If you get a genetic test, could a life insurance firm use it against you?
There are a number of serious ethical and legal questions that need to be addressed about life insurance firms discriminating on the basis of genetic testing results
Genetic testing has progressed in leaps and bounds in recent years. From learning about potential genetic conditions that run in families to diagnosing genetic conditions in children or revealing genetic mutations that may cause illness or disease, genetic testing is increasingly popular for many Australians. Research has found that most underