Applicant 202271 v AIA Australia ACN 004 837 861 (Discrimination)

Case •

[2023] ACAT 59

•

5 October 2023

ACT CIVIL & ADMINISTRATIVE TRIBUNAL

APPLICANT 202271 v AIA AUSTRALIA ACN 004 837 861 (Discrimination) [2023] ACAT 59

DT 71/2022

Catchwords:               DISCRIMINATION – unlawful discrimination on the grounds of disability in the provision of goods, services and facilities contrary to the Discrimination Act 1991 – whether the refusal to insure the applicant due to their disability is unlawful – application of section 28 of the Discrimination Act 1991 – the tribunal observes that Direct Products pose some special challenges for insurers due to their automated online nature – the Tribunal finds that it was reasonable for the respondent to manage the risks of its product in the manner that it did – the Tribunal accepts the respondent’s submissions that the applicant could apply for another product – the Tribunal has found there was not unlawful discrimination due to the operation of section 28

Legislation cited:        Discrimination Act 1991 ss 7, 8, 20, 28

Disability Discrimination Act 1992 (Cth) s 46
Human Rights Commission Act 2005 ss 53A, 53C

Cases cited:Bassanelli v QBE Insurance [2003] FMCA 412

QBE Insurance v Bassanelli [2004] FCA 396
Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342
Waters v Public Transport Corporation [1991] HCA 49
Xiros v Fortis Life Assurance Ltd [2001] FMCA 15

List of

Texts/Papers cited:     Babak Roshanael-Moghaddam and Wayne Katon, ‘Premature Mortality from General Medical Illnesses Among Persons with Bipolar Disorder: A Review’ (2009) 60(2) Psychiatric Services, 147

Financial Services Council, Life Insurance (Code of Practice, 2016)
Gin S Malhi et al, ‘Royal Australian and New Zealand College of Psychiatrists clinical practice guidelines for mood disorders: bipolar disorder summary’ (2018) 208(5) Medical Journal of Australia 219
Gin S Malhi et al, ‘Royal Australian and New Zealand College of Psychiatrists clinical practice guidelines for mood disorders’ (2015) 49(12) Australian & New Zealand Journal of Psychiatry, 1087
J. F. Hayes et al, ‘A systematic review and meta-analysis of premature mortality in bipolar affective disorder’ [2015] (131) Acta Psychiatrica Scandinavica, 417
Marion Leboyer et al, ‘Can bipolar disorder be viewed as a multi-system inflammatory disease?’ (2012) 141(1) J Affect Discord, 1
Miriam Weiner, Lois Warren and Jess G. Fiedorowicz ‘Cardiovascular Morbidity and Mortality in Bipolar Disorder’ (2011) 23(1) Ann Clin Psychiatry, 40

Tribunal:Senior Member L Beacroft

Member C Carnell

Date of Orders:  5 October 2023

Date of Reasons for Decision:      5 October 2023

AUSTRALIAN CAPITAL TERRITORY          )

CIVIL & ADMINISTRATIVE TRIBUNAL     )          DT 71/2022

BETWEEN:

APPLICANT 202271
Applicant

AND:

AIA AUSTRALIA ACN 004 837 861
Respondent

TRIBUNAL:Senior Member L Beacroft

Member C Carnell

DATE:5 October 2023

ORDER

The Tribunal orders that:

  1. The application is dismissed

    ………………………………..

Senior Member L Beacroft
For and on behalf of the Tribunal

REASONS FOR DECISION

Background

  1. On 8 November 2022, the Human Rights Commission (HRC) referred a complaint to the ACT Civil and Administrative Tribunal (the ACAT) under section 53A of the Human Rights Commission Act 2005 (the HRC Act). The complaint was by Applicant 202271 (the applicant) against AIA Australia ACN 004 837 861 (the respondent or AIA).

  2. The applicant claimed AIA had unlawfully discriminated against them on the grounds of disability in the provision of goods, services and facilities contrary to the Discrimination Act 1991 (the D Act). More specifically, they claimed that they were refused insurance because of their disability:

    On 18 March 2022, AIA treated me unfavourably by refusing to insure me and rejecting my application for the Life Cover including life insurance and trauma insurance because of my disability.[1]

    They sought orders that they be offered “insurance cover for death and trauma”, be paid damages of $131,808.50, and that the respondent stop discriminating against them, their family, and the Australian community.[2]

    [1] Applicant’s discrimination complaint to the Human Rights Commission dated 26 March 2022, page 3

    [2] Applicant’s submission dated 19 December 2022, page 37

  3. The respondent denied that it had acted unlawfully. It relied on section 28 of the D Act and on this basis contended that it is not unlawful for it to discriminate against a customer on the grounds of the customer’s disability if the discrimination is “reasonable in the circumstances, having regard to any actuarial or statistical data on which it is reasonable for [the respondent] to rely”.[3]

    [3] Respondent’s letter to ACT Human Rights Commission dated 16 August 2022, page 2

  4. The parties made written and oral submissions. The applicant, their spouse, and various witnesses for the respondent gave evidence. There were two hearings, the first on 24 February 2023, and the second on 25 July 2023. At the second hearing, the Tribunal asked the respondent to provide specific information, which it subsequently did. The applicant then provided a response, which, in part, went beyond the scope of the specific information, and indeed raised new issues.[4] The respondent then provided a further submission to which the applicant then responded.[5] The Tribunal has not considered submissions raised by either party beyond the scope of the specific request it made at the hearing on 25 July 2023, in the interests of fairness to both parties.

