Should Genetic and Genomic Testing be Banned When Underwriting Risk-Rated Insurance?

This article is the second in a three-part series intended to inform actuaries about recent developments in the use of genetic testing in life insurance.

The first article provided an update on the Government's plan to review the rules governing the use of genetic information in life insurance following outcomes of government-sponsored research from the A-GLIMMER Project. ^[1]

In this article, I offer additional perspectives on using genetic test results in life insurance underwriting drawing substantially on a Swiss Re Study ^[2] of 3,200 Australian consumers and some other research.

From the research, I observe:

• Consumer hesitance in obtaining genetic tests to assist in managing their health is an important issue. However, the use of genetic test results by employers and insurers is likely the third most significant fear factor.
• When life insurer use of genetic test results changed the underwriting decision, 72% of customers benefited. The complete ban advocated in the A-GLIMMER Report is highly unlikely to be good for consumers.
• Banning the use of genetic test results in insurance underwriting is not going to solve the unmet consumer need identified by A-GLIMMER. As a long-term solution, I suggest that a new product incorporating principles of "community rating" is needed (akin to private health insurance in Australia).

In the interim and to match the rapidly changing field of genetics, I suggest that regulatory settings need to remain flexible to ensure that anti-selection by a minority of consumers does not become an excessive cost for the vast majority of consumers.

Fear of the consequences of genetic testing is significant

It is simplistic to think that a ban on the use of genetic tests in life insurance will substantially solve the issue of consumer hesitance. 

A-GLIMMER finds that 30% of consumers initially interested in preventative genetic testing did not proceed.

The Swiss Re Study finds that only 6% of consumers fear how their genetic tests might be used by employers or insurers. The top two consumer fears of getting a genetic test are: (i) 14% fear data privacy issues and (ii) 12% fear the genetic test result itself (i.e., they don't want to know). Noting that 61% have no interest in genetic testing, a significant proportion of consumers interested in genetic testing may hesitate.

Consumer confidence in seeking genetic testing is important. The Swiss Re Study finds that 67% of individuals undergoing medical genetic testing make lifestyle changes or take health actions. A-GLIMMER cites cases where insurers have not taken such mitigating actions into account with underwriting decisions. This may relate to an inability to re-underwrite if the mitigating activity stops or process weaknesses.

Consumer and health professional awareness is too low

A-GLIMMER finds that consumer confidence towards clinical genetic tests has improved since the start of the industry moratorium in 2019. Of particular note is the awareness that their own genetic tests will not impact life insurance for family members including children. A less well-known fact from data collected by the life insurance industry for 2022 is that in 72% of cases, where genetic tests changed an underwriting decision, it was favourable to the consumer.  Genetic tests can enable insurers to disregard information about high-risk family histories and reduce insurance premiums for those customers.

The A-GLIMMER research finds that 82% of patients with high-risk genetic conditions favour a ban on the use of genetic tests in life insurance. I expect that this group of patients may represent less than 5% of all consumers.

This is based on research ^[3] that 2.1-4.1% of adults may have medically actionable genetic markers for Tier 1 conditions including hereditary breast and ovarian cancer, Lynch syndrome, and familial hypercholesterolemia. Understanding this context for that A-GLIMMER research finding does not negate the needs of this segment of consumers.

There are contradictory findings on whether the broader community would support a ban. A-GLIMMER finds that 7% of Australian citizens think that it should be legal for insurers to use genetic test results in underwriting.  The Swiss Re Study finds that 52% of Australian consumers support the use of genetic tests by insurers. If consumers expect cheaper premiums then that support increases to 63%.   Perhaps explaining this difference, both the pool of survey respondents and the context of the questions appear to differ.

Anti-selection on the basis of genetic testing is real

Anti-selection is present in both the proportion of consumers that get insurance and the amount they insure. The Swiss Re Study finds that Australians receiving a high-risk medical genetic test result are twice as likely to take out life insurance than average and low-risk consumers. This figure was four times for consumers in the USA.

A-GLIMMER notes "One respondent with a family history of Lynch syndrome reported that they had been intending to have testing, and although they had trauma cover already, they had not had testing yet because they wanted to obtain new cover with a different insurer before proceeding with testing." Sensible for that individual but it will increase premiums for other consumers.

Limiting potential anti-selection from consumers seeking excessive sums insured continues to be sensible.  Research ^[4] suggests that a full ban on the use of genetic testing results in life insurance could cost $100's per customer per annum.

The conclusions are often contentious because they are based on highly uncertain factors such as the impact of other underwriting questions, the unknown effect of the existing partial ban, the trajectory of genetic research, future changes in medical treatments and consumer behaviour. However, anti-selection costs projected in the academic research are likely real, of uncertain magnitude and to emerge slowly in premium rates over a decade or more.

Is a new community rated product needed?

The underlying issue on the use of underwriting is more fundamental than current concerns with the use of genetic tests in life insurance underwriting. At its core, underwriting is designed to assess health risk and, in doing so, may exclude a relatively small proportion of individuals that most need the financial support that insurance provides.

In Australia, the government regulates the private health insurance industry through "community rating" to address this issue. The industry essentially has no underwriting. Other community-rated schemes exist in Compulsory Third Party motor insurance and in Workers Compensation.

Successful community-rated insurance has many features that don't exist in the life insurance industry today, including:

1. To avoid excessive anti-selection, benefits including sums insured are limited and waiting periods apply.
2. To help ensure affordability there is widespread coverage of the community.
3. To be viable, premium rates reflect a small number of regulated insurance risk rating factors such as age.

I welcome the Institute's initiative to form a public policy position on behalf of the actuarial profession and I hope that such a community-rated product may prove a viable option for the government to consider.

Disclaimer: This article has been written in a personal capacity and does not necessarily represent the views of my employer or the Actuaries Institute.

References

[i] (n.d.). https://www.monash.edu/medicine/a-glimmer/about-the-a-glimmer-project

[ii] The subset of Swiss Re's 2019 (as cited on the Swiss Re website) global study for 3,200 Australian consumers in the demographic of potential life insurance consumers. The full version of the study covering 36,000 individuals (of which 60% were from the USA) is published here: https://www.swissre.com/reinsurance/life-and-health/reinsurance/can-life-insurance-pass-the-genetic-test.html

[iii] (n.d.). https://onlinelibrary.wiley.com/doi/10.1002/ajmg.c.32036

[iv] (1) Genetic Testing Model for CI: If Underwriters of Individual Critical Illness Insurance Had No Access to Known Results of Genetic Tests, Canadian Institute of Actuaries, Robert C. W. (Bob) Howard, January 2016; (2) Thinking about life insurance through a genetic lens, Damjan Vukcevic & Jessica Chen, May 2017; (3) Genetic Testing & the Threat of Anti-selection, Mark Lombardo, ACLI Symposium on Genetics & Insurance, April 2018.