pdf">principles</a> of constructing a financial system that is aimed at “protecting financial customers, promotes their fair treatment and protection, and promotes financial inclusion and the transformation of the financial sector”. </p>
<p>Interrogation of those processes would involve chunking conduct standards into a set of qualitative and conceptual (as opposed to analytical) enquiries. By aligning with overall corporate values, these enquiries reinforce the “all together” concept. What is also required is independence in the design of recursive reviews that will make a valuable contribution in mitigating otherwise unavoidable “observer biases”. Evidence of the problems caused by such cognitive biases are to be found in Australia, in the recent review by the Prudential Regulator of Commonwealth Bank and the Westpac self-assessment. Both allude to governance and conduct failures precipitated by a process-driven, as opposed to goal-orientated, myopia.</p>
<h2>Future-focused firms will lead the way</h2>
<p>Forward-thinking firms will be first movers towards stakeholder (as opposed to shareholder) <a href="https://www.apra.gov.au/sites/default/files/CBA-Prudential-Inquiry_Final-Report_30042018.pdf">primacy</a>. </p>
<p>This approach was recently promoted by the Australian Royal Commission as the way forward for Australian banks and insurers. The South African authorities are paying careful attention to the commission’s findings. </p>
<p>In time, therefore, first movers in this space will no longer seem radical, but simply <a href="https://www.westpac.com.au/content/dam/public/wbc/documents/pdf/aw/media/Westpac_Self-Assessment_Report_.pdf">early</a>. Those firms will provide the definition of leadership in the industry. If being values-driven is an end in itself, then first movers will enjoy an advantage. Moreover, credibility in this space affords firms the opportunity to set the standards to which the regulator will hold the rest of the industry.</p><img src="https://counter.theconversation.com/content/121948/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Schmulow consults to DB & Associates. He receives funding from the Universities of Wollongong and Witwatersrand. He is affiliated with, inter alia, the Australian Institute of Superannuation Trustees and Sungkyunkwan University. </span></em></p>Attitudes to banks are changing. This requires them to be more customer centric, and to take their role in society more seriously.Andrew Schmulow, Senior Lecturer, Faculty of Law, University of WollongongLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1124972019-03-10T13:10:03Z2019-03-10T13:10:03ZEchoes of 2008: Could climate change spark a global financial crisis?<figure><img src="https://images.theconversation.com/files/262961/original/file-20190308-155532-1nvts27.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">A forest fire rages in California in November 2018. </span> <span class="attribution"><span class="source">AP Photo/Noah Berger</span></span></figcaption></figure><p>The dire climate change situation continues to <a href="https://www.theguardian.com/environment/2019/mar/04/can-they-save-us-meet-the-climate-kids-fighting-to-fix-the-planet">make headlines</a> and inspire actions like the <a href="https://www.sunrisemovement.org/">Sunrise Movement</a>. </p>
<p>Recently, United States congresswoman Alexandria Ocasio-Cortez and Sen. Ed Markey pushed the debate about addressing climate change forward by introducing resolutions for a <a href="https://www.theatlantic.com/science/archive/2018/12/ocasio-cortez-green-new-deal-winning-climate-strategy/576514/">Green New Deal</a> to transform the American economy.</p>
<p>The Green New Deal is supported by politicians currently seeking the Democratic Party’s 2020 presidential nomination, including <a href="https://www.newyorker.com/news/our-columnists/with-the-green-new-deal-democrats-present-a-radical-proposition-for-combatting-climate-change">Sen. Bernie Sanders and Sen. Elizabeth Warren.</a></p>
<p>Proponents of the proposed deal, like Ocasio-Cortez, rightly point out the pressing urgency to implement policy to reduce the impact of climate change. She likened this effort to other massive undertakings in U.S. history, such as <a href="https://www.sanders.senate.gov/newsroom/video-audio/climate-change-town-hall">the moon landing and the civil rights movement</a>. The Green New Deal represents an endeavour on a similar scale aimed at addressing climate change.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=379&fit=crop&dpr=1 600w, https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=379&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=379&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=476&fit=crop&dpr=1 754w, https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=476&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/262968/original/file-20190308-155523-ay6o7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=476&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The insurance industry has enabled and invested in the fossil fuel industry.</span>
<span class="attribution"><span class="source">Matt Artz/Unsplash</span></span>
</figcaption>
</figure>
<p>But despite all the climate change buzz, its impact on the insurance industry has been largely absent from discussion. This is especially significant considering <a href="http://www.aiadc.org/File%20Library/Resources/Insurance_101_Property_Casualty_Basics_11.2017.pdf">the importance of insurance in managing risk</a>. It’s surprising that media coverage on the Green New Deal has not included some mention of insurance especially because insurers, and particularly American insurers, <a href="https://www.insureourfuture.us/insurers">enable and invest in the fossil fuel industry</a>. All of the largest U.S. insurance companies, including AIG and Berkshire Hathaway, continue to <a href="https://www.insureourfuture.us/scorecard2018">invest in and underwrite the coal industry.</a></p>
<h2>The intersection of insurance and climate</h2>
<p>A <a href="https://www.cisl.cam.ac.uk/business-action/sustainable-finance/climatewise/news/investors-and-lenders-need-better-tools-to-manage-climate-risk-to-homes-mortgages-and-assets-finds-new-research">recent report</a> from Cambridge University has underlined just how necessary it is to have conversations about the intersection of insurance and climate in the context of the Green New Deal. The Cambridge report was produced in partnership with top global insurance and reinsurance firms.</p>
<p>Alarmingly, the report highlights that increasingly severe losses for insurers due to climate change could <a href="https://www.thestar.com/business/2019/02/22/insurers-worry-climate-change-could-lead-to-a-global-financial-crisis.html">result in a global financial crisis</a>. Given the historical precedent for economic crises caused by insurance losses, the industry is justifiably concerned.</p>
<p>The history of insurance is in fact the history of crisis. Since its inception, the insurance industry has had to grapple with its exposure to catastrophe. The traditional way it’s done so is by transferring catastrophic risk to reinsurance companies —firms that specialize in providing insurance coverage to insurers and spreading the risk globally so as to dilute its impacts. </p>
<p>However, these efforts are not always successful, and massive catastrophes continue to result in <a href="https://www.cnn.com/2018/12/04/us/camp-fire-insurance-company-liquidation/index.html">the bankruptcy of insurers</a>.</p>
<p>As I discussed in a previous article written in the aftermath of Hurricanes Harvey, Irma and Maria, significant changes have occurred in the insurance industry in an attempt to better insulate primary insurance companies from catastrophic risk. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/the-stormy-outlook-for-insurance-linked-securities-84365">The stormy outlook for insurance-linked securities</a>
</strong>
</em>
</p>
<hr>
<p>These changes have largely been focused on increasing the amount of what’s known as <em>reinsurance capital</em> available to cover insurers’ exposure to catastrophe.</p>