Agreed issues

[4] Applicant’s outline of reply submission dated 11 August 2023

[5] Email correspondence of parties dated 6 September 2023

  1. It was not contested that the applicant had, and has, a disability which is a protected attribute under section 7 of the D Act.[6] The applicant stated their diagnoses as: “bipolar affective disorder, mild non-psychotic querulous paranoia, and obsessive-compulsive disorder”.[7]

    [6] Transcript of proceedings 24 February 2023, page 8, lines 39-43

    [7] Witness statement of the applicant dated 19 December 2022 at [3]

  2. It was not contested that, when the respondent refused insurance to the applicant, that it treated the applicant unfavourably because the applicant has a protected attribute.[8]

    [8] Transcript of proceedings 24 February 2023, page 8, lines 41-43

  3. It was not disputed that the rebuttable presumption under section 53C of the HRC Act applies in this case – a rebuttable presumption that discrimination has occurred – which the respondent has the onus of rebutting. In any case, given the above agreed issues, the test for discrimination under section 8 of the D Act was met.

  4. It was acknowledged by the respondent that it has the onus of proving an exception that it seeks to rely on – in this case it has the onus of proving that section 28 of the D Act applies.[9]

    Contested issue

    [9] Transcript of proceedings 24 February 2023, page 9, lines 1-6

  5. The main contested issue in regard to liability was whether the refusal to insure the applicant due to their disability is unlawful, and more particularly whether the exception under section 28 of the D Act applies.

Summary of law

Statutory law

  1. The D Act states in Part 3 as follows:

    20     Goods, services and facilities

    It is unlawful for a person (the provider) who (whether for payment or not) provides goods or services, or makes facilities available, to discriminate against another person—

    (a)by refusing to provide those goods or services or make those facilities available to the other person; or

    (b)in the terms or conditions on which the provider provides those goods or services or makes those facilities available to the other person; or

    (c)in the way in which the provider provides those goods or services or makes those facilities available to the other person.

    28     Insurance

    Part 3 does not make it unlawful for a person (the first person) to discriminate against someone else (the second person) in relation to the terms on which an annuity or policy of insurance is offered to, or may be obtained by, the second person, if the discrimination is reasonable in the circumstances, having regard to any actuarial or statistical data on which it is reasonable for the first person to rely.

  2. Section 28 provides an exception to discrimination being unlawful where the provision applies. The respondent made submissions about the interpretation and limits to this exception during the hearing on 25 July 2023.[10] The respondent acknowledged that the scope of section 28 is not unlimited, for example, it may not apply to some discrimination that occurs “in the way in which the provider provides those goods or services or makes those facilities available to the other person”.[11] The respondent contended that the wording of section 28 clearly means that it does apply where the discrimination concerns the refusal to insure or the terms of the insurance offered, provided that the discrimination otherwise meets the requirements of section 28. The Tribunal agrees with the respondent’s interpretation of the meaning and scope of section 28 – it is consistent with the plain meaning of the section, case law, and the relevant Explanatory Statement.[12] It is also consistent with the plain meaning of a similar provision (s46) in the Disability Discrimination Act 1992 (Cth), case law, and the relevant Explanatory Memorandum for that Commonwealth provision.[13]

    Case law

    [10] Transcript of proceedings 25 July 2023, page 13, line 1-page 19, line 3

    [11] Transcript of proceedings 25 July 2023, pages 14, line 20-page 15, line 27, citing Discrimination Act 1991 section 20(c)

    [12] Explanatory Memorandum, Human Rights and Equal Opportunity Bill 1991

    [13] Explanatory Memorandum, Disability Discrimination Bill 1992

  3. Xiros v Fortis Life Assurance Ltd (Xiros) found that the respondent insurer was entitled to the exemption under section 46(2) of the Disability Discrimination Act1992 (Cth) given the actuarial and statistical evidence before the court.[14] Section 46(2) is a provision that is like section 28 of the D Act as mentioned above. The court in Xiros reviewed the authorities on ‘reasonableness’[15] and stated the test as follows:

    The test of reasonableness is less demanding than one of necessity but more demanding than one of convenience…The criterion is an objective one which requires the court to weigh the nature and extent of the discriminatory effect on the one hand against the reasons advanced in favour of the requirement or condition on the other. All the circumstances of the case must be taken into account.[16]

    [14] [2001] FMCA 15

    [15] Waters v Public Transport Corporation [1991] HCA 49 at [29] (Dawson and Toohey JJ), quoting Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342 at [51]

    [16] Xiros v Fortis Life Assurance Ltd [2001] FMCA 15 at [16], quoting Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342 at [51]

  4. The respondent cited various cases to support its key contentions, and referred the Tribunal to the test for ‘reasonableness’ as set out above.[17]

    [17] Respondent’s outline of submissions dated 24 February 2023 at [8]-[10]

  5. In Xiros, the court confirmed “anti-selection” was a risk that an insurer was entitled to manage, and explained it as follows:

    the risk that persons will intentionally select a policy of insurance offered by a particular insurer to provide cover against risks to which those persons are peculiarly susceptible.[18]

    [18] Xirosv Fortis Life Assurance Ltd [2001] FMCA 15 at [16]

  6. In Bassanelli v QBE Insurance (Bassanelli), the court found that the refusal by the respondent insurer to issue any policy whatsoever was unreasonable, that it was not entitled to the insurance exemption.[19] The case involved a product that was not a ‘Direct Product’ - a Direct Product involves an automated assessment. In Bassanelli the product involved an assessment by an appraisal officer of the insurer. Further, unlike this case there was no actuarial or statistical data relied on.[20] On appeal, the Federal Court of Australia clarified that, when deciding if the insurance exception in the Commonwealth law applied, it was not reasonable to rely on actuarial and statistical data where its “nature and quality” is objectively assessed to be inadequate in the case, and the data must have been available and actually relied on at the time when the discriminatory conduct occurred:

    The first of those elements [in the statutory insurance exemption] focuses upon the decision-making of the discriminator. The use of the expression ‘is based’ and the reference to reliance must mean that the discriminator actually based its decision upon certain actuarial or statistical data. Then the inquiry directs attention to the reasonableness of the discriminator in having relied upon the data. It involves an objective judgment about the nature and quality of the actuarial or statistical data relied on. The actuary or statistician (or the data itself) may indicate that for whatever reason it would not be reasonable to rely upon it. It may be qualified, or be an insufficient sample for reliable use, or not be directly applicable to the decision. There may be other reasons why, on its face, it would not be reasonable to rely upon it. There may be actuarial or statistical data upon which it may be unreasonable to rely for other reasons external to the data being relied upon. The data may be incomplete, or out-of-date, or discredited, and the decision-maker ought, in the circumstances, to have known that.[21]

    [19] [2003] FMCA 412 at [36]-[37], citing Xiros v Fortis Life Assurance Ltd [2001] FMCA 15

    [20] Bassanelli v QBE Insurance [2003] FMCA 412 at [22] and [37]

    [21] QBE InsurancevBassanelli [2004] FCA 396 at [30]

  7. In Bassanelli, the court determined that “[t]he reasons given for not issuing a policy, which excluded all medical events, were that such a policy would be uneconomic and was not a standard form policy for [that insurer]”.[22] The evidence was that the insurer’s staff had, in the past, issued such policies, and the court noted that the insurer could not answer key questions during the court proceedings about why the applicant should be denied the insurance.[23] The court stated that the matters it took into account were: the nature of insurance contracts, the history of claims, the medical evidence, that it was an urgent application, and that the insurer did not obtain any further medical information stating that “any information that [it] did obtain would just reinforce [its] decision”.[24] The court found that the decision was one of “convenience” and unreasonable.[25]

Applicant’s contentions

[22] Bassanelli v QBE Insurance [2003] FMCA 412 at [54]

[23] Bassanelli v QBE Insurance [2003] FMCA 412 at [54]

[24] Bassanelli v QBE Insurance [2003] FMCA 412 at [55]

[25] Bassanelli v QBE Insurance [2003] FMCA 412 at [55]

  1. In their complaint to the HRC, the applicant stated that the respondent unlawfully discriminated against them “by refusing to insure [them] and rejecting [their] application …because of [their] disability”.[26] The applicant contended that they manage their disability well, their spouse gave similar evidence on this issue, and they provided evidence to support this.[27] The applicant stated in their oral evidence that they were fully capable of completing the online application and did not regard their disability as adversely impacting their ability to do so.[28] In the hearing on 25 July 2023, the applicant was clear that their complaint was about the rejection of their application, delivered in such a quick manner after they had completed the online application, and without the specifics of their mental illness and circumstances being considered or even known by AIA at that time.[29]

    [26] Applicant’s discrimination complaint to the Human Rights Commission dated 26 March 2022, page 3

    [27] Attachment – ‘Letter from [Health Practitioner], Notes on Consultation’ dated 25 January 2023 to applicant’s final submission dated 10 March 2023 at [4]; Witness statement of the applicant’s spouse, dated 19 December 2022 at [4]

    [28] Transcript of proceedings 25 July 2023, page 9, lines 41-47

    [29] Transcript of proceedings 25 July 2023, page 9, line 4-page 10, line 40

  2. In their witness statement they expanded on their complaint as follows:

    [I]mmediately after I hit the ‘Submit’ button at the end of the online insurance application, a rejection message form the respondent popped up on the screen … I contend, the respondent did not read and rely on any statistical and actuarial data while making a decision of refusing to offer me the insurance cover [b]ecause the decision of rejection or refusal was very quick … I contacted via email the customer service department of the respondent seeking reasons … I received a response … I submitted a disability discrimination complaint. I disclosed my medical condition … in my complaint. I believe the respondent came to know about my exact protected attribute (bipolar) because of my complaint to the ACT HRC.[30]

    [30] Witness statement of the applicant dated 19 December 2022 at [10]-[15]

  3. In their oral evidence the applicant re-iterated that, when their application was refused, they had called the 1800 number provided on the screen, but was told that the relevant team was closed due to the call coming after hours, and that they then promptly emailed various email addresses at AIA about the refusal.[31] After it was confirmed in the hearing on 24 February 2023 by Ms Gibbs that the online application process and related questions did “not delve into the detail of someone’s condition”,[32] the applicant reiterated their complaint that this was not appropriate. They explained that it was not appropriate for the question which was the basis of the refusal to be framed so generally, in that it asked if they had any of a number of mental health conditions.[33]

    [31] Transcript of proceedings dated 24 February 2023, page 93, line 20-page 96, line 10

    [32] Transcript of proceedings dated 24 February 2023, page 63, lines 24-25

    [33] Transcript of proceedings dated 24 February 2023, page 31, lines 26-31

  4. The applicant’s submission, dated 11 August 2023, stated that records of their application process, as submitted by the respondent, were “unauthentic, incomplete” and contained “manipulated data.”[34] The applicant set out what they contended were examples of the unreliability of the respondent’s data, and in doing so raised issues that had not been raised at the prior hearings, as well as proffering new evidence, including records from a new application process they undertook on 6 August 2023 for insurance from the respondent.

    [34] Applicant’s outline of reply submissions dated 11 August 2023 at [15]

  5. The applicant’s final submission was a response to the second Witness Statement by Ms Gibbs, dated 4 August 2023, which was submitted by the respondent (with attachments). These latter party submissions followed a specific request for certain information issued by the Tribunal to the respondent at the conclusion of the second hearing day on 25 July 2023. As explained above, after the respondent provided its response, the applicant provided a submission which, in part, went beyond the scope of the specific information, and indeed raised new issues. The respondent then provided a further submission to which the applicant then responded.[35] As stated above, the Tribunal has not considered submissions raised by either party beyond the scope of the specific request it made at the hearing on 25 July 2023, in the interests of fairness to both parties.

Respondent’s contentions

[35] Email correspondence of parties dated 6 September 2023

  1. The respondent directed its main submissions to the question of whether section 28 – the exemption for otherwise unlawful discrimination – applied in this case. In summary, it contended that this is a question of fact, requiring determination that “the outcome was reasonable having regard to actuarial or statistical data” and that it is reasonable for the respondent to rely on that data.[36] ‘Reasonable’ in this context means that:

    The decision not to offer cover for bipolar disorder through the product applied for be one which [is] rationally open to [the respondent], having regard to actuarial or statistical data.[37]

    The respondent, by submissions and in evidence, set out other factors relevant to determining if the refusal was ‘reasonable’ in the circumstances, including in the hearing on 25 July 2023.[38]

    [36] Respondent’s outline of submissions dated 24 February 2023 at [7]

    [37] Respondent’s outline of submissions dated 24 February 2023 at [11]

    [38] Transcript of proceedings 25 July 2023, page 21, lines 8-38

  1. The particular online application process and product offered by the respondent in this case was defined and referred to as a ‘Direct Product’, the nature of which meant there was no opportunity for the respondent to obtain further information from the applicant, such as medical reports.[39]

    Direct products are designed to provide customers with the opportunity to obtain a quick, tailored quote without the need to consult an adviser (sic) and undertake a potentially lengthy underwriting process. They provide standard insurance cover to people that represent relatively low risks.[40]

    [39] Respondent’s outline of submissions dated 24 February 2023 at [13]

    [40] Respondent’s outline of submissions dated 24 February 2023 at [22]

  2. The product did not provide cover for “schizophrenia, bipolar disorder, major or severe depression or other psychotic disorders” and this was reflected in the pricing which had been approved within AIA and by regulatory bodies – the decision not to provide automatic cover for these disorders was “reasonable having regard to the increased mortality and morbidity risks associated with the conditions”.[41]

    [41] Respondent’s outline of submissions dated 24 February 2023 at [24]-[25]

  3. If the product was manually underwritten, the respondent would have been required to comply with the relevant reinsurer’s guidelines, in this case the “Hannover Life Re of Australasia Ltd” (the Underwriting Guidelines). For an applicant with bipolar disorder, the Underwriting Guidelines require an assessment of the level of bipolar disorder from mild to severe, and other circumstances and conditions of the applicant.[42] Then either an increased premium will be imposed, or the application will be declined due to risk.[43] The Underwriting Guidelines are based on actuarial and statistical data, some of which was provided by the respondent in evidence, which leads to the conclusion that bipolar is associated with increased “mortality and morbidity risks”.[44]

    [42] Respondent’s outline of submissions dated 24 February 2023 at [18]-[19]

    [43] Respondent’s outline of submissions dated 24 February 2023 at [19]

    [44] Respondent’s outline of submissions dated 24 February 2023 at [21]

  4. The Underwriting Guidelines “informed the design of the ruleset that the automated process [for applying for the product] applied”.[45] Also, actuarial and statical data that relates to the Underwriting Guidelines was used to price the product; it was priced “on the assumption that bipolar disorder and other excluded disorders were not included in the risks covered … [and if this changed] to cover conditions such as bipolar disorder and schizophrenia, it would increase the price”.[46] Importantly, the respondent contended that section 28 does not require it to “consult the …data every time an application is declined.”[47]

    [45] Respondent’s further and final submissions dated 9 March 2023 at [18]

    [46] Respondent’s further and final submissions dated 9 March 2023 at [17]

    [47] Respondent’s outline of submissions dated 24 February 2023 at [7]

  5. The respondent contended that a risk associated with Direct Products is “anti‑selection”. It explained this risk as follows:

    [I]f AIA’s direct products were required to offer automatic cover for bipolar disorder and other major mood and psychotic disorders, AIA would be at risk of having to accept a disproportionate number of applications for cover by persons with [such disorders] who would not be covered by other insurers or under retail or group life products…It could have material consequences for the financial viability of the product.[48]

    [48] Respondent’s outline of submissions dated 24 February 2023 at [31]

  6. The respondent provided copies of the information that was displayed during the online application process at the time the applicant made their application for cover, and documents that were able to be accessed during this process i.e., the Product Disclosure Statement (PDS) and the Target Market Determination.[49] Early in the online application process, the screen headed “What you can expect” stated that the product is available to Commonwealth Bank of Australia (CBA) customers who meet certain criteria set out there and who “have read” the PDS.[50] The respondent pointed out that the Target Market Determination document referred to in the PDS states that the “insurance cover has not been designed for individuals who … do not meet underwriting requirements”.[51]

    [49] Respondent’s further and final submissions dated 9 March 2023 at [6]-[16]; Annexures to witness statement of Lisa Gibbs dated 10 February 2023, pages 54-65

    [50] Annexures to witness statement of Lisa Gibbs dated 10 February 2023, page 54

    [51] Respondent’s further and final submissions dated 9 March 2023 at [10-11] and Exhibit R1 – ‘Target Market Determination’, page 2

  7. The respondent accepted that the online screens that were displayed “did not list medical and other conditions that would result in the application being declined”,[52] and that the PDS did not list these.[53] However, it contended that providing information about who might not have the application accepted for the insurance, before an applicant completes the online application process, would “unduly complicate the application process…[with] some 86 instances in which the ruleset provides for cover to be declined”.[54] In any case, the respondent claimed that the issue is not relevant to whether the respondent has acted in an unlawful discriminatory manner in this case because the applicant has made it clear that the discriminatory conduct they complains of is the refusal to provide them insurance.[55]

