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September 13, 2018

The Future of InsurTech Now: Genomics

Unlocking the human genome to understand, define, and manage risk.

Key Takeaway
The potential benefits from genomics for insurance are enticing - but insurers need to be aware of the risks too.

Genomics has moved from the frontier of science to the front door of the insurance industry.  It carries potential to reshape the insurance sector, with both benefits and challenges for an industry dedicated to planning for and mitigating risks.  How much can we know about our genetic makeup?  How much can we or should we share?  How can it be used to identify and manage risk?  How can we anticipate and mitigate any downside effects of the world genomics opens up to use?  These questions apply as much to insurers as they do to scientists and healthcare practitioners. And they matter very much to consumers.

Perhaps the most high profile use of genomics is building personal awareness – whether for genealogy or for personal health.  Take 23andMe, for example.  Customers take a saliva test at home that can be sent to a lab to determine their genetic traits, including genetic variants that put them or their family at a higher risk of developing certain diseases. The tests, which often cost less than $200, can also help people understand how their genes might affect their lifestyle, like their propensity to gain weight or have a good night's sleep.  Or not - as recent use of genomic tests in criminal investigations has shown, where samples submitted to better understand family history ended up being used to connect individuals to criminal activity.

But genomic testing also has the potential to upend the insurance industry.  For example, as more people access their genes, some insurers might worry about the technology providing customers with asymmetric information, where they know more about their own genetic predisposition and insurers are left in the dark, making it very difficult for the industry to properly quantify risk.

In a report published in 2017 from the International Actuarial Association  (IAA) titled The Impact of Personalised Medicine and Genomics on the Insurance Industry , the author frets over the industry going into a “death spiral”- where healthy people chose to opt out of insurance and sick people buy more “spinning premiums out of control.”

And medical research has given some weight to this claim. A 2015 study published in the journal Health Affairs  found that people, who tested genetically positive for Alzheimer’s disease, were 5.76 times as likely to have altered their long-term care coverage than those that tested negative for the disease.

The researchers found no significant difference for health, life or disability coverage. Nevertheless the authors warned: “if genetic testing for Alzheimer’s risk assessment becomes common, it could trigger adverse selection in long-term care issuance.” Currently the Genetic Information Nondiscrimination Act prohibits insurance companies from using genetic tests for underwriting employment and health insurance polices. Life, disability or long-term care insurance are not included in the statute. The law was designed to reduce people’s fear about discrimination, so they could take advantage of new technologies, research and therapies, according to an article on the topic published in  The New England Journal of Medicine .

To deal with the problem of asymmetric information and adverse selection insurance experts have proposed a variety of solutions. Reinsurance pools were posited as a possible solution by The American Academy of Actuaries as far back as 2002 and raised again by the IAA again in the previously cited report published more than a decade later:  in this scenario, companies would “have the right to reinsure genetic risk into a pool and [each company] would be required participate in the pool according to their market share.”

Experts have also suggested that insurers could also request policy-holders disclose if they have undergone genetic testing and/or ask targeted questions that provide some guidance on genetic predisposition, like: “Have your parents, siblings or grandparents had any diseases of the nervous system, cardiac diseases, strokes, diabetes, cancer or hereditary diseases before the age of 55?”

Another possible solution is to create incentives for customers to share their genetic information with insurers by offering better financial terms or providing more expansive coverage.  These financial incentives could be tied to health and wellness programs that encourage physical fitness, a healthy diet and provide added value to customers.

Research suggests that tying genomic testing to health and wellness makes some sense. One recent study in BMC Medical Genomics found that about a third of its 1,000 participants reported eating more vegetables and exercising more vigorously after taking a genomic test, regardless of the test’s results. This led the authors to conclude that genomic tests may have “a unique ability to impact how individuals perceive health, and how they make decisions regarding their health behaviors and medical care.”

That’s critical because genetic variants influence, but don’t always determine a person’s health status. Lifestyle factors like exercise, diet and sleep matter too, and the benefits of a healthy lifestyle are well known for reducing risks and making medical conditions more manageable.

In one particularly rosy estimate of the potential benefits of genomic testing, a 2016 Think Advisor article postulated that “The technology can also improve recommendations for lifestyle changes that might help make a medical condition manageable (if not curable),” and added, “Armed with this information, product manufacturers may be willing to offer policies to applicants currently deemed uninsurable or an adverse risk.”

But insurers need to be exceedingly careful with their response to genomic testing, especially because policyholders are likely to be very concerned about discrimination where they are denied coverage based on their genomic information.

When participants were asked about the Genetic Information Nondiscrimination Act in the study cited in the New England Journal of Medicine article, most were unaware of it.  But when they read a description of the law, 30% of them said they were concerned about genetic discrimination afterwards.

The potential benefits of genomics, for personalizing medical treatment, diet, exercise and even pharmaceuticals is enticing.  The possibility of mapping health risks at the individual level and applying it to insurance, driven by advances in artificial intelligence and machine learning, carries risks and benefits for insurers, technology companies, and consumers.  Where each group will take the knowledge unlocked by this technology and how they will align on its everyday application remains to be seen.

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