<p>New strategies involve the introduction of alternative sources of reinsurance capital provided by bringing capital market investors into the insurance sector. This process has been accomplished through the packaging of risk into insurance-linked securities, and then selling those securities to institutional investors like sovereign wealth funds, pension funds and <a href="https://www.insurancejournal.com/news/international/2014/10/29/345196.htm">dedicated hedge funds specializing in catastrophic risk</a>.</p>
<h2>Pattern repeating</h2>
<p>The scenarios raised in the Cambridge report about a global financial crisis brought on by the collision of climate change and insurance fit the historical pattern of the industry. </p>
<p><a href="https://www.nytimes.com/2007/08/26/magazine/26neworleans-t.html">Changes to the insurance industry since the mid-1990s,</a> along with the proliferation of alternative reinsurance sources through the integration of capital markets and institutional investors, are significant. That’s why initiatives like the Green New Deal must take into account the changes occurring in the insurance industry.</p>
<p>The primary source of systemic risk outlined in the Cambridge report stems from rising global temperatures and untenable losses to insurers as a result. For example, the authors warn that if climate change is left unchecked, the world will witness the tripling of catastrophic losses on property investments over the next 30 years. </p>
<h2>Eerily reminiscent of 2008</h2>
<p>While this is a shocking and extremely disturbing finding, there are other equally troubling ways that the intersection of insurance and climate change could <a href="https://www.reuters.com/article/europe-insurance-watchdog/eu-insurance-watchdog-highlights-cat-bond-market-risks-idUSL6N0JQ34520131212">produce global financial systemic risk</a>.</p>
<p>That’s due to the transformation of risk into securities which are then sold to capital market investors. </p>
<p>The creation of insurance-linked securities to increase the availability of reinsurance capital to primary insurers — and better protect them from catastrophic risk — creates at the same time a perverse incentive structure. It’s very similar to the mortgage-backed securities that formed the <a href="https://www.investopedia.com/articles/economics/09/financial-crisis-review.asp">underlying risky assets that caused the 2008 crisis</a>.</p>
<p>With the growth of alternative reinsurance capital in the sector and <a href="http://www.artemis.bm/news/fema-secures-500m-nfip-cat-bond-with-backing-of-over-35-investors/">massive government programs</a>, as well as <a href="https://www.ft.com/content/4696996e-0c07-11e8-8eb7-42f857ea9f09">global institutions turning towards the securitization</a>
of catastrophic risk in response to climate change, another global financial crisis is certainly a possibility, just as the authors of the Cambridge report warn. </p>
<p>While massive and courageous transformations to our economies and societies like the Green New Deal are necessary in the face of climate change, we must broaden our conversations to include the increasing integration of insurance and finance. </p>
<p>If we don’t, strategies adopted to address climate change, like the buying and selling of catastrophic risk, could produce calamitous outcomes themselves.</p><img src="https://counter.theconversation.com/content/112497/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Korey Pasch does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Increasingly severe losses for insurers due to climate change could result in a global financial crisis.Korey Pasch, PhD Candidate in Political Science and International Relations, Queen's University, OntarioLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1035152018-09-19T20:14:11Z2018-09-19T20:14:11ZThe shocking truth about insurance. We pick bad policies even with good information<figure><img src="https://images.theconversation.com/files/237037/original/file-20180919-158246-19l1b68.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Even with a simple choice between an obviously good product and an obviously bad one, many people choose wrong.</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p>The Financial Services Royal Commission has highlighted the astonishment and anger of some customers who’ve had their insurance claims rejected. </p>
<p>Some assumed wrongly their policy covered them for losses from their heart attack or cancer. Others were angry and frustrated that their home contents insurance didn’t cover losses from floods.</p>
<p>When you take out insurance you are buying a promise. The insurer promises to pay for losses arising from the event mentioned in the policy; be it fire, robbery, flood or something else.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/what-is-flood-insurance-and-why-the-system-is-broken-6-questions-answered-103058">What is flood insurance and why the system is broken: 6 questions answered</a>
</strong>
</em>
</p>
<hr>
<p>It would be reasonable to think that a sensible person would know what that promise was before he or she paid the premium. </p>
<p>But that assumes a sensible person can understand the words used in the policy.</p>
<p>Federal legislation requires insurers to produce a product disclosure statement (PDS) and make it available to potential buyers. </p>
<p>They are not always easy to find on the insurer’s website and, even when they can be found, are usually long and complex. </p>
<p>No less a body than the <a href="http://www.insurancecouncil.com.au/assets/report/2017_02_Effective%20Disclosure%20Research%20Report.pdf">Insurance Council of Australia</a> has acknowledged that the exclusions and limits in the statements are often poorly understood.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/forcing-insurers-to-reveal-rejected-claims-a-win-for-consumers-66987">Forcing insurers to reveal rejected claims a win for consumers</a>
</strong>
</em>
</p>
<hr>
<p>To overcome this problem, it has been mandatory since 2012 for home contents insurers to also provide a shorter two-page “key fact sheet” (KFS). </p>
<p>It outlines in simpler language which events the policy does, and does not, cover.</p>
<p>We undertook a study, <a href="https://australiancentre.com.au/publication/ineffectivedisclosure">funded by the NSW Financial Rights Legal Centre</a> to find out if a KFS is more likely to nudge consumers towards making rational buying choices than simply providing a PDS. </p>
<h2>Does a ‘key fact sheet’ help?</h2>
<p>We found that, even in highly idealised conditions, the KFS wasn’t a standout success. </p>
<p>The study involved 406 randomly chosen participants across Australia. They were asked to consider buying a hypothetical home contents insurance policy. </p>
<p>We provided them various choices between buying a good, okay or bad policy. They were not told the policies varied in quality. The only information they had about each policy was a PDS or a KFS, or both, we designed.</p>
<p>They could also choose not to buy a policy. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/royal-commission-scandals-the-result-of-poor-regulation-not-literacy-99441">Royal commission scandals the result of poor regulation, not literacy</a>
</strong>
</em>
</p>
<hr>
<p>We told them that after they decided on their purchase, a computer simulation might signal that an event, like a robbery or fire, would happen over the following 12 months - or that nothing would happen. If the simulator signalled a bad event, and they hadn’t bought insurance that covered them for it, they would lose a “bonus payment”.</p>
<p>The good policy included cover for fire and explosion but excluded “damage that occurs within 72 hours of the beginning of your policy”. The bad policy also covered fire and explosion but excluded “fires igniting within or outside the premises” – in other words it effectively excluded any cover for fire. </p>
<p>The inclusions and exclusions were not buried in fine print but set out clearly in both documents.</p>
<p>Here are the findings for when we asked people to choose between the good policy and the bad policy:</p>
<hr>
<iframe id="datawrapper-chart-uyAvi" src="https://datawrapper.dwcdn.net/uyAvi/4/" scrolling="no" frameborder="0" allowtransparency="true" style="width: 0; min-width: 100% !important;" height="450" width="100%"></iframe>
<hr>
<p>The best outcome was when participants were offered only a short KFS and not the longer PDS. In this scenario 76% of participants opted for the good policy.</p>
<p>Yet even in this most ideal circumstance – a simple choice between an obviously good product and an obviously bad one on the basis of a clear two-page document – about 10% still chose the bad product and 14% bought no insurance at all.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/people-on-low-incomes-are-sacrificing-basic-goods-to-take-out-insurance-89296">People on low incomes are sacrificing basic goods to take out insurance</a>
</strong>
</em>
</p>
<hr>
<p>Disturbingly, the worst outcome was when participants were presented with both the short KFS and the longer PDS. It was even worse than with the disclosure statement only. </p>
<p>When participants were required to choose between three products, the proportion choosing the better product declined markedly. Using the KFS alone, only 41% chose the best product. </p>
<p>The take-home message is that although being presented with the KFS appears to be marginally better than being presented with the PDS, or even both, it is far from a panacea.</p>
<h2>Time to rethink the onus on us</h2>
<p>These findings, along with other research on the lack of consumer comprehension of insurance terms and conditions, ought to prompt a rethink about putting the onus on consumers to make the best choices on the basis of the information available to them.</p>
<p>The government might instead consider mandating standard terms for consumer insurance products across the entire industry. </p>
<p>The inclusions and exclusions for all home contents policies, for example, would be the same. And also for motor vehicle, travel and other forms of insurance.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/do-we-really-need-funeral-insurance-94406">Do we really need funeral insurance?</a>
</strong>
</em>
</p>
<hr>
<p>Consumers could be offered a choice between gold standard cover, which would provide the most cover, and silver and bronze, which would offer less.</p>
<p>By mandating standard terms, consumers would have less anxiety about what is buried in the detail of their policies.</p>
<p>It would mean insurers have to compete on price, rather than confusing consumers by making products difficult to compare.</p><img src="https://counter.theconversation.com/content/103515/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Justin Malbon received funding from the Financial Rights Legal Centre. He is an independent member of the Comminsure Claims Review Panel. He is also a member of the Superannuation Complaints Tribunal.</span></em></p><p class="fine-print"><em><span>Harmen Oppewal received funding from the Financial Rights Legal Centre and the Australian Research Council. </span></em></p>Product disclosure laws are meant to help insurance buyers make informed rational decisions. Our research shows more must be done to protect consumers.Justin Malbon, Professor of Law, Monash UniversityHarmen Oppewal, Professor of Marketing, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/943672018-04-23T10:39:40Z2018-04-23T10:39:40ZShould you insure that trip or TV? Here’s what an economist would do<figure><img src="https://images.theconversation.com/files/213958/original/file-20180409-114098-bch97d.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Offers of extended warranties are increasingly becoming the norm for TVs and other relatively inexpensive goods. </span> <span class="attribution"><span class="source">AP Photo/Mark Humphrey</span></span></figcaption></figure><p>You can buy insurance for practically anything these days. </p>
<p>Planning a vacation to France? Your airline, travel agent or even hotel will likely offer trip insurance in case you need to change your dates or cancel. Going to the casino? You can insure your blackjack hand in case it’s not your lucky day.</p>
<p>Recently, I was even asked if I wanted to pay US$20 to insure a pair of $80 ice skates beyond the <a href="https://www.bauer.com/warranties">three-month warranty</a> or $12 to protect a $40 television cable for a “lifetime” of protection – a quarter of each product’s price in exchange for extra “peace of mind.”</p>
<p>But is it really worth paying the extra money? Here’s how an economist like me would answer that question. </p>
<h2>Who’s afraid of a little loss?</h2>
<p>While the use of insurance to protect against loss <a href="https://books.google.com/books?hl=en&lr=&id=kkiFKCO5BAgC&oi=fnd&pg=PR1&dq=history+insurance&ots=6aR-iTG8hT&sig=N350SXYxSX5__2xL8mWlnYPrPsQ#v=onepage&q=history%20insurance&f=false">can be traced back thousands of years</a>, the modern industry only emerged in the 17th century. Companies in <a href="https://www.lloyds.com/about-lloyds/history/corporate-history">London</a> and later the <a href="https://cup.columbia.edu/book/morals-and-markets/9780231183352">U.S.</a> developed a sophisticated understanding of risk aimed at protecting people against large losses, disasters and death.</p>
<p>Only in recent years has insurance been used to provide protection against relatively small losses, such as on consumer goods and airline tickets. And while most <a href="https://www.sciencedirect.com/science/article/pii/S0925527302001536">products come with limited warranties</a>, retailers and manufacturers offer to extend them for small fees – something that used to only be available for large purchases, <a href="https://www.consumerreports.org/used-car-buying/when-an-extended-car-warranty-is-worth-it/">such as a new car</a>.</p>
<p>Companies seem to be increasingly offering insurance on all manner of things in part because of something known as <a href="https://www.scientificamerican.com/article/what-is-loss-aversion/">loss aversion</a>, which is when people feel more psychological impact from a loss than from a similar-sized dollar gain. Another reason is probably because it’s <a href="https://www.consumerreports.org/cro/extended-warranties/buying-guide/index.htm">very profitable</a>. </p>
<p>Fundamentally, buying insurance means giving up a small certain payment today – or in regular installments over time – to ensure that a larger, uncertain payment is not required in the future.</p>
<h2>The three times to insure</h2>
<p>So how do you know when you should plunk down the extra cash and buy insurance? In general, I would argue there are only three types of situations in which you should do so.</p>
<p>First, obviously buy it when you are obliged to. For example, most states <a href="https://www.thebalance.com/understanding-minimum-car-insurance-requirements-2645473">require car owners</a> to have insurance. And <a href="https://finance.zacks.com/lenders-homeowners-insurance-requirements-6551.html">banks usually demand</a> that home buyers insure their properties in exchange for a mortgage. </p>
<p>Second, buy it when you know you are likely to need it. For example, most of us probably don’t need the phone insurance Apple or Samsung offer with their devices. The plans, which can be expensive, cover some or all of the cost to repair or replace the phone if you break it. </p>
<p>In general, these plans are a <a href="http://fortune.com/2017/02/13/smartphone-insurance-plans/">terrible deal for a consumer</a>. However, one of my friends is a klutz. He constantly drops and breaks his phone and so has found buying the plan a good deal.</p>
<p>Third, buy insurance when the loss would be devastating financially or emotionally. A good example of this is health insurance. Many of us have some type of medical policy because if a major accident or illness occurs, the <a href="http://time.com/money/4765443/obamacare-bankruptcy-decline/">financial cost of a large number of doctor</a> visits or surgeries in a hospital <a href="https://www.nytimes.com/2016/01/06/upshot/lost-jobs-houses-savings-even-insured-often-face-crushing-medical-debt.html">quickly overwhelms our savings</a>.</p>
<p>In the case of my $80 skates, on the other hand, extra insurance really doesn’t make much sense. If they break – unlikely given they won’t be subjected to harsh conditions since I don’t skate that often or aggressively – it’ll just mean paying another $80 for a new pair. The extra expense will not affect my lifestyle or cause me to lose sleep. </p>
<h2>Calculating emotional loss</h2>
