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Genetic Testing and Insurance

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Genetic Testing and Insurance
Ahwaz Chagani and Philippe L. Michaud
10/28/2015
Genetics, and in particular genetic testing, has seen significant advances since the completion of the Human Genome Project in the 1990s, an international scientific research effort that produced the mapping of the full sequence of human genes. This effort holds the promise of great benefits in the early diagnosis and treatment of various medical conditions, through the diagnosis of genetic conditions, identification of the predisposition to a genetic disease, and the tailoring of therapy to a patient’s genetic profile.

​However, hand in hand with this promise is the potential to use genetic information to discriminate against someone.

A genetic test can reveal that a person who is otherwise healthy has a higher risk at some point in the future of being unable to work, or requiring extensive medical care, or otherwise being more predisposed to an adverse state of health. In turn, this information could be used to affect decisions regarding employment and insurance. The following are a few examples of how this is being applied:

  • Some companies have used genetic screening and/or genetic monitoring of employees and job applicants for research and other undisclosed purposes
  • Certain countries require genetic tests to verify biological relationships amongst family members for immigration purposes.

But employers and governments are not the only ones that use genetic information. Insurance companies are also interested in knowing who is more likely to become ill or live a shorter lifespan. If you are interested in learning more about the relevance and use of genetic information within the insurance industry and the arguments both for and against the collection of such personal information, keep on reading.​


How insurance works​

Before delving into the specifics of the debate around the use of genetic information by insurers, we must first discuss some of the fundamentals about how insurance works.

Insurance is an exercise in "pooling" together individuals that are likely to exhibit similar financial risk in the future. It is hard to predict if an individual will fall sick or die in a given year. However, when several individuals are pooled together, their aggregated financial risk may be predicted with some accuracy. A number of factors are considered for pooling individuals, such as age, smoking status, existing illnesses, etc.  Premiums for a pool are determined based on the risks of that pool to ensure that the insurance company has enough funds to pay all future claims.​

​ Insurance is an exercise in "pooling" together individuals that are likely to exhibit similar financial risk in the future

Charging premiums based on risk pools also ensures that all individuals pay their fair share and no pool cross-subsidizes another pool.  In the absence of pools, lower-risk individuals would subsidize higher-risk individuals via higher premiums.

For risk pooling to work effectively, an applicant and the insurer must have the same information about the applicant's risks in order for the applicant to be assigned to the appropriate pool and charged the appropriate premium.  If the applicant has more information about their risk than the insurer, they may buy more insurance than what they would purchase otherwise. In addition, the insurer may assign the applicant to a pool classified as lower risk and charge a lower premium, which would be unfair to other individuals in the pool. This behaviour of selecting against the insurer due to information asymmetry is often referred to as "anti-selection".

The fundamental requirement of an insurance contract is that both the insurer and the applicant must deal in good faith and make full declaration of all material facts related to the risks being insured. It would be wrong for an applicant to anticipate a gain from the contract due to information not shared with the insurer as it would be unfair with other policyholders. Since all of the funds in a risk pool are derived from the premiums paid by policyholders (plus any investment income on these premiums), any unfair gain by one policyholder results in a loss to the other policyholders: the end result is higher premiums for the risk pool than would otherwise be needed or, in a worst case scenario, the insolvency of a risk pool and the inability to pay future claims for the properly-classified risks.  An applicant withholding information so they can be assigned to a lower priced risk pool is not only cheating the insurance company, but they are also cheating other policyholders who may have to pay more premium to cover the costs of the fraud.

Now that we have discussed the basics of how insurance arrangements work, let's put it in context.


Arguments for the use of genetic information in insurance underwriting​

The arguments that support the use of genetic information as part of the insurance underwriting process are generally centred on anti-selection, or more precisely avoiding anti-selection. An applicant who has already gone through genetic testing and is likely to become severely ill or die at an earlier age is likely to seek much more insurance coverage than may otherwise be the case. An insurer that does not know about the applicant's genetic test results would issue the increased coverage, without realizing the high likelihood of an earlier claim. It would also assign the applicant to a risk pool with lower premiums, which would be unfair to the other policyholders in the pool. Over time, as the insurer recognizes an increase in claims cost, it would increase premiums for all policyholders of the pool. This will result in cross-subsidization of the high-risk policyholder by other low-risk policyholders.

Insurers often require applicants to disclose their family's health history as a means to assess risk.  The argument presented above is predicated on genetic tests providing information that is substantially different than what insurers can already establish through family history.

Though it remains to be seen to what extent this assumption is true, there has been at least one attempt to quantify the cost of banning insurers access to the known results of genetic tests. In July 2014 the Canadian Institute of Actuaries (CIA) published a study titled "Genetic Testing Model: If Underwriters Had No Access to Known Results". This study concluded that the impact of banning access to known results of genetic tests will be substantial to insurers offering term insurance. It will be much more than what the insurers can be expected to absorb without a very substantial increase in premium rates for term insurance. The study also concluded that the rates for traditional permanent insurance would also rise but to a lesser extent than term insurance.

At present, in Canada, there is no law that prohibits the use of genetic information by insurance companies. However, the insurance industry has exercised a voluntary ban on asking existing policyholders or new applicants to undergo genetic testing. The common practice in the industry is to ask for new applicants to submit results of genetic tests only if they have already gone through such tests. This practice corrects for any information asymmetry that may exist between the applicants and insurers and it is in line with the argument presented above.


Arguments against the use of genetic tests results by insurers​

The Office of the Privacy Commissioner (OPC) of Canada disagrees with the CIA's report referenced above. It maintains that there is little evidence to believe that results of genetic tests will result in significant antiselection. The OPC advocates that genetic information (even known test results) should not be used by the insurance industry. The OPC's argument is structured around two themes: discrimination and privacy.

​ The Office of the Privacy Commissioner of Canada... maintains that there is little evidence to believe that results of genetic tests will result in significant antiselection

Individuals undergo genetic testing for various purposes and they may decline tests because of the fear that a positive result may mean they could face discrimination from insurance companies. This would also imply that individuals will delay taking actions to improve their health, which will in turn have an adverse impact on the quality of their life as well as the Canadian healthcare system.

In addition to the discrimination argument, the OPC has cited concerns that Canada is the only G7 country that does not have privacy protection laws in place to regulate how genetic information can be used by insurance companies. Private information, according to the OPC's privacy criteria, should only be collected if it can be shown that it is necessary for legitimate business purposes and efficient in accomplishing the task for which it is used.

According to the OPC, the insurance industry has failed to establish that genetic information is necessary and efficient for the purpose of pricing risk accurately and avoiding antiselection. The OPC maintains that insurers already have access to health information, including family history, and are able to price insurance products just as effectively as they would if they also had access to genetic information. According to the OPC, this can be validated by insurance markets in countries that have legislations prohibiting the use of known genetic test results. Moreover, the OPC maintains, even if all genetic test results were 100% accurate and reliable (which is not the case), they would be helpful to insurers in only a limited number of cases. This is because "monogenic disorders", the conditions that can be attributed to a specific gene, are very rare. The vast majority of diseases are multifactorial, i.e. they are associated with the effects of multiple genes in combination with lifestyle and environmental factors. With the existing knowledge and technology, the contribution of multiple genes, relative to other factors, in causing an illness cannot be established accurately. For these reasons, the OPC has concluded that the use of genetic test results by insurance companies is neither necessary nor efficient.


Regulating access to genetic information​

In August, 2015 the Canadian Medical Association passed the following motion: "The Canadian Medical Association urges the federal government to enact legislation prohibiting all forms of discrimination based on genetic testing. (DM 5-67)." This motion does not specifically address the use of genetic testing  by insurance companies but "all forms of discrimination" could be construed to include the use of genetic information in the establishment of insurance rates and acceptability although, as you will read below, similar wording in the USA has not been applied to all insurance.​​

​ Canada is the only G7 country that does not have privacy protection laws in place to regulate how genetic information can be used by insurance companies

Also in August, 2015 the Canadian Life and Health Insurance Association (CLHIA) developed an Industry Code as part of its updated position on how genetic test results are used in risk selection and insurance underwriting. This code – which constitutes a voluntary guideline for member companies – has three fundamental positions with respect to the use of genetic tests, consistant with what has already been mentioned:

​(a) Insurers will not initiate or require any applicant to undergo a genetic test as part of the process of applying for insurance.

(b) Insurers will not request genetic testing results where an applicant has undergone genetic testing for research purposes but did not receive the results.

(c) Insurers may request that existing genetic test results be made available to the insurer for the purposes of classifying risk.

Despite the stance of the OPC, the recent motion passed by the CMA, and the Industry Code adopted by the CLHIA, there are presently no laws in Canada that specifically address the use of genetic test results by insurance companies. The Canadian Human Rights Act and provincial human rights codes are potentially relevant to the extent that they prohibit discrimination or discriminatory practices on the basis of disability, age, sex, race and other enumerated grounds. However, there are no specific provisions to protect against genetic discrimination. In October 2013, Bill S-201, which was aimed at prohibiting and preventing genetic discrimination, was proposed. In February 2015, the Senate Human Rights Committee voted to remove most of its provisions applicable to insurance. Supporters of the bill have argued that the bill was amended due to lobbying by the insurance industry whereas critics of the bill maintain that insurance is a provincially regulated matter and the bill would have stepped on provincial powers.

As far as the privacy of genetic information is concerned, in Canada, the Personal Information Protection and Electronic Documents Act (PIPEDA) and certain provincial legislations govern the collection, use, and disclosure of private information. As most of these privacy laws were passed before genetic testing became accessible, they do not specifically define what constitutes genetic information, nor do they provide any guidance on how such information should be protected.

In contrast, several countries have prohibited, or introduced moratoria on, the use of genetic information by insurance companies. Other jurisdictions have responded in different ways. In the United States, the federal government adopted the Genetic Information Non-discrimination Act (GINA) in 2008. In broad terms, GINA prohibits employers from using genetic information for hiring or compensation purposes and insurance companies from using genetic information to make underwriting decisions with respect to health insurance. However, GINA does not cover life insurance, disability insurance or long-term care insurance. Most American states have similar laws. California's law also prohibits genetic discrimination in areas such as housing, mortgage lending, education, and public accommodation.

In the United Kingdom, the Association of British Insurers and the Government have agreed on a voluntary moratorium, recently extended to 2017, on the use of predictive genetic test results for life insurance policies under £500,000 or critical illness policies under £300,000. Above these amounts, insurers can only use test results if the test, the disease, and the product have been approved. At present, insurers are only allowed to use test results for Huntington's disease when selling life insurance. In Germany, insurers may only request genetic test results for life insurance policies that pay out more than €300,000 or for disability policies that pay more than €30,000 annually. In Australia, insurers can ask to see test results if tests have been taken but they cannot request new tests.


What can you do about your own genetic information​

If you want to undergo genetic testing but fear that the results might have a negative impact on your insurance eligibility, here is a recommended approach:

  1. Get insurance before getting tested. Once the insurance contract is signed, you will be covered even if subsequent test results turn out to show disorders.
  2. Assess the health rating that your insurer assigned to you. It is possible that factors such as family history increased your premium (or rendered you uninsurable). It may be possible to use a genetic test to produce a more favourable rating.
  3. Get tested if you feel there is value to you. What you will learn from the test results may allow you to make better healthcare and lifestyle choices. It might also provide proof that you have no predisposition to become ill or have a shorter lifespan and that you should get a better rate than what the insurer judged initially. For example, if you are in good health but were assigned to an average risk group due to family history of heart disease, genetic test results that show that you to be a better than average risk could help you get lower premiums on another policy.
  4. Check whether or not test results allow you to get a better deal than your existing policy. If yes, consider applying for new coverage and terminate the existing one after the new policy has been issued and accepted.

If you have undergone genetic testing already, you will need to disclose the results to the insurers if they ask for them. We strongly advise against hiding any information as it could nullify your insurance contract (and the most expensive insurance is when you pay a premium but do not get any coverage). If your test results make you uninsurable (or result in prohibitively high premiums), there are various solutions you could consider to obtain the coverage that you need:

  1. Obtain as much coverage as possible through your employer's group insurance plan
  2. Obtain as much coverage as possible through your spouse's employer's group insurance plan
  3. Convert your group policy to an individual policy, if permitted to do so
  4. Purchase guaranteed/simplified issue insurance
  5. Purchase a "second or last-to-die" policy

To better understand the advantages and disadvantages of each option refer to our previous article titled "What Can I Do If I Am Told I Am Uninsurable?

​ We strongly advise against hiding any information as it could nullify your insurance contract

What OMA Insurance is doing about it​

OMA Insurance offers two different approaches to insurance: the use of group insurance policies – owned and controlled by the OMA and made available on a non-cancelable basis to its members – and access to individual policies, owned by individual members and underwritten by various insurance companies.

Within our Group Life Insurance program, provided through New York Life, the underwriting does not include the examination of genetic information under any circumstances. 

Our other Group insurance programs, underwritten by Sun Life, follow CLHIA practices. This means that genetic testing is not required for the purpose of obtaining insurance. But applicants are expected and required to disclose all test results—genetic or otherwise. These rules mean that disclosure of genetic test results of any family members (e.g. parents or siblings) who are not applying for insurance through our programs is not required.

