Genetic tests are unlikely to create problems for life insurers for the immediate future as they are not entirely reliable at present and may be challenged in court by policy holders.
Furthermore, some of the conditions discovered in a genetic test are too rare to affect claims management or are common enough they are already evident in family history and blood tests, claims a new research paper.
The paper – ‘Thinking about life insurance through a genetic lens’ – by Dr Damjan Vukcevic from the University of Melbourne and BT Financial Group’s Jessica Chen said that genetic testing may become a threat to the pricing models of insurers in the future but would require more people to take the tests and supply the results when applying for insurance.
In the paper, Vukcevic and Chen said there was only a limited number of life-debilitating diseases which will definitely occur, usually later in life, that could be picked up by genetic testing and “…the incidence of such disorders is rare enough that they do not materially impact the costs of claims.”
“…once about 2% to 5% of the population has undertaken genetic tests, we may see a material impact on the life insurance industry…”
They added that predictive genetic tests were also limited in rejecting applications or varying premium rates “…because lifestyle factors are often a greater contributor to health outcomes and thus can counter-balance the predicted genetic risk” and could be challenged in court.
The pair said that genetic tests were only an emerging risk as few people had taken them but may become a problem for both insurers and individuals as the results did not change over time and could be used to anti-select against insurers.
“Even if only a small proportion of the population get tested each year, the cumulative impact over time might become significant. We suggest that once about 2% to 5% of the population has undertaken genetic tests, we may see a material impact on the life insurance industry,” Vukcevic and Chen said.
“A further risk consideration for insurers is that increase in claim cost would be predominately due to anti-selection of new applicants…In particular, it would be challenging to retain customers if their perceived need for insurance changes if they have greater awareness of their potential future health state.”
