Premium
Will genetic test results be monetized in life insurance?
Author(s) -
Haçarız Oytun,
Kleinow Torsten,
Macdonald Angus S.,
Tapadar Pradip,
Thomas R. Guy
Publication year - 2020
Publication title -
risk management and insurance review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.386
H-Index - 16
eISSN - 1540-6296
pISSN - 1098-1616
DOI - 10.1111/rmir.12159
Subject(s) - underwriting , adverse selection , odds , credence , life insurance , actuarial science , test (biology) , medical underwriting , face (sociological concept) , economics , settlement (finance) , genetic testing , business , insurance policy , general insurance , finance , medicine , sociology , income protection insurance , biology , paleontology , social science , statistics , logistic regression , mathematics , payment
If life insurers are not permitted to use genetic test results in underwriting, they may face adverse selection. It is sometimes claimed that applicants will choose abnormally high sums insured as a form of financial gamble, possibly financed by life settlement companies (LSCs). The latter possibility is given some credence by the recent experience of “stranger‐originated life insurance” (STOLI) in the United States. We examine these claims, and find them unconvincing for four reasons. First, apparently high mortality implies surprisingly high probabilities of surviving for decades, so the gamble faces long odds. Second, LSCs would have to adopt a different business model, involving much longer time horizons. Third, STOLI is being effectively dealt with by the U.S. courts. Fourth, the gamble would be predicated upon a deep understanding of the genetic epidemiology, which is evolving, subject to uncertain biases, and cannot predict the emergence of effective treatments.