Genetic testing poses risk to life insurers

Genetic testing could destabilise the insurance industry, as consumers may not disclose their health risks or could withdraw from life insurance because genetic testing shows that they are unlikely to suffer heritable diseases, according to the Actuaries Institute.

A report by the Institute found that genetic testing could both increase the cost of insurance and cause healthy consumers to withdraw from their policies, changing the structure of the industry.

The Institute warned that premium rates could increase to cover extra insurance claim costs, as people with an increased risk of future disease claimed life insurance at standard rates despite their genetic testing showing they should be in a higher risk bracket.

This could then lead to consumers with a clean bill of genetic health dropping out from the life insurance pool, as their risk of hereditary disease no longer warrants high insurance premiums.

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‘This creates a fundamental tension between the desire for insurance providers to be inclusive and not discriminate between insurance applicants, and the sustainability of insurance companies’ business models in the presence of information symmetry and potential anti-selection,” a report by the Institute said.

The Institute said that the end result could be life insurers finding themselves with a pool of insured lives with the genetics to become less healthy, pushing premiums up.

Australia currently has an industry code of conduct that prohibits insurers from requiring life insurance applicants take a genetic test.