    [52] Respondent’s further and final submissions dated 9 March 2023 at [7]

    [53] Respondent’s further and final submissions dated 9 March 2023 at [8], citing Exhibit R1 – ‘Target Market Determination’

    [54] Respondent’s further and final submissions dated 9 March 2023 at [13]-[15]

    [55] Respondent’s further and final submissions dated 9 March 2023 at [16]; Transcript of proceedings 25 July 2023, page 8, line 25-page 9, line 18

  8. The respondent explained that an extra paragraph has since been added to the last screen in the case of an application being refused as follows:

    We may be able to help you with other protection options, from a range of insurance providers. Get in touch with an authorised AIA Financial Wellbeing Financial Planner by calling [an 1800 number in specified hours and days] for an obligation free general discussion around your needs.[56]

    Ms Gibbs stated in her oral evidence that this was able to be added after CBA agreed that this paragraph, which refers readers to another product, could be added.[57]

    [56] Annexures to witness statement of Lisa Gibbs dated 10 February 2023, page 65

    [57] Transcript of proceedings 24 February 2023, page 37 line 40-page 38, line 4

  9. The evidence of the respondent’s witnesses is summarised below.

    Evidence of Mr Robert Michel, Underwriting Solutions Manager, AIA

  10. In his statement dated 10 February 2023, Mr Michel explained that part of his underwriting responsibilities is to assess “applications for insurance against the risk of future claims”.[58] Key risks include “medical, financial, occupational, pastimes, and habits”.[59] The underwriting process differs in “depth and complexity between retail, group life and direct insurance products”[60] – direct insurance involves an automated process and underwriting determines the ruleset underpinning the product.[61] The effect of the ruleset for the product that the applicant applied for is to “allow cover for less severe mental health conditions that are associated with lower levels of risk” and to decline cover for more severe forms, that includes bipolar disorder, which are associated with higher levels of risk.[62] Mr Michel specified bipolar is considered to be one of the more severe mental health conditions, and has risks relevant to life and TPD insurance, and he annexed two journal articles detailing these.[63]

    [58] Witness statement of Robert Michel dated 10 February 2023 at [4]

    [59] Witness statement of Robert Michel dated 10 February 2023 at [5]

    [60] Witness statement of Robert Michel dated 10 February 2023 at [6]

    [61] Witness statement of Robert Michel dated 10 February 2023 at [17]

    [62] Witness statement of Robert Michel dated 10 February 2023 at [18]

    [63] Witness statement of Robert Michel dated 10 February 2023 at [19]-[21], Annexures to witness statement of Robert Michel dated 10 February 2023, pages 1-16

  11. He also annexed the underwriting guidelines used to develop the “online application questions” for the direct product that the applicant applied for, which were developed by the reinsurer Hannover Re Australasia.[64] For the purposes of preparing his statement, he obtained the “actuarial and statistical data underlying Hannover’s underwriting guidelines [the Underwriting Guidelines] for bipolar”, which he summarised in his statement, including meta analyses of the data.[65] While a retail product applying the Underwriting Guidelines might allow someone with bipolar disorder to obtain insurance, this would involve an assessment against numerous criteria about its severity, usually with an adviser involved and a report from a treating medical practitioner provided.[66] However, the Direct Product “does not allow for manual underwriting or requesting any further medical requirements…therefore it is not practically possible to address these criteria through a Direct product application”.[67]

    [64] Witness statement of Robert Michel at [21]; Annexures to witness statement of Robert Michel dated 10 February 2023, pages 23-27

    [65] Witness statement of Robert Michel dated 10 February 2023 at [22]

    [66] Witness statement of Robert Michel dated 10 February 2023 at [7] and [23]

    [67] Witness statement of Robert Michel dated 10 February 2023 at [26]

  12. Mr Michel’s oral evidence confirmed his written statement.

    Evidence of Ms Jenny Gibson, Head of Actuarial, Finance and Business Support, AIA

  13. In her statement dated 14 February 2023, Ms Gibson stated that her responsibilities include pricing and reviewing insurance products, including direct products, to advise AIA in pricing assumptions, and to advise the appointed actuary in complying with the APRA Prudential Standard CPS320.[68] The standard aims to ensure that there are adequate premiums to support sound management of insurers and to protect policy holders’ interests.[69] She was involved in reviewing what the applicant applied for.[70] It was a product provided through CBA and was one of two in the CBA MaxLife Product, being “Life Insurance provided by AIA” (LPA).[71] Ms Gibson stated that LPA is a direct product and therefore has a “simplified underwriting assessment … via a limited number of questions with outcomes built into the product application tool”.[72] She noted and attached as relevant various documents required for the LPA to be approved.[73] Neither MaxLife or LPA products provided cover for bipolar disorder and other mental illnesses described as “major mood and psychotic disorders” and this was “reflected in the pricing”.[74]

    [68] Witness statement of Jenny Gibson dated 14 February 2023 at [2]

    [69] Witness statement of Jenny Gibson dated 14 February 2023 at [2]

    [70] Witness statement of Jenny Gibson dated 14 February 2023 at [3]

    [71] Witness statement of Jenny Gibson dated 14 February 2023 at [3]

    [72] Witness statement of Jenny Gibson dated 14 February 2023 at [5]

    [73] Witness statement of Jenny Gibson dated 14 February 2023 at [9]-[10]

    [74] Witness statement of Jenny Gibson dated 14 February 2023 at [11]

  14. If she had been asked to consider including major mood and psychotic disorders for the LPA product, Ms Gibson stated that, if this involved the additional risk associated with these disorders being passed onto applicants who identified as sufferers, then pricing could be “2 or 3 times the usual premiums”.[75] She referred to information and analysis and data from AIA and others, including a report which she provided as an attachment, which showed that such disorders are a significant percent of current claims, and if coupled with potential “deselection”, would increase the cost to consumers.[76]