<p>To figure out whether that third category applies to you with a particular purchase, you should figure out your cutoff point. </p>
<p>Start by pondering how it would feel to lose $1 instantly. How long would you be in anguish? My guess is probably not long, so add another zero. Ten dollars, $100, $1,000? A good rule of thumb is if the answer is less than 24 hours, keep going higher until the loss would leave you in anguish mentally or financially for more than a day. Stop and write the number down.</p>
<p>Now work your way backwards. Start with a high number, like $1 million. If you’re like me, losing that much money would leave you sweating and shaking. How about half a million? Keep lowering the figure until the financial and mental anguish are under control. Write the number down too.</p>
<p>You now have an upper and lower bound. Never insure anything whose value falls below your lower bound. Always insure anything above your upper bound.</p>
<p>The hard decisions are trying to decide if you should insure things that fall in the middle, which requires more careful analysis. Another option is to <a href="https://www.nerdwallet.com/blog/the-official-nerdwallet-guide-your-credit-cards-extended-warranty-policy/">get a credit card</a> that offer extended protection on some purchases. </p>
<p>Insuring the little things in life may make you feel better, but odds are it’ll leave you worse off.</p><img src="https://counter.theconversation.com/content/94367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jay L. Zagorsky does not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Companies these days offer insurance on pretty much anything you buy, no matter how inexpensive. How do you know when it’s worth it?Jay L. Zagorsky, Economist and Research Scientist, The Ohio State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/839352017-09-26T00:16:51Z2017-09-26T00:16:51ZAs communities rebuild after hurricanes, study shows wetlands can significantly reduce property damage<figure><img src="https://images.theconversation.com/files/187281/original/file-20170924-11625-oduqde.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Coastal wetlands are an effective first line of defense and act by slowing down storm surges and reducing flooding</span> <span class="attribution"><a class="source" href="https://flic.kr/p/dibGy9">Kelly Fike/USFWS</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span></figcaption></figure><p>A 12-year “<a href="https://www.washingtonpost.com/news/energy-environment/wp/2017/09/07/the-science-behind-the-u-s-s-strange-hurricane-drought-and-its-sudden-end/?utm_term=.c030f9594f3e">hurricane drought</a>” during which no major hurricanes made landfall in the continental United States ended dramatically in 2017. The devastating impacts of Harvey, Irma, Jose and Maria across the United States and the Caribbean provide tragic reminders of the catastrophic risks we face on our coasts.</p>
<p>Coastlines are being developed rapidly and intensely in the United States and worldwide. The population of central and south Florida, for example, has grown by <a href="https://www.nytimes.com/2017/09/07/climate/florida-hurricane-irma-damage.html?mcubz=0">six million since 1990</a>. Many of these cities and towns face the brunt of damage from hurricanes and are looking for better and cheaper ways to reduce their risks. Yet this rapid coastal development is destroying natural ecosystems like marshes, mangroves and coral reefs – resources that help protect us from catastrophes.</p>
<p>In a new and unique partnership <a href="https://www.lloyds.com/lloyds/corporate-responsibility/charity/tercentenary-research-foundation/role-of-coastal-habitats-in-managing-natural-hazards">funded by Lloyd’s of London</a>, we worked with colleagues in academia, environmental organizations and the insurance industry to calculate the financial benefits that coastal wetlands provide by reducing storm surge damages from hurricanes. Our recently published <a href="http://dx.doi.org/10.1038/s41598-017-09269-z">study</a> found that this function is enormously valuable. It offers new evidence that protecting natural ecosystems is a cost-effective way to reduce risks from coastal storms and flooding.</p>
<figure>
<iframe src="https://player.vimeo.com/video/188757883" width="500" height="281" frameborder="0" webkitallowfullscreen="" mozallowfullscreen="" allowfullscreen=""></iframe>
<figcaption><span class="caption">Coastal wetlands and flood damage reduction: A collaboration between academia, conservation and the risk industry.</span></figcaption>
</figure>
<h2>The economic value of flood protection from wetlands</h2>
<p>Although there is a broad understanding that <a href="https://doi.org/10.1371/journal.pone.0154735">wetlands can protect coastlines</a>, researchers have not explicitly measured how and where these benefits translate into dollar values in terms of reduced risks to people and property. To answer this question, our group worked with experts who understand risk best: insurers and risk modelers. </p>
<p>Using the industry’s storm surge <a href="http://www.rms.com/models/flood">models,</a> we compared the flooding and property damages that occurred with wetlands during Hurricane Sandy to the damages that would have occurred if these wetlands were lost. First we compared the extent and severity of flooding during Sandy to the flooding that would have happened in a scenario where all the coastal wetlands were lost. Then, using high-resolution data on assets in the flooded locations, we measured the property damages for both simulations. The difference in damages – with wetlands and without – gave us an estimate of the damages that were avoided due to the presence of these ecosystems.</p>
<p><a href="http://dx.doi.org/10.1038/s41598-017-09269-z">Our paper</a> shows that during Hurricane Sandy in 2012, coastal wetlands prevented more than US$625 million in direct property damages by buffering coasts against its storm surge. Across 12 coastal states, from Maine to North Carolina, wetlands and marshes reduced damages by an average of 11 percent. </p>
<p>These benefits varied widely by location at the local and state level. In Maryland, wetlands reduced damages by 30 percent. In highly urban areas like New York and New Jersey they provided hundreds of millions of dollars in flood protection.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=763&fit=crop&dpr=1 600w, https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=763&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=763&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=959&fit=crop&dpr=1 754w, https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=959&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/186483/original/file-20170918-30563-celbpm.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=959&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Wetland benefits for flood damage reduction during Sandy (redder areas benefited more from having wetlands).</span>
<span class="attribution"><a class="source" href="https://www.nature.com/articles/s41598-017-09269-z/figures/1">Narayan et al., Nature Scientific Reports 7, 9463 (2017).</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Wetlands reduced damages in most locations, but not everywhere. In places in North Carolina and the Chesapeake Bay, wetlands redirected the surge in ways that protected properties directly behind them, but caused greater flooding to some properties, mainly in front of the marshes. Just as we would not build in front of a seawall or a levee, it is important to be aware of the impacts of building near wetlands.</p>
<p>Wetlands reduce flood losses from storms every year, not just during single catastrophic events. We examined the effects of marshes across 2,000 storms in Barnegat Bay, New Jersey. These marshes reduced flood losses annually by an average of 16 percent, and up to 70 percent in some locations.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=261&fit=crop&dpr=1 600w, https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=261&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=261&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=328&fit=crop&dpr=1 754w, https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=328&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/186485/original/file-20170918-30536-5x4eea.jpeg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=328&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Reductions in annual flood losses to properties that have a marsh in front (blue) versus properties that have lost the marshes in front (orange).</span>
