Genetic Testing in Underwriting: Implications for Life Insurance Markets

This paper discusses and analyzes the problems for life insurers when individuals obtain results from genetic tests that can have bearing on their estimated mortality. Some forms of genetic information are valuable in the underwriting process, especially test results that may be relied on by medical doctors for treatment. To the extent that test results lead to better medical care, underwriting consequences may be favorable. If the information is not allowed for underwriting, insurers will experience some degree of adverse selection, which will raise the cost of coverage for all applicants and reduce the availability of coverage. This paper considers one recent proposal in the state of Florida to extend a ban on the use of genetic test results in health insurance underwriting to life insurance, disability and long-term care (LTC). This paper concludes that the financial consequence of a ban on the use of genetic information in life insurance underwriting could significantly increase the risk of insolvency; legislation that imposes restrictions on the use of genetic information may be a reasonable compromise to a complete ban.