    [75] Witness statement of Jenny Gibson dated 14 February 2023 at [14]-[21]; Annexures to witness statement of Jenny Gibson dated 14 February 2023, pages 82-89

    [76] Witness statement of Jenny Gibson dated 14 February 2023 at [14]-[21], Annexures to witness statement of Jenny Gibson dated 14 February 2023, pages 82-89

  15. Relevant to pricing was managing the risk of “deselection”, which she explained as follows:

    This refers to the risk that, if cover is made available for a condition which is not covered by other comparable products in the marketplace, the insurer offering that cover will receive a disproportionate number of applicants who suffer from or are at risk of suffering from that particular condition…Underestimating the number of individuals who anti-select will have material consequences on the financial viability of the product.[77]

    [77] Witness statement of Jenny Gibson dated 14 February 2023 at [21]

  16. Ms Gibson’s oral evidence confirmed her written statement.

    Evidence of Ms Lisa Gibbs, Product Manager in the direct product and pricing team, AIA

  17. In her statement dated 10 February 2023, Ms Gibbs confirmed her role as Product Manager in the Direct Product & Pricing team for AIA, the respondent. She explained that:

    A direct insurance product is a policy of insurance that a customer can apply for on their own, that is without an adviser (known as a retail insurance product) or without going through a superannuation fund (known as a group insurance product). The application for a direct insurance product is made either online or over the phone depending on the AIA business partner offering the product. The current business partners selling AIA insurance products [include] CBA.[78]

    [78] Witness statement of Lisa Gibbs dated 10 February 2023 at [3]

  18. Further, Ms Gibbs explained that “[i]n 2019, CBA partnered with AIA to distribute a version of the MaxLife Life Protect product with slight variations. The life insurance product launched is called ‘Life Insurance Provided by AIA Australia’ (LPA)”.[79] The applicant applied for LPA, a direct insurance product available through CBA.[80]

    [79] Witness statement of Lisa Gibbs dated 10 February 2023 at [10]

    [80] Witness statement of Lisa Gibbs dated 10 February 2023 at [11]

  19. Ms Gibbs explained as follows:

    Each direct product has an underlying ruleset which sets the risk limits AIA has assessed as acceptable risks. The ruleset contains underwriting questions and outcomes based on product design, AIA’s acceptable risk tolerance, reinsurer’s risk tolerance, pricing rates/impact and internal/external reinsurer’s guidelines.

    The applicable ruleset is agreed with the relevant reinsurer for the direct product.

    The ruleset underpinning the LPA is contained in a computer code throughout the application process. This is translated into code from a spreadsheet …[which] shows the questions asked throughout the application process and the decision pathway that the software guides the customer through.[81]

    [81] Witness statement of Lisa Gibbs dated 10 February 2023 at [12]-[14]

  20. To her witness statement, Ms Gibbs attached the relevant spreadsheet for LPA – being the version current at the time the applicant applied,[82] and a “summary of the questions that were asked and answered by the applicant when completing the online application”.[83]

    [82] Witness statement of Lisa Gibbs dated 10 February 2023 at [14]-[15]; Annexures to witness statement of Lisa Gibbs dated 10 February 2023, pages 48-50

    [83] Witness statement of Lisa Gibbs dated 10 February 2023 at [18]; Annexures to witness statement of Lisa Gibbs dated 10 February 2023, pages 51-53

  21. In this summary, she stated:

    The applicant answered “yes” to question 17.1 “Have you ever been diagnosed with schizophrenia, bipolar disorder, major or severe depression, or other psychotic disorder?” which resulted in an automatic decline. At this point, given the applicant’s answer, AIA would require further information from the applicant in order to proceed with [their] application for cover.[84]

    As Ms Gibbs had previously explained, this is not available in an online application process for a direct insurance product, in contrast to a retail insurance product.[85] Therefore, this direct product, LPA, “was not suitable for the applicant and [their] application was declined”.[86]

    [84] Witness statement of Lisa Gibbs dated 10 February 2023 at [19]; Annexures to witness statement of Lisa Gibbs dated 10 February 2023, page 53

    [85] Witness statement of Lisa Gibbs dated 10 February 2023 at [4], [6]

    [86] Witness statement of Lisa Gibbs dated 10 February 2023 at [19]

  22. She attached a “walk-through of the online application process that the applicant would have completed for the … LPA product”.[87] She stated:

    No changes have been made to this application process since the applicant applied for cover, apart from the final declinature page which was edited in October 2022 to include an additional paragraph directing declined customers to contact an AIA financial planner. The AIA Financial Wellbeing team was created in 2022.

    To access this online application the applicant would have gone through CBA’s website. The application is a quick and simple process which does not require an applicant to supply supporting information or provide any medical records.[88]

    [87] Witness statement of Lisa Gibbs dated 10 February 2023 at [20]; Annexures to witness statement of Lisa Gibbs dated 10 February 2023, pages 54 to 65

    [88] Witness statement of Lisa Gibbs dated 10 February 2023 at [20]-[21]

  23. She further explained the respondent’s processes as follows:

    On the final page, after the applicant’s application was declined, [they] would have been directed to contact a customer service number for further information. The process is that, had [they] contacted this number, [they] would have been advised that [they] could arrange a consultation with a financial planner or adviser to explore options for a fully underwritten insurance product. The final page of the applicant’s online application would have read as follows:

    ‘We’re sorry.

    We’re sorry but we aren’t able to offer you Life Insurance provided by AIA Australia. This is due to some of the answers you provided to the health and lifestyle questions.