<span class="attribution"><a class="source" href="https://www.nature.com/articles/s41598-017-09269-z/figures/3">Narayan et al., Nature Scientific Reports 7, 9463 (2017).</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<h2>Reducing risk through conservation</h2>
<p>Our study demonstrates that we can measure the reduction in flood risks that coastal ecosystems provide – a concern that is central for the <a href="https://hbr.org/2017/08/how-the-insurance-industry-can-push-us-to-prepare-for-climate-change">risk and insurance industry</a> and for coastal managers. We show that these risk reduction benefits are significant and make a strong case for conserving and protecting our coastal ecosystems – an issue central to conservation practitioners.</p>
<p>The next step is to <a href="http://nature.org/FinancingNaturalInfrastructureReport10.7291/V9PN93H3">use these benefits to create incentives</a> for wetland conservation and restoration. Homeowners and municipalities could receive reductions on insurance premiums for managing wetlands. Post-storm spending should include more <a href="http://news.maryland.gov/dnr/2017/09/20/new-grant-program-funds-nature-based-solutions-to-protect-coastal-communities/">support for this natural infrastructure</a>. And new financial tools such as <a href="http://www.refocuspartners.com/rebound/">resilience bonds</a>, which incentivize investments in measures that reduce risk, could support wetland restoration efforts too.</p>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=900&fit=crop&dpr=1 600w, https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=900&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=900&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1131&fit=crop&dpr=1 754w, https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1131&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/187408/original/file-20170925-18946-e7hsee.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1131&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The dense vegetation and shallow waters within wetlands can slow the advance of storm surge and dissipate wave energy.</span>
<span class="attribution"><a class="source" href="http://www.nad.usace.army.mil/Portals/40/siteimages/NACCS/20.jpg">USACE</a></span>
</figcaption>
</figure>
<h2>After the 2017 hurricanes</h2>
<p>As communities in Texas, Florida and the Caribbean assess their losses, the conversation is starting to turn toward <a href="https://theconversation.com/6-rules-for-rebuilding-infrastructure-in-an-era-of-unprecedented-weather-events-83129">rebuilding and improving resilience</a> against future storms.</p>
<p>It is human nature to want to return to the status quo after a disaster. More often than not, this means <a href="https://doi.org/10.15351/2373-8456.1069">rebuilding seawalls</a> and concrete barriers. But concrete walls are expensive, <a href="https://doi.org/10.2112/JCOASTRES-D-12-00230.1">will need constant upgrades</a> as sea levels rise and will further damage our natural ecosystems.</p>
<p>Even after suffering years of damage, Florida’s <a href="https://doi.org/10.1016/j.ecss.2012.02.021">mangrove wetlands</a> and <a href="http://dx.doi.org/10.1038/ncomms4794">coral reefs</a> play crucial roles in protecting the state from hurricane surges and waves. And yet, over the last six decades urban development has <a href="https://sanctuaries.noaa.gov/science/condition/fknms/state.html">eliminated</a> half of Florida’s historic mangrove habitat. Losses are still occurring across the state from the Keys to <a href="http://reefrelieffounders.com/mangroves.html">Tampa Bay and Miami</a>. Protecting and nurturing these natural first lines of defense could help Florida homeowners reduce damages to their properties during future storms.</p>
<p>Protecting coastal ecosystems is not a full remedy for coastal risks, but it should be part of a <a href="http://www.nad.usace.army.mil/CompStudy/Risk-Management-Strategies/">portfolio of solutions</a>, from elevating buildings to strengthening levees to flood proofing. Beyond hurricane season, coastal communities face a crucial question: whether they can <a href="https://theconversation.com/what-victims-of-hurricane-harvey-can-learn-from-katrina-as-rebuilding-begins-83184">rebuild</a> in ways that make them better-prepared for the next storm while also conserving their natural resources. Our work shows that the answer is yes. </p>
<p><em>Editor’s note: This article has been updated to clarify that the 12-year “hurricane drought” describes a period during which no major hurricane made landfall in the continental United States.</em></p><img src="https://counter.theconversation.com/content/83935/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Siddharth Narayan receives funding from the Lloyd's Tercentenary Research Foundation, a charity wing of Lloyd's of London.</span></em></p><p class="fine-print"><em><span>Michael Beck receives funding from the Lloyd's Tercentenary Research Foundation. He is the lead marine scientist for The Nature Conservancy.</span></em></p>New research by scholars, conservationists and the insurance industry shows that coastal wetlands provide hundreds of millions of dollars’ worth of protection from flooding, boosting the case for protecting them.Siddharth Narayan, Postdoctoral Fellow, Coastal Flood Risk, University of California, Santa CruzMichael Beck, Adjunct Professor, University of California, Santa CruzLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/813802017-09-12T23:01:23Z2017-09-12T23:01:23ZWhy insurers are wrong about Canada’s genetic non-discrimination law<figure><img src="https://images.theconversation.com/files/185545/original/file-20170911-15801-k0ztl5.jpg?ixlib=rb-1.1.0&rect=30%2C3%2C2478%2C1667&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Canadians are overwhelmingly opposed to insurance companies having access to their genetic test results. A new Canadian law prevents insurers from using genetic information to determine coverage or pricing.</span> <span class="attribution"><span class="source">(Shutterstock)</span></span></figcaption></figure><p>Most western European countries have banned insurance companies from accessing privately held genetic test results on individuals since or even before the <a href="http://unesdoc.unesco.org/images/0013/001361/136112e.pdf">UNESCO Declaration on Human Genetic Data 2003.</a> </p>
<p>The United States passed legislation in 2008. It covers health insurance and employment, but not life and other forms of insurance, although some states have passed regulations about use of genetic tests by life insurers. </p>
<p>Canada was <a href="https://beta.theglobeandmail.com/life/health-and-fitness/health/bill-s-201-aims-to-end-genetic-discrimination-in-canada/article29494782/?ref=http://www.theglobeandmail.com&">the last member of the G7</a> to pass its own genetic discrimination law, Bill S-201, in May. It prevents insurance companies from using results of any genetic tests to determine coverage or pricing.</p>
<p>In other words, if you’re a woman with a genetic predisposition to breast cancer, a health or life insurer cannot deny coverage, restrict coverage or hike premiums.</p>
<p>So although life or health insurance companies may continue to ask for access to medical records, they’re prohibited from using information from genetic tests when offering insurance to potential clients.</p>
<h2>Why the controversy?</h2>
<p>That’s really what the bill is all about. So why has it been <a href="http://www.huffingtonpost.ca/2017/03/07/bill-s201-mps-to-debate-v_n_15207840.html">controversial</a> given Canada’s late entry into the game?</p>
<p>The Canadian Life and Health Insurance Association warned of higher costs and reduced coverage if the legislation passed. Insurers also argued no ban was needed; they would do it themselves via codes of conduct.</p>
