Why your genes may come at a premium

Life insurance is a product that depends on both parties to the contract maintaining a certain degree of ignorance. If individuals knew their exact chances of contracting cancer or heart disease, for example, were very low, then they might not be in a big hurry to take out an all-encompassing life insurance policy.

Likewise, if insurers could identify the individuals most likely to fall victim to the common fatal diseases - well, they wouldn't want them on their books.

If you follow this logic to its ultimate conclusion, everyone who needs life insurance wouldn't be able to get it and the insurers wouldn't be able to find any clients - at least, any clients they'd want.

(Of course, there remains the risk of accidental death - car crash, drowning, failed parachute and the like - which life insurers could still cover but these are more or less random events distributed evenly across the community. If you want to know the precise accidental death data, ask an actuary.)

Over the years life insurance companies have gradually weighted the odds in their favour, ramping up premiums for smokers, for example, and those who work in dangerous occupations. As well, family history of diseases is now also an important factor in pricing life insurance premiums.

Family disease history is a kind of crude attempt at genetic screening of at-risk people by insurance companies. Rapid advances in genetic technology, however, have now enabled insurers to apply much more refined screening of their potential clients.

Individual gene-testing has the ability to fundamentally disrupt the life insurance business model.

Which is why insurance industry, government and consumer groups have kept a close eye on the developing genetic testing technology.

Until recently, the threat of genetic discrimination by insurers has been theoretical but as this story in the Sydney Morning Herald reveals the reality has arrived in Australia.

The story refers to at least two cases where insurance cover has been refused or restricted because of genetic testing. The body representing Australia's insurers and fund managers, the Investment and Financial Services Association (IFSA), said insurance companies were merely putting scientific advances into practice.

In a recent press release, Vance Arkinstall, head of the Investment Savings and Insurance Association (ISI) - New Zealand's version of IFSA, said genetic testing in life insurance underwriting in this country "has been very low to date but over time this will almost certainly increase".

By law, insurers in New Zealand cannot refuse anybody cover but they can alter the terms and premium of policies to reflect the risk. Arkinstall pointed out that - as per international guidelines - New Zealand insurance companies will not require anybody to complete a gene test. But if you have already had a gene test carried out the insurer can request it when figuring out how much your life is worth.

Importantly, though, if you're life is already insured and you have a gene test an insurer can't alter the terms of your cover based on this new information. The lesson is - wait until you're insured before you get your genes tested unless you're pretty sure the test would reveal your genetic perfection.

David Chaplin

 

 

Photo: Glenn Jeffrey