The Irish Insurance Federation has warned of "significant" premium increases for all life assurance policy holders if the Disability Bill is enacted.
It says the legislation, which could restrict access to family medical history and genetic tests, would raise the likelihood of higher-than-anticipated claims and significantly increase costs for policy holders.
It also warned that insurance companies could stop offering some types of cover, such as critical illness insurance, which pays out a lump sum on the diagnosis of a serious illness.
Unlike health insurance, where policy holders pay the same regardless of age, premiums for life assurance policy holders may be based on factors such as age, gender and health status.
At present around four per cent of policy holders pay an additional loading on their life assurance policies because of health problems, while around one per cent are refused cover altogether.
The IIF's life assurance manager, Ms Jennifer Hoban, said insurance firms were concerned that applicants with sensitive health information could apply more frequently for cover, seek cover for higher amounts or receive a lower premium than they were entitled to.
"IIF members are of the view that any restriction on the ability of insurers to obtain information they currently have access to could have a serious negative impact on the price and availability of all product lines and in particular on critical illness cover," Ms Hoban told an Oireachtas committee yesterday.
She said restricted access to this information would have "significant negative consequences" for the continued availability of some health-related insurance products, such as critical illness cover.
Around €30 million was paid out to policy holders with critical illness insurance last year.
Ms Hoban said the industry operated a voluntary code of practice, where information on genetic tests was not sought for life assurance policies below the value of €381,000. She said such a threshold should be maintained under the new legislation, while restrictions should not be placed on access to family history.
The Equality Authority told the Oireachtas committee that the Disability Bill could reduce existing provisions in law for disabled people.
Mr Niall Crowley said: "They [the Bill's contents] could diminish and reduce existing provisions and will be a source of confusion in the public sector in relation to their obligations towards people with disabilities."
He also said compliance measures in the Bill surrounding the provision of services were "bureaucratic, complex, resource intensive".