<p>Others dismissed the ban as mere <a href="https://beta.theglobeandmail.com/news/national/anti-genetic-discrimination-bill-is-little-more-than-virtue-signalling/article34261843/?ref=http://www.theglobeandmail.com&">“virtue signalling”</a> and argued there’s no evidence Canadian insurance companies were engaging in genetic discrimination to begin with.</p>
<p>Despite the worldwide popularity of such bans, it’s still worth asking whether they’re a good idea. </p>
<p>Groups that include the <a href="http://ccgf-cceg.ca/en/home/">Canadian Coalition for Genetic Fairness (CCGF)</a> support the law, but <a href="https://www.clhia.ca/domino/html/clhia/clhia_lp4w_lnd_webstation.nsf/page/47B017C379E6898185257F70005B756C">there are still misgivings</a> in the insurance industry.</p>
<p>Insurance companies selling life insurance and other related products, including long-term care insurance, believe they should have access to the same information that their customers have. They say that’s in order to avoid high-risk individuals buying excessive amounts of insurance at the same price as those with low risks.</p>
<h2>Higher claims?</h2>
<p>The insurance industry argues the law will lead to higher claims costs and result in higher prices and a smaller market for the insurance industry, a phenomenon known as “adverse selection.”</p>
<p>Adverse selection occurs if more insurance is purchased by people deemed to be a higher risk — say, those with Huntington disease — than the average person with low risks.</p>
<p>That increases the overall claims costs to insurers, and if they can’t provide coverage to those with a higher risk of serious illnesses by charging a higher price, then those with scant health risks won’t buy insurance because it becomes too expensive. </p>
<p>Essentially, insurers argue, prices are driven up and the quantity of insurance available is reduced.</p>
<h2>Canadians opposed</h2>
<p>Organizations like the CCGF, however, represent the interests of people who would feel discriminated against if charged a higher price for an insurance product based on their inherited genetic makeup.</p>
<p><a href="https://beta.theglobeandmail.com/news/national/hands-off-my-genes-canadians-say/article1128996/?ref=http://www.theglobeandmail.com&">A 2003 poll by Pollara-Earnscliffe</a> found that a whopping 91 per cent of Canadian respondents agreed with the CCGF position that insurance companies should not be allowed to use genetic test results in pricing contracts. </p>
<p><a href="http://www.bmj.com/content/338/bmj.b2175">Another survey</a> suggested that 86 per cent of people with a family history of <a href="https://www.huntingtonsociety.ca/learn-about-hd/what-is-huntingtons/">Huntington disease,</a> for example, feared genetic discrimination. The same poll found 40 per cent reported actually experiencing genetic discrimination, mainly from life and long-term disability insurers.</p>
<p>If the insurance industry is correct, and significant amounts of high-risk people start buying up insurance as a result of the ban, then prices will become so high that many people simply won’t purchase coverage.</p>
<h2>‘Highly unlikely’ costs will rise</h2>
<p>As an economics professor who’s done <a href="https://www.priv.gc.ca/en/opc-actions-and-decisions/research/explore-privacy-research/2012/gi_hoy_201203/">extensive research on genetic discrimination</a>, I argue this scenario is highly unlikely. Studying the phenomenon of adverse selection has made up a large part of my research activity for more than three decades. </p>
<p>For a ban on insurers’ use of genetic test results to create a serious problem in insurance markets, it would require particular conditions:</p>
<ol>
<li><p>There would have to be a significant percentage of individuals seeking life insurance who have had genetic tests that determined they carry the genes for fatal diseases, or much higher future health costs for long-term care and other types of health insurance.</p></li>
<li><p>Having such information would have to spur people to purchase substantially more insurance than a typical consumer without such information. </p></li>
</ol>
<p>Actuarial evidence suggests that these conditions aren’t at play, so there won’t be a major impact on the average price of insurance. That suggests the objectionable phenomenon of genetic discrimination will, in fact, be thwarted by the new law. </p>
<h2>‘As many good genes as bad genes’</h2>
<p>I believe that Bill S-201 is an appropriate response to the concerns of citizens about genetic discrimination.</p>
<p>A Liberal party senator, James Cowan, should be congratulated for initiating the bill in the Senate, as should Liberal MP Robert Oliphant for presenting and championing it through the House of Commons. </p>
<figure class="align-right ">
<img alt="" src="https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=452&fit=crop&dpr=1 600w, https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=452&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=452&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=567&fit=crop&dpr=1 754w, https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=567&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/185547/original/file-20170911-20832-1p9gzjo.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=567&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Sen. James Cowan is seen here on Parliament Hill in June 2015.</span>
<span class="attribution"><span class="source">THE CANADIAN PRESS/Sean Kilpatrick</span></span>
</figcaption>
</figure>
<p>The Office of the Privacy Commissioner of Canada (OPCC) also acted responsibly in their mandate as ombudsman for Canadians’ privacy concerns by <a href="https://www.priv.gc.ca/en/opc-actions-and-decisions/research/explore-privacy-research/2011/gi_macdonald_201107/">commissioning several reports</a>, including <a href="https://www.priv.gc.ca/en/opc-actions-and-decisions/research/explore-privacy-research/2011/gi_macdonald_201107/">one by a highly knowledgeable actuary</a>, Prof. Angus Macdonald, and the economic analysis by myself and Maureen Durnin.</p>
<p>It is, of course, possible that in the future, the costs of genetic tests will become much lower, more genetic tests for diseases will become available and the current fraction of people who privately hold such information may become much larger. </p>
<p>So there may be, in the long run, reason to revisit this law. </p>
<p>But if there’s an explosion of genetic information across the population in the long term, it’s probable that most people will find that they have as many good genes as bad ones.</p>
<p>And that means there likely won’t be substantial differences among the risk levels for mortality or morbidity — a necessity if adverse selection becomes a problem for insurance markets.</p><img src="https://counter.theconversation.com/content/81380/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Mike Hoy does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Canadian insurance companies argue that a new law denying them access to genetic test results will raise the cost of insurance for everyone. That’s doubtful.Mike Hoy, Professor of Economics, University of GuelphLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/813352017-08-24T19:24:17Z2017-08-24T19:24:17ZAustralians can be denied life insurance based on genetic test results, and there is little protection<figure><img src="https://images.theconversation.com/files/182894/original/file-20170822-5201-30l5p8.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Australia has a lack of regulation to prevent discrimination by life insurance companies based on genetic test results.</span> <span class="attribution"><span class="source">from shutterstock.com</span></span></figcaption></figure><p>A parliamentary inquiry is currently underway into Australia’s <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/LifeInsurance">life insurance industry</a>, which has raised several issues including discrimination by insurers against people with <a href="http://www.huffingtonpost.com.au/2017/02/21/mental-health-unfairly-treated-by-life-insurance-companies-hear_a_21718953/">mental health problems</a>. In our <a href="http://www.aph.gov.au/Parliamentary_Business/Committees/Joint/Corporations_and_Financial_Services/LifeInsurance/Submissions">submission to the inquiry</a>, we argue comparable discrimination is possible based on genetics, with insurers denying applicants life insurance and raising premiums inappropriately based on genetic test results. </p>
