Beliefs about Genetic Information about Disease and Consumers' Insurance Purchasing Behaviour

The greatest threat to risk-based life insurance of any type is adverse selection, defined as the likelihood that those who know they are at increased risk will be more likely to purchase life insurance and in greater amounts than those who lack such knowledge or know they are at decreased risk. Insurers attempt to prevent adverse selection in various ways, including the obvious example of refusing to sell flood insurance to homeowners after a hurricane has been tracked bearing down on the coast.

Adverse selection has two essential elements in the context of medical underwriting. First is asymmetry of information relevant to mortality risks. If the life insurance company has the same predictive health information as the consumer, known risks can be reflected in the pricing of the product. Currently, few genetic tests are performed in routine medical practice, and they are generally limited to testing for predisposition to rare disorders among individuals with a family history of the illnesses. Because life insurance application forms ask about family health history, as to rare disorders there is unlikely to be substantial information asymmetry between the applicant and the company. The possibility of asymmetry will grow, however, as more genetic tests are performed for more common disorders in primary care settings or even by applicants themselves if home-collection genetic test kits become more widely available.

The second requirement for adverse selection is the inclination of an individual to act on the information, willingness to "game the system" by withholding information in the medical underwriting process. Virtually no empirical evidence or survey data of likely consumer behaviour are available in the specific context of genetic information and life insurance. One empirical study found no evidence of adverse selection and another study found some evidence of adverse selection, but both studies had serious methodological limitations.
We asked respondents if they thought that consumers would withhold unfavourable results of a genetic test from a life insurance company. Nearly one-fourth (23.1 %) strongly agreed and 50% agreed, whereas only 11.3 % disagreed or strongly disagreed. Almost three-quarters of the population believe that other people would withhold information from an insurance company about a genetic test that indicated that they were more likely to get a serious illness. When half of the sample was asked if they agreed or disagreed with the statement that "it would be wrong to withhold genetic information from an insurance company," 50.6% agreed or strongly agreed, 25.9% disagreed, and 5.8% strongly disagreed. The other half of the sample was asked if they agreed r disagreed that it "would not be wrong to withhold genetic information from a life insurance company"; 37.7% disagreed or strongly disagreed, but 43.3% agreed and 10.9% strongly agreed.

To summarize these findings, respondents overwhelmingly expected .consumers to withhold unfavourable results of a genetic test from life insurers. They were more closely divided on the issue of whether it would be wrong to do so, with results varying on whether the question was asked in the affirmative or negative. We attempted to obtain additional insights into the prospects of adverse selection in life insurance based on genetic information by asking a question that placed life insurance in the context of other forms of insurance.

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