Impact of Genomics on Insurers - Part 9
How Will Genomics Impact Medical Underwriting?
Progress in genomics is creating opportunities and threats for medical underwriting in both health and life insurance. In our market study, we asked insurance experts how they assess the impact.
Synpulse industry survey
Synpulse has assessed how insurers across EMEA, APAC, and the Americas perceive the impact of genomics on their industry. Most of the experts polled see the biggest threat for both life and health insurers in underwriting and portfolio management:
However, nearly a quarter of those surveyed see underwriting as the part of the value chain with the highest opportunities as well:
Impact on underwriting
Participants see an information asymmetry between insurance applicants and insurers as the greatest impact, closely followed by genetic or genomic information enabling more accurate risk assessment in underwriting. Only a small minority believes that such information could also be leveraged to enable a faster and customer-friendlier underwriting process.
Information asymmetry due to direct-to-consumer genetic testing
As genetic testing becomes more widespread and affordable, information asymmetries between patients and insurers may increase the risk of adverse selection: somebody learning about a significant genetic predisposition for a disease could apply for appropriate insurance cover without disclosing this information to the insurer. Direct-to-consumer genetic testingis a particular threat, as it is typically performed outside any official medical record.
More accurate risk assessment
Diagnostic or predictive genetic testing results could be used in medical underwriting by both life and health insurers to assess risks more precisely. The result of this might be, for example, that default premiums in a risk group could receive a reduction, loading, or exclusion depending on whether an applicant carries certain genetic variants known to impact the insured risk.
For appropriately designed products, underwriting could be limited to sending in the genetic test results, enabling an easy and transparent underwriting process.
However, all the above require sound actuarial models to interpret genetic or genomic information; such models are not always available.
Obstacles to leveraging genomics in underwriting
Various obstacles can prevent an insurer from leveraging genomics in underwriting. Three-quarters of the experts polled in our survey see regulatory constraints as a key obstacle. Slightly more than half of them also see a risk in consumer resistance. Not surprisingly, the risk of damage to the company’s reputation is also among the three key obstacles mentioned the most, though only by about a third of the participants. In contrast, only a small minority of the experts polled (below one quarter) sees internal factors – such as how to manage the required data, or the knowledge and effort required to design and implement new underwriting approaches based on genetic or genomic data – as key factors.
Concerns about genetic discrimination have prompted regulators in many countries to limit the use of genetic information in insurance underwriting. Very roughly speaking, regulatory restrictions are strictest in Europe, and more relaxed in the Americas, Asia, and Africa. The table below outlines the situation in some exemplary countries with regard to life underwriting:
A majority of industry experts confirmed our hypothesis that the increased adoption of gene diagnostics (including direct-to-consumer genetic testing) poses a threat to proper risk assessment in medical underwriting. Leveraging genetic information in underwriting may allow more precise risk assessment and potentially even a faster and customer-friendlier process. However, the extent to which the latter two opportunities can be realized is subject to both local regulation and the sociopolitical climate at the intersection of corporates and data privacy.
Our next article will present findings of our market study in the area of claims management. Stay tuned!
- Dr. Dominik Langer
- Dr. Andreas Wicht
- Wolfgang Rueckert