Genetic testing may ‘become a threat’ to life insurance
An Actuaries Institute report suggests that genetic testing may “become a threat” to life insurance if it becomes more prevalent.
The report, Thinking about life insurance through a genetic lens, said genetic risk is “not viewed as a current threat to life insurance, however it may become a threat if genetic testing becomes more prevalent”.
It noted that, even if only a small proportion of the population is tested each year, the cumulative impact over time might become significant.
“We suggest that once about 2 to 5 per cent of the population has undertaken genetic tests, we may see a material impact on the life insurance industry,” the study said.
One concern, the report, noted is the direct to customer nature of many of the new genetic testing companies.
The Institute said this would make it difficult for insurers to prove non-disclosure and, therefore, easy for customers to anti-select against insurers.
The report also said that a further risk consideration for insurers is that an increase in claim cost would be predominately due to anti-selection of new applicants.
“This anti-selection risk can be somewhat managed by an insurer through their underwriting process,” it said.
“However, the risk of selective lapsation on the in-force book may be more difficult to manage as there are less direct management actions available.
“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.”
In April, the FSC announced it had made improvements to its mandatory standards around genetic testing and family history for its members.
The changes to Standard 11 – Genetic Testing Policy and Standard 16 – Family Medical History Policy are designed to ensure they remain relevant to consumers as scientific advances are made, the FSC said in a statement.
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