Introduction and Overview:
As part of its mandate under the Ontario Human Rights Code to promote awareness and understanding of human rights, the Ontario Human Rights Commission has initiated a research project to examine human rights issues in the insurance industry.
The objective of the Paper is twofold: to promote dialogue on protecting human rights in the insurance industry and to examine alternatives to current practices by obtaining input from experts, regulators and consumers. Access to insurance in our society raises significant issues about distributive justice and fairness in the public sphere, issues that have received scant attention in Canada and in Ontario where rate setting has traditionally been viewed as a private matter.
In 1992, the Supreme Court of Canada in Bates v. Zurich Insurance encouraged the industry to begin looking more closely at non-discriminatory alternatives in rate setting in the auto industry. It ruled that the insurance industry could continue to use discriminatory criteria such as age and marital status as a bona fide means of assessing risk, but that the industry could not do so indefinitely.
In light of the Supreme Court of Canada’s comments on this matter and the relative scarcity of human rights analysis on the insurance industry in this province, the Commission is of the view that this is an appropriate time to give consideration to human rights issues in insurance.
Human Rights and Insurance:
The Discussion Paper reviews insurance-related legislative authority, provisions of the Human Rights Code and discusses issues of discrimination in insurance.
Every person has the right to be free from discrimination in insurance in the areas of services, contracts and employment based on enumerated grounds under the Code. Insurance usually falls within the area of services or employment, depending on the context of the complaint.
Risk assessment and underwriting criteria are necessarily based on assumptions about groups and group behaviour that may conflict with human rights principles. Several insurance practices routinely distinguish between people based on, among other things, gender, age, marital status and disability. Many of these distinctions may be justified by valid business and actuarial standards, but others raise questions and concerns. Most important is the question of whether there are non-discriminatory alternatives to current practices and whether there have been efforts by the insurance industry to avoid practices such as setting premiums that are based on personal characteristics protected by human rights law.
There are four insurance-related exceptions or “defences” in sections 22 and 25 of the Code. These exceptions require distinctions based on age, sex, marital and family status or handicap to be bona fide and reasonable. In the case of handicap, insurers may allow limits as a result of pre-existing conditions or conditions that substantially increase risk. The underwriter’s assessment of whether a pre-existing condition substantially increases risk is often based on generalized assumptions about how a group behaves and the risk to the insured may be inaccurate in that it relies on stereotypes rather than the actual circumstances of the case.
The next area of concern relates to the pace of change in society generally and in human rights law and policy, changes that have had, little if any, impact on the business of insurance. Protection of privacy has expanded significantly in the last several years. There have been many cases related to equality and systemic disadvantage that have changed the face of human rights law dramatically. The insurance industry’s approach to underwriting, rate setting and risk assessment, on the other hand, has undergone relatively little change in practice, at least in regards to these issues. There is, therefore, a significant opportunity to develop innovative criteria that are capable of responding to new market realities as well as to societal developments.
A number of issues are described in the Discussion Paper with respect to these defences and human rights in insurance.
In light of the Bates v. Zurich Insurance ruling, questions arise as to whether current practices of risk assessment are still acceptable today, seven years after the Court’s directions to the industry to develop alternative methods of assessing risk. The paper examines whether there are alternatives to risk assessment that are not based on age, sex, family or marital status.
Life and Disability Insurance:
Pre-existing conditions are a bar to insurability. However, the reasonableness of exclusionary periods, the duty to disclose material facts and, once again, the existence of reasonable and bona fide exclusions and alternatives to current practices all raise serious human rights issues that have not received adequate attention from the courts or from academic writers. This is especially true for the duty to disclose material facts in light of emerging technologies such as genetic testing.
Distinctions between physical and mental disabilities have diminished somewhat in recent years as a result of case law, but is still a concern since insurers are still more reluctant to cover mental disabilities. The Paper discusses this issue in light of increased claims for stress-related disability claims arising out of the workplace.
Finally, women are partially excluded from receiving disability benefits while they are on pregnancy or parental leave under the Employment Standards Act, whereas a similar prohibition does not extend to men on parental leave.
The courts have repeatedly ruled that unequal treatment of gays and lesbians violates the Charter of Rights and Freedoms. Both the Code and the Insurance Act contain definitions of “spouse” that exclude same sex couples and are therefore discriminatory.
The insurance industry has the right to use sound and accepted insurance practices and to achieve the legitimate business objective of charging premiums commensurate with risk. However, new approaches to actuarial evidence and cost analyses may result in rate setting schemes or classifications that are non-discriminatory in nature or at least result in less discriminatory outcomes.
The Paper concludes by proposing several courses of action for the OHRC and other stakeholders in the industry to begin constructively addressing human rights issues in the insurance industry.