<p>There is a concerning lack of regulation over the use of genetic information by the Australian life insurance industry. Insurance companies are allowed to use genetic test results to discriminate against applicants for life, permanent disability, and income protection insurance (which all come under the life-insurance product category), with little independent oversight or consumer transparency.</p>
<p>This discrimination can deter people from getting genetic tests and being involved in medical research that could prove useful for their future health and scientific understanding of diseases.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/brace-yourself-genetic-testing-might-give-you-more-than-you-bargained-for-40246">Brace yourself, genetic testing might give you more than you bargained for</a>
</strong>
</em>
</p>
<hr>
<h2>Genetic discrimination</h2>
<p>Australian insurers can increase premiums, exclude insurance cover for certain conditions such as cancer, or refuse insurance cover altogether purely based on your genetic test results. </p>
<p>Genetic tests look at DNA, the material that contains the instructions for our bodies to grow, develop and function. Some DNA changes cause diseases such as cystic fibrosis or Huntington’s Disease, while others can make us more susceptible to conditions such as cancer. Doctors can refer patients to a genetics service if they consider such tests might be of value due to family or personal history. </p>
<p>Although cases of genetic discrimination are difficult to identify, they have been documented in Australia. In <a href="https://www.ncbi.nlm.nih.gov/labs/articles/17355100/">one case</a>, a woman with a BRCA gene, which is known to <a href="https://theconversation.com/angelina-jolie-has-had-a-double-mastectomy-so-what-is-brca1-14227">increase breast cancer risk</a>, elected to have both breasts removed to reduce her risk. However, the consequent, significant risk reduction wasn’t taken into account by the insurer. When she applied for death and critical illness cover, the insurer excluded any cancer cover and imposed a 50% premium loading for death cover.</p>
<p>In <a href="https://www.mja.com.au/journal/2013/199/5/life-insurance-and-genetic-test-results-mutation-carriers-fight-achieve-full">another case</a>, a man whose mother had bowel cancer was found to carry a gene increasing his risk of also developing bowel cancer. He was refused cancer cover despite proactively seeking increased surveillance through colonoscopies, which reduced his risk back down to population average. The man eventually obtained cover, but only after taking a complaint to the Human Rights Commission. </p>
<h2>Lack of regulation</h2>
<p>Under <a href="https://www.legislation.gov.au/Details/C2016C00820">Australian law</a>, life insurance applicants must disclose any known genetic test results if requested by the insurer. This includes results from <a href="http://www1.health.nsw.gov.au/PDS/pages/doc.aspx?dn=PD2007_066">approved clinical genetic tests</a>, but also less reliable findings from research or <a href="https://www.nps.org.au/australian-prescriber/articles/retail-genetics#article">direct-to-consumer (DTC) genetic tests</a>, if they are known to the applicant. </p>
<p>Direct-to-consumer genetic tests are a new concept whereby consumers have genes tested directly through a private company without medical consultation. Although most of these lack evidence of any predictive medical value, the law does not distinguish between types of genetic tests.</p>
<hr>
<p><strong><em>Read more: <a href="https://theconversation.com/genetic-testing-isnt-a-crystal-ball-for-your-health-66906?sr=1">Genetic testing isn’t a crystal ball for your health</a></em></strong></p>
<hr>
<p>Australian life insurance companies are technically <a href="https://www.legislation.gov.au/Details/C2016C00763">required by law</a> to justify decisions based on genetic results. In practice, however, consumers have no way of requiring insurers to provide information about how decisions are made. </p>
<p>The Australian government leaves the life insurance industry to self-regulate its policy through the Financial Services Council (FSC). This essentially means the insurance industry writes its own rules on the use of genetic data, raising obvious conflicts of interest. Recently the FSC <a href="https://www.fsc.org.au/resources/standards/11s-genetic-testing-policy-final.pdf">updated its genetic testing policy</a> to suggest that insurance companies ask applicants if they are considering having a genetic test. This is a concerning development. </p>
<p>Many other countries have protected consumers by restricting or banning the use of genetic information for insurance altogether. In the UK, a <a href="https://www.abi.org.uk/globalassets/sitecore/files/documents/publications/public/2014/genetics/concordat-and-moratorium-on-genetics-and-insurance.pdf">moratorium</a> established in 2001 sets out an agreement between the government and the insurance industry not to ask for, or use, genetic test results (except for Huntington’s Disease for policies worth over £500,000). </p>
<p>Canada has just passed <a href="http://laws-lois.justice.gc.ca/PDF/2017_3.pdf">legislation</a> prohibiting insurance companies from asking for any genetic test results. And many European countries such as Belgium, Austria, Denmark, France, Germany, Lithuania, Norway, Portugal, and Sweden have <a href="https://www.ncbi.nlm.nih.gov/pubmed/22607273">implemented outright bans or other regulation</a> in accordance with the Council of Europe’s <a href="http://www.coe.int/en/web/bioethics/oviedo-convention">Oviedo (human rights and biomedicine) Convention</a>.</p>
<h2>Implications</h2>
<p>In Australia, the situation is very different. Patients considering predictive or family-based clinical genetic testing are <a href="https://www.mja.com.au/journal/2013/199/5/life-insurance-and-genetic-test-results-mutation-carriers-fight-achieve-full">frequently advised</a> to review their life insurance situation prior to taking the test, due to the obligation to disclose results to insurers. </p>
<p>The fear of unknown insurance implications deters some of these people from having this testing. This can sometimes mean <a href="https://www.ncbi.nlm.nih.gov/pubmed/28197815">passing up critical information</a> that can be used to <a href="https://www.mja.com.au/journal/2009/191/5/uptake-genetic-testing-colorectal-cancer-influenced-knowledge-insurance">help prevent cancers</a> and other serious diseases. </p>
<p>For example, <a href="https://www.mja.com.au/journal/2009/191/5/uptake-genetic-testing-colorectal-cancer-influenced-knowledge-insurance">one study</a> looked at patients at risk of bowel cancer due to family history. It found more than double the patients, who had been advised of the possible effect of having a positive test on their insurance claim, declined testing compared with patients who had not been advised of this possible effect. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/gene-testing-for-the-public-a-way-to-ward-off-disease-or-a-useless-worry-79757">Gene testing for the public: a way to ward off disease, or a useless worry?</a>
</strong>
</em>
</p>
<hr>
<p>Some participants are also being <a href="http://cebp.aacrjournals.org/content/early/2016/10/04/1055-9965.EPI-16-0395">deterred from involvement</a> in medical research, which can sometimes involve the return of genetic findings. Fortunately, this issue only affects life insurance and related policies in Australia, not private health insurance, which is <a href="http://www.privatehealth.gov.au/healthfunds/howhealthfundswork/">treated differently</a>. However, this distinction isn’t always understood by consumers, who may mistakenly believe that these issues affect all insurance types. </p>
<p>As genetic testing becomes more widespread in our society and offers increased potential to help manage patient risk, we must find a way of regulating the insurance implications. </p>
