Genetic testing has become an increasingly fast and affordable way to uncover health issues. For example, actor Chris Hemsworth decided to take a break from acting after genetic testing showed he had an increased risk of developing Alzheimer’s disease. [1] But revealing health risks can also affect your ability to buy life insurance.
Life insurance companies evaluate your health information when determining your overall risk and deciding how much you’ll pay for coverage. This underwriting process typically includes a medical exam and a review of your medical records, which can include genetic tests.
What laws govern the use of genetic information?
The federal Genetic Information Nondiscrimination Act, passed in 2008, restricts the use of genetic information, but only for health insurance, not for life insurance underwriting. [2] In the absence of a federal regulation, some state legislatures have written their own laws to prohibit life insurers from using genetic information in underwriting.
The restrictions vary based on the state, says Patricia Born, a professor of risk management and insurance at Florida State University who's researched how genetic tests are used in life insurance underwriting. Many of them apply only to direct-to-consumer tests, like those you’d get from AncestryDNA or 23andMe. However, insurers are permitted to underwrite treatment for a medical condition that was unearthed by genetic testing. For example, if your doctor orders a genetic test to determine your risk of breast cancer and you receive treatment as a result, your life insurance company can use that information.
Genetic testing & adverse selection
Genetic tests create what’s known as an adverse selection problem for life insurance companies. The idea here is that people who are likely to cost the life insurance company more money because of health or lifestyle risks — risks the life insurance company isn’t privy to — are also the most likely people to buy life insurance. Imagine you take a genetic test that tells you you’re going to die in five years. If you buy life insurance and the insurance company can’t see the results of your test, they’re going to lose money on your policy.
“If an applicant knows they have a likelihood of dying prematurely and they don’t have to disclose that to the insurance company, it creates a situation called adverse selection, where the insurance companies may accept people for life insurance at a rate that’s not adequate, because the individual is going to die sooner than they expected,” Born says.
If this scenario becomes more common, it would be natural for insurance companies to raise their prices to make up for their losses from all the people applying who know they’re going to die soon, she says. Insurance companies try to collect information on their customers’ health and other factors to get a better idea of that likelihood.
How genetic testing affects life insurance customers
So is it risky for consumers to take genetic tests? When it comes to direct-to-consumer tests, there is a chance that the results could end up in the hands of a life insurance underwriter, especially if you don’t live in a state that restricts how life insurance companies can use information from DNA tests. But if a doctor orders a genetic test, both you and your life insurance company could benefit.
“If people are taking these tests and getting treated, maybe they’ll live as long as they should or longer because they’re getting appropriate treatment,” Born says.
Genetic tests represent only a fraction of the factors that life insurance companies are likely to consider. When it comes to how much you pay for life insurance, things like your gender, age, and whether or not you smoke will probably have the same if not more weight than, say, a genetic test that says you have a 10% chance of contracting breast cancer. Life insurance companies have plenty of other ways of predicting mortality — it’s their whole business.
Image: Getty Images
