The use of genetic testing in life and health insurance underwriting has been a key topic of debate (and the subject of a Supreme Court challenge in Canada) for years among those in the industry. A new report from Swiss Re, Genetic testing in the Life & Health insurance industry says insurers need access to this information (prohibited by law in Canada), to ensure the continued societal and financial benefits of life and health insurance.
The report notes that the cost of sequencing a full human genome has dropped to under $500 (figures in U.S. dollars) from $10-million in 2007. The first human genome draft in 2003 reportedly cost $3-billion.
This development has led to the rapid expansion of genetic tests for a variety of medical and personal well-being purposes, they write. Prices of such direct-to-consumer kits range from $99 to over $1,000. They are not typically covered by health insurance.
Adverse selection concerns
They say information asymmetry, where consumers have information about their genetic predispositions while insurers are restricted by regulation from using such tests, can create an imbalanced risk pool, lead to higher-than-expected claims and costs for insurers, while high-risk individuals pay lower premiums than they should.
“To manage adverse selection, insurers may raise premiums across the board, which can further discourage low-risk individuals from purchasing coverage, exacerbating the problem and, in some cases, making insurance unaffordable or unsustainable,” they warn.
The report continues, saying widely adopted testing could also accelerate diagnoses, potentially leading to higher claims for products such as critical illness (CI) and medical reimbursement. “Insurers may notice unexpected changes in disease incidence, diagnosis stage shifts and survival probabilities. Expectations for these metrics should be taken into consideration when pricing new policies, especially where long-term guarantees are in place,” they write.
Additionally, they warn of overdiagnosis resulting from the increased use of liquid biopsies and other genetic testing which identify conditions which may never become symptomatic or lead to premature death. In addition to calling for unnecessary treatments, they say overdiagnosis can significantly impact the insurance company portfolio experience. The report recommends insurers tighten definitions, reduce the duration of long-term CI products or offer non-guaranteed premiums to manage the risk.
“Recent advancements in genomic technologies, larger datasets and improved algorithms have significantly improved the power of genetic tests,” they write. “This trend is likely to heighten life and health insurers’ exposure to adverse selection.”
Canadian law
The 2017 Genetic Non-Discrimination Act prevents and prohibits insurers from requiring genetic testing or the disclosure of genetic test results in exchange for goods or services. “Challenges on the constitutionality were finally settled in July 2020 and the industry continues to adhere to the law as it is written,” they state.
In the leadup to the Act’s passage, back in 2016, the Canadian Institute of Actuaries produced its own research suggesting that prohibiting access to predictive genetic information could increase life insurance claims costs by 12 per cent and CI claims costs by 26 per cent.