<p>The Australian government must take action towards an immediate ban (moratorium) on the use of genetic test results in insurance, until adequate long-term regulation is in place. This would bring us in line with other countries.</p>
<hr>
<p><em>If you have experienced genetic discrimination by an insurer, or have concerns about this issue and would like to be involved with enacting change, please contact the author.</em></p><img src="https://counter.theconversation.com/content/81335/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Lacaze receives funding from NHMRC and NIH. </span></em></p><p class="fine-print"><em><span>Jane Tiller does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Life insurance applicants must disclose genetic test results if required by the insurer. While other countries have protected consumers from this, there is no such regulation in Australia.Jane Tiller, Ethical, Legal & Social Adviser - Public Health Genomics, Monash UniversityPaul Lacaze, Head, Public Health Genomics Program, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/795582017-07-14T16:24:01Z2017-07-14T16:24:01ZHow risky are you? Why insurance works better with less discrimination<figure><img src="https://images.theconversation.com/files/177844/original/file-20170712-9330-1d9utyv.jpg?ixlib=rb-1.1.0&rect=189%2C63%2C5637%2C3413&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/athlete-walking-highline-slackline-tight-rope-516415948?src=KYgR1puIG1XqleeBolA2jw-3-34">Edu Silva 2ev/Shutterstock</a></span></figcaption></figure><p>Discrimination is a great taboo of our times, and yet one huge industry gets away with it every day. The insurance sector looks at us as risk with legs. It puts us into groups, and if we are in a group deemed riskier, we have to pay more. It’s even written into law. Anti-discrimination legislation usually <a href="http://www.legislation.gov.uk/ukpga/2010/15/schedule/3/part/5">includes exemptions</a> for insurance pricing. </p>
<p>Behind this approach lies the fear of an economic phenomenon known as “adverse selection”. In insurance terms it refers to the idea that you are more likely to buy insurance if you think you are going to need it. </p>
<p>This happens when insurers are not allowed to discriminate and the cost of risk has to be spread among the entire group. It means that insurance becomes a better deal for higher-risk people. Further down the line, the conventional wisdom is that this leads to higher average prices and fewer people insured – a bad outcome for insurers and society.</p>
<p>But is that conventional wisdom faulty? Thus far it has justified the insurance industry’s ability to charge more to some people for the same product. That may not always be justified after all.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=360&fit=crop&dpr=1 600w, https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=360&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=360&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=452&fit=crop&dpr=1 754w, https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=452&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/177845/original/file-20170712-3192-slas0t.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=452&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Living apart.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/excluded-group-business-concept-birds-on-460275331?src=dZEPHhsjtZ3MPHdN2IXzFQ-1-58">Lightspring/Shutterstock</a></span>
</figcaption>
</figure>
<h2>Loss coverage</h2>
<p>To explore this phenomenon, let’s look at a simple example on an island with a population of 10 people (and a curiously well-developed insurance industry).</p>
<p>With no bar on discrimination at all, an insurance company would set prices which matched risk. And so if eight of our island residents were low-risk and two were high-risk (let’s say they are genetically predisposed to illness), the premiums charged to each group would reflect their expected claims. </p>
<p><a href="https://books.google.co.uk/books?id=CXOuDgAAQBAJ&q=extant#v=onepage&q=census&f=false">Evidence suggests</a> that under that system, about half in each group would buy the insurance. The mix of higher and lower risks among the insured is the same as in the population. This means there is no adverse selection. It also means that half the population’s losses are compensated by insurance. We can call this a <a href="http://www.guythomas.org.uk/genetics/genetics.php">loss coverage</a> of 50%.</p>
<p>Now suppose our island’s curiously well-developed regulators stepped in to ban insurers from discriminating between higher and lower risks. Now they have to put all the islanders into one risk pool and charge the same premium to them all. </p>
<p>For insurers to break even, the pooled premium will need to be relatively expensive for the lower risks, leading fewer of them to buy – and it will be cheaper for the higher risks, leading more of them to buy. And so we have the dreaded adverse selection in play. </p>
<p>You can follow the pattern in the images below. Here, the different premiums are expressed as a figure between zero and one. On average, people in the second example are paying more for their insurance than before. And the number of people who buy is lower too (three, compared with five). These features – higher average price and lower numbers insured – are the classic features of adverse selection.</p>
<p>But wait. There is also a nice surprise. In the second example, with no discrimination but with consequent adverse selection, the loss coverage is now higher. That is, 56% of the island population’s expected losses are now compensated by insurance, compared with 50% before. The better outcome arises not <em>despite</em> adverse selection, but <em>because</em> of adverse selection. </p>
<h2>Tweaking the rules</h2>
<p>It’s not all plain sailing. If pooled premiums are set too high – so that lower risk people don’t bother with insurance at all – then adverse selection can be extreme and loss coverage plummets. But it seems from the above example that some limits on discrimination, leading to moderate adverse selection, can help. If we accept that the whole point of insurance is to compensate the population’s losses, then tweaking the rules of insurance to increase loss coverage seems a reasonable goal.</p>
<p>One way to do that is to make everyone buy insurance. That’s what we do for motorists, where the central goal is to protect other people and the need is the same for every driver. But what about life insurance? </p>
<p>Life insurance is very important for many people, but not for everyone. If you don’t have dependants, you probably don’t need life insurance – or perhaps your employer already provides it. Where individual needs vary so much, making everyone buy insurance doesn’t work well.</p>
<p>But if we leave people free to make their own choices, we can still tweak the rules to increase loss coverage. The key here is to allow only the level of discrimination in pricing which delivers the right amount of adverse selection. </p>
<p>The insurance industry <a href="https://www.abi.org.uk/news/news-articles/2011/03/european-court-of-justice-gender-ban-is-disappointing-news-for-uk-insurance-customers-says-the-abi/">complained</a> noisily when the EU stopped companies from applying different prices for men and women. But in truth this probably makes insurance work better, and so might limiting some other traditional exemptions. At present, insurers get almost a free pass from age and disability discrimination laws, on the grounds that discriminatory pricing is necessary to stamp out adverse selection. But if some adverse selection makes insurance work better – <a href="http://admin.cambridge.org/aq/academic/subjects/economics/finance/loss-coverage-why-insurance-works-better-some-adverse-selection?format=PB">as my argument suggests</a> – then we need to look at the exemptions again.</p><img src="https://counter.theconversation.com/content/79558/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Guy Thomas does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Insurers complain noisily when regulators step in to stop them charging more to some groups, but there might be a benefit to us all when a better balance is found.Guy Thomas, Honorary Lecturer in Actuarial Science, University of KentLicensed as Creative Commons – attribution, no derivatives.