For individual policies, we are obligated to follow the underwriting rules of the companies who issue the policy. It is our practice to work with insurers that are members of CLHIA and follow the Industry Code recommended by CLHIA, however, we may work with other insurers in some very exceptional situations requiring specialised insurance. We will always advise you if we are recommending insurance that will require any type of genetic testing.  


Points to consider when advising patients about genetic testing​

As genetic testing is becoming more affordable and accessible, it will become a common tool for physicians in determining a patient's existing genetic conditions, in tailoring a treatment regime to their genetic profile, in assessing their chances of developing a particular genetic condition in the future, and in determining the chances of them passing a certain genetic condition to their children. As discussed above, genetic testing could have broader implications than medical diagnosis. It could affect a patient's eligibility for insurance or result in a significant increase in their insurance premium. Therefore, while discussing the possibility of genetic tests with patients, physicians may want to consider the effects that the test results may have on their eligibility for insurance or insurance premiums, among other things. However, any caution or advice that physicians may provide should be consistent with the prevailing practice guidelines.​​

Ahwaz Chagani 
Ahwaz Chagani, 
FCIA FSA CERA BMath

Consulting Actuary
Dion Strategic Consulting Group​

Philippe L. Michaud 
Philippe L. Michaud, 
BSc Act Sci

Actuarial Analyst
Dion Strategic Consulting Group​


Sources

  1. Statement on the Use of Genetic Test Results by Life and Health Insurance Companies, Office of the Privacy Commissioner of Canada, July 2014
  2. Genetic Testing and Privacy, Privacy Commissioner of Canada, 1995
  3. Genetic Information, the Life and Health Insurance Industry and the Protection of Personal Information: Framing the Debate, Office of the Privacy Commissioner of Canada, December 2012
  4. The Potential Economic Impact of a Ban on the Use of Genetic Information for Life and Health Insurance, Office of the Privacy Commissioner of Canada (Michael Hoy and Maureen Durnin), March 2012
  5. The Actuarial Relevance of Genetic Information in the Life and Health Insurance Context (Angus Macdonald, Department of Actuarial Mathematics and Statistics and the Maxwell Institute for Mathematical Sciences, Heriot-Watt University, Edinburgh, Scotland), Office of the Privacy Commissioner of Canada, July 2011
  6. Genetic Testing Model: If Underwriters Had No Access to Known Results, Report to Canadian Institute of Actuaries Research Committee, Robert C.W. Howard (FCIA, FSA), July 2014
  7. Statement on Genetic Testing and Insurance, Canadian Institute of Actuaries, June 2014
  8. Statement on Genetic Testing and Insurance, Canadian Institute of Actuaries, November 2000
  9. Canadian Life and Health Insurers Limit Use of Genetic Test Results, Jacqueline Nelson, The Globe and Mail, September 25, 2014
  10. Debate Over Use of Genetic Tests in Insurance Heats Up, Jacqueline Nelson, The Globe and Mail, November 2, 2014
  11. Health Insurance and 'Genetic Discrimination': Are Rules Needed?, Carly Weeks, The Globe and Mail, January 1, 2012
  12. Home DNA Tests May Affect Insurance, Employment – Marketplace Investigation Finds No Protection for Canadians Against Discrimination Based on DNA Tests, Megan Griffith-Greene, CBC News, April 2, 2015
  13. Insurance Companies Shouldn't Seek Genetic Test Results, Says Privacy Watchdog, Steve Rennie, The Canadian Press, July 10, 2014
  14. Study Finds Genetic Discrimination by Insurance Firms, Joseph Hall, The Toronto Star, June 9, 2009
  15. About Genetic Discrimination, Canadian Coalition for Genetic Fairness, 2009
  16. Genetic Testing – New Options, New Obligations,The Canadian Medical Protective Association, September 2013
  17. Genetic Discrimination: Australian Experiences and Policies, GeneWatch, The Council for Responsible Genetics (Kristine Barlow-Stewart, Ph.D.), 2009
  18. Genetic Discrimination and Canadian Law, Library of Parliament Background Paper, Julian Walker (Legal and Social Affairs Division, Parliamentary Information and Research Service), September 16, 2014
  19. Summary of Provisions on Genetic Discrimination in other Jurisdictions

Genetic Testing Information for Insurance Underwriting, CLHIA , 2015, available online at in English and French​.

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