    If you have questions about your application, please call us on 1800 491 588 between 9am and 5pm, Mon – Fri AEST/AEDT.’

    Although the online application was declined, the applicant was able to go through the consultation process and apply for insurance cover through an adviser.[89]

    [89] Witness statement of Lisa Gibbs dated 10 February 2023 at [22]-[23]

  24. Ms Gibbs agreed that the applicant was not advised as part of the online application and refusal process of the reasons for this refusal, or that they might be eligible for another form of life insurance. She stated that the phone number provided to an applicant when advised of refusal in the online process was to a call centre, not an adviser, and was intended to allow the applicant to make inquiries about such matters or be referred onto an adviser.[90] She also agreed in her oral evidence that after the date the applicant applied, there had been changes to the online application process for this product, as set out in her statement. Specifically, in the information provided to unsuccessful applicants, such that unsuccessful applicants are now provided a phone number for an AIA adviser. She stated that this change was able to be made after a new agreement with CBA and other distribution partners was finalized.[91]

    [90] Transcript of proceedings 24 February 2023, page 33 line 42-page 34 line 3

    [91] Transcript of proceedings 24 February 2023, page 34 lines 25-38

  25. Ms Gibbs provided a second Witness Statement, dated 4 August 2023, with attachments, which was submitted in answer to a specific request from the Tribunal at the second hearing on 25 July 2023. The second witness statement included details about help that could be requested by an applicant and follow up that could then be provided by an “insurance specialist”, during the online application process.[92] She provided the respondent’s records about the applicant’s response to this question. The records were not screenshots, but data captured in a spreadsheet, which showed that the applicant had stated “no” to “consent to call”.[93] She explained that in answering “no” the respondent then had no authority to pro-actively follow-up with them due to regulatory, anti-hawking requirements.[94]

Findings

[92] Witness statement of Lisa Gibbs dated 4 August 2023 at [1]-[8]

[93] Witness statement of Lisa Gibbs dated 4 August 2023 at 10; Annexure A to witness statement of Lisa Gibbs dated 4 August 2023

[94] Witness statement of Lisa Gibbs dated 4 August 2023 at [6]-[7]

  1. As set out earlier, there were many agreed issues in this case. It is not necessary for the Tribunal to make findings about these.

  2. In all matters considering discrimination and the application of these types of statutory provisions, it is important to identify specifically and with certainty what the discriminatory conduct complained of was and/or is. In this case it is especially so, and the Tribunal finds that the discriminatory conduct which the applicant complains of is the refusal to provide them with the insurance product that they applied for. Therefore, the issue relevant to liability that the Tribunal must determine was whether section 28 of the D Act applies in this case. More specifically, has the respondent met its onus to show that the refusal to insure the applicant was “reasonable in the circumstances” with regard to “any actuarial or statistical data [on which] it is reasonable for [the respondent] to rely”?

    Actuarial and statistical data

  3. Firstly, the Tribunal has considered the evidence about the reasonableness of actuarial and statistical evidence submitted by the respondent, which it contended it relied on in refusing to provide insurance to the applicant. The Tribunal finds that the data was of adequate quality and relevance for it to be reasonable in the circumstances, both for the respondent to apply it in this case and on this basis to refuse insurance for the applicant.

  4. The Tribunal agrees with the respondent that section 28 does not require the respondent to “consult the … data every time an application is declined”,[95] and that what is required under section 28 is that the respondent relied on that data when refusing the issue of an insurance product to this applicant. The Tribunal finds that the respondent relied on the submitted data in this manner, in that the submitted data underpinned the online application and automated decision‑making process which led to the insurance being refused to the applicant.

    [95] Respondent’s outline of submissions dated 24 February 2023 at [7]

  5. The evidence from the respondent’s witnesses on these issues, as summarised above, was consistent, comprehensive, relevant, and not seriously contested by the applicant. It provides a very strong basis for these findings.

Other factors

  1. The Tribunal agrees with the respondent’s position as set out in the hearing on 25 July 2023, insofar as the ‘other factors’ to be considered when determining if section 28 applies in this case are:

    (a)the nature of the product, being a ‘Direct Product’; and

    (b)whether the applicant could apply for another product, i.e., a ‘retail product’, which would (or at the very least could) consider the specifics of their mental illness and circumstances, and whether the applicant was given appropriate and adequate information so as to follow up this alternate avenue if they chose to do so.

    Findings regarding (a)

  2. Considering (a), the nature of a Direct Product was well explained by the respondent’s witnesses, as set out above in the summary of their evidence. The applicant’s complaint might be seen as a complaint about Direct Products in general, and whether such products are discriminatory by their very nature. The Tribunal observes that Direct Products pose some special challenges for insurers due to their automated online nature and there may be circumstances where such a product could be found to involve unlawful discrimination. However, the Tribunal has found, in the context of this case, there was not unlawful discrimination, in that section 28 applies.

  3. The Tribunal finds that it was reasonable for the respondent to manage the risks of its product in the manner that it did. The case law summarised above supports the view that business conduct about balancing risks and pricing in an insurance product, provided there is a sound basis in data, is reasonable. The Tribunal finds that it was reasonable for the respondent to manage the risk of ‘anti-selection’ and accepts that this risk is heightened when offering a Direct Product. In Xiros, the court confirmed anti-selection was a risk that an insurer was entitled to manage.[96] In this case, management of risk with pricing meant that what was offered was a Direct Product, being an online application process that was quick, required no medical reports, and that was consistent with the Underwriting Guidelines. This meant that applications would be accepted or rejected based on automated algorithms – or “rules” – which underpinned the answers as given to relevant questions. The applicant’s application for insurance was refused for this reason.

    Findings regarding (b)

    [96] Xiros v Fortis Life Assurance Ltd [2001] FMCA 15 at [16]

  4. Considering (b), the Tribunal accepts the respondent’s submissions that the applicant could apply for another product, that is – a ‘retail product’, which would allow a tailored (human) response from the insurer, including a specific consideration of their mental illness and circumstances, and how these might be managed or addressed in the delivery of an insurance product. However, it is clear from the evidence that, while the applicant was not directly or specifically advised of this at the time of or via the online refusal, they were referred to a 1800 number for further queries. It is contended by the respondent that the applicant could have been informed and assisted with such a process through the 1800 number. Section 28 requires the Tribunal to determine “if the discrimination is reasonable in the circumstances”.

  5. While the discriminatory conduct complained of is the refusal to insure, the Tribunal is of the view this involves consideration of the circumstances of the refusal, which in this case includes elements of the manner by which the refusal was conveyed to the applicant.

  6. Regarding the manner in which the respondent advised the applicant of its refusal, it is the Tribunal’s view that the critical and relevant evidence is as follows.

  7. As set out above, the respondent provided evidence that the applicant answered “No” to a question early in the online application process which asked if they needed help or would like an “AIA specialist to call [them] and follow up within 48 hours?”.[97] The applicant disputed the reliability of this evidence (as set out above), however the Tribunal finds that on this point, the respondent’s evidence is preferable, being internally and universally consistent with the totality of evidence submitted by witnesses and otherwise. The respondent provided evidence that the 1800 number for follow up was provided to the applicant on many of the screens of the online application and at the point of refusal.[98] Crucially, in their evidence the applicant stated that they were fully capable of completing the online application and did not regard their disability as adversely impacting their ability to do so.[99]

    [97] Witness statement of Lisa Gibbs dated 4 August 2023 at [2], [10]; Annexure A to witness statement of Lisa Gibbs dated 4 August 2023

    [98] Witness statement of Lisa Gibbs dated 4 August 2023 at [11]-[12]; Witness statement of Lisa Gibbs dated 14 February 2023 at [22]; Annexures to witness statement of Lisa Gibbs dated 14 February 2023, pages 59-65

    [99] Transcript of proceedings 25 July 2023, page 9, lines 41-47

  8. Upon being refused the insurance, the applicant stated that they promptly called the 1800 number provided, which, on the evidence, appears to have been a call which occurred (just) outside of office hours. The applicant, being dissatisfied with the information available via this call, promptly sent emails to various AIA email addresses requesting that they “look into my application” and “provide reasons for rejection”.[100] The emailed responses from the respondent dated 21 March 2023 and 22 March 2023 each provided some basis for the refusal as well as the same 1800 number to them for follow up, but they did not specifically tell them that they could apply for another product.[101] There is no evidence that the applicant called the 1800 number again in regard to this application, even though it was provided to them by the respondent. Upon being refused insurance via the online process, the applicant’s focus has been to find out the reasons for the refusal, and not to obtain information about another product that they might be eligible for. The applicant is entitled to this focus. However, whether the applicant could obtain information about other products which may be more tailored to their circumstances and disabilities is a relevant consideration to whether section 28 applies, and the Tribunal finds that the applicant could have (and indeed still can) pursue this avenue.

    [100] Email from applicant ‘Life Insurance Application’ dated 18 March 2022

    [101] Email from respondent ‘RE: Life Insurance Application’ dated 21 March 2022; Email from respondent ‘Complaint Resolution’ dated 22 March 2022

  9. The Tribunal accepts the respondent’s evidence that if the applicant called the 1800 number in office hours, they would have access to information about other products that they might be eligible for.

Conclusion

  1. The court in Xiros set out a basis for considering the reasonableness of relevant circumstances, involving weighing “the nature and extent of the discriminatory effect on the one hand against the reasons advanced in favour of the requirement or condition on the other”.[102] The Tribunal accepts that, upon being refused insurance, the applicant identified this issue – i.e., remaining uninsured by the respondent – as a significant issue, and that their view did not change after they received responses from AIA both shortly after and in ongoing communiques since the initial refusal. It is objectively significant that the applicant, in being refused, was uninsured. In the Tribunal’s view, the effects of the refusal to insure are significant.

    [102] Xiros v Fortis Life Assurance Ltd [2001] FMCA 15 at [16], quoting Secretary, Department of Foreign Affairs and Trade v Styles [1989] FCA 342 at [51]

  2. The respondent’s main submissions on this point were, and are, that it is impractical to include more detailed or tailored information when insurance is refused for this product, given the automated and online nature of the Direct Product. Further, the respondent contends the various referrals to the 1800 number throughout the online application process and at the time of the refusal provided an alternate avenue for this to (at least potentially) occur. In weighing the discriminatory effect of the refusal to insure against the reasons advanced by the respondent, the Tribunal considers it highly relevant that the applicant’s evidence was that they were competent to undertake the online process.

  3. The Tribunal finds that the refusal to insure the applicant, including the manner by which the refusal was conveyed to the applicant, was reasonable in all the circumstances of this case. While the refusal to insure and the manner by which it was conveyed may not have been therapeutic for the applicant, or illustrative of a sensitive customer service, it was not unlawful discrimination. Other circumstances in another case may lead to another conclusion.

    ………………………………..

Senior Member L Beacroft

For and on behalf of the Tribunal

Date(s) of hearing: 24 February 2023, 25 July 2023
Applicant: Self-represented
Counsel for the Respondent: Mr S Walsh
Solicitors for the Respondent: Clyde and Co Solicitors

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Cases Citing This Decision

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Cases Cited

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Statutory Material Cited

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Xiros v Fortis Life Assurance Limited [2001] FMCA 15
Waters v Public Transport Corporation [1991] HCA 49
Bassanelli v QBE Insurance [2003] FMCA 412