A small rise in the number of genetic tests could lead to significant increases in life insurance claims costs, the Actuaries Institute has warned.
The impact of declining test costs and greater public interest in ancestry and health is driving increased genetic testing, the Institute notes.
Australia must have a robust debate around the increasing use of genetic testing and its implications for Australia's life insurance industry, two senior actuaries said in a paper paper issued last week.
Consumers who don’t disclose their health risks, or those who withdraw from life insurance because genetic tests show they are unlikely to suffer heritable diseases, could destabilise the insurance industry.
“For the life insurance industry, if health information known to the insurance applicant is not disclosed, it may be expected to lead to anti-selection, increasing premiums and ultimately impacting the financial sustainability of the industry,” said the report titled “Genetics - A Testing Time for Insurers”.
“Conversely, if it is known that genetic test information may need to be disclosed for use in underwriting life insurance policies, that may deter people from undertaking a test that could benefit their wellbeing.”
“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 asymmetry and potential anti-selection,” the report said.
The outcome would be that insurers find themselves with a pool of insured lives that are becoming potentially less healthy, forcing premiums higher, particularly as recipients of such testing may choose to withdraw from life insurance if results show they're unlikely to suffer hereditary diseases.