What genetic testing means for life insurers

“What we’re looking for when we are underwriting is to underwrite fairly and accurately and to set the appropriate price,” said Jack Dolan of the American Council of Life Insurers. “We are relying on making sure that we’re on a level playing field with an applicant so that when it comes to medical information, both sides are on the same page and there aren’t any secrets.”

Genetic testing represents a new development and sometimes these new medical developments can spook consumers, leading them toward the protection of insurance. “What we have found historically is that medical advances tend to increase the number of applicants that are given coverage,” said Dolan. “So it’s really important to recognize that we are an industry that, because we are always focused on accurately measuring the risks we assume, we want to make sure if a new development, like a medical advancement, becomes a standard of practice, that we have access to it.”

Providing insurance companies with access to genetic profiles of current or potential clients, though highly controversial, may become necessary. If the evolution and modernization of genetic testing continues on the path it’s currently on, and government regulation prevents life insurance companies from obtaining genetic profiles, it has the potential to cause a situation of asymmetric information — or a case in which one party to a transaction (consumers) has more or better information than the other party (insurers). In other words, an insurer’s worst nightmare.

Robert Green, a researcher in the genetics department of Harvard Medical School, conducted a study about how people reacted after they discovered they have a gene associated with Alzheimer’s and found they are five times more likely than the average person to buy long-term insurance. These findings upset those in the life insurance and long-term care industry, and rightfully so. This could, essentially, create such a costly asset that the entire market could disappear.

Increasing interest and availability

A 2010 study published in Health Economics found that up to 88 percent of people said they would like to take a test that could predict their odds of developing Alzheimer’s, arthritis, Huntington’s disease and other afflictions. As genetic tests become more accurate, widely available and inexpensive, its popularity will only continue to grow. History has shown that when new techniques have become widely recognized and used in the medical community, insurers often choose to incorporate them into the underwriting process. And genetic testing is no different. It is, however, something that is catching on so quickly, it has the potential to leave the industry in its dust.

Consumers can now order at-home genetic tests with the click of a computer mouse. For example, 23andMe, a California-based genomic and biotech company, offers “rapid genetic testing” kits to customers for use in the privacy of their home for a mere $99.00. The Genetic Testing Laboratories, Inc. offers mail-to-order genetic testing kits for $285.00, though if you buy in bulk, say one for each member of your household, the price drops in accordance — kind of like the Sam’s Club of genetic testing supplies. 

Though genetic testing, either at a facility or at-home, may not be commonplace just yet, the drastic drop in price and spike in interest over the last several years has the power to make it a common practice. According to National Institutes of Health National Human Genome Research Institute, the cost of genome sequencing has been in free fall, dropping as much as 90% since 2007. The drastic change in cost represents the rapid evolution of DNA sequencing technologies that has occurred in recent years.

But it’s not just the drop in price that shows genetic testing is becoming more mainstream. “There are more companies entering the market, more genetic counselors being trained, more genetic-based practices being set up in university hospitals around the U.S. and more patients seeking genetic testing for familial disorders,” said Lisa Salberg, founder and CEO of Hypertrophic Cardiomyopathy (HCM) Association, a resource center for HCM patients and medical providers. This, along with its accessibility and affordability is “proof of its increasing usage,” said Salberg.

Life insurance industry access to genetic information is controversial. Consumer groups argue that access will increase discrimination in life insurance premiums and discourage individuals from undergoing genetic testing that may provide health benefits. Conversely, life insurers argue that without access to risk information available to individuals, they face substantial financial risk from adverse selection.

Life insurance industry access to genetic information is controversial. Consumer groups argue that access will increase discrimination in life insurance premiums and discourage individuals from undergoing genetic testing that may provide health benefits. Conversely, life insurers argue that without access to risk information available to individuals, they face substantial financial risk from adverse selection.

Without government regulation, both consumers and insurers are left in limbo. It’s certainly a frightening situation for insurers, not having access to crucial information. And for consumers, privacy prevails. Trying to cater to both parties will be all but impossible. Regulations, which are surely on the horizon, will be bipartisan at best and anti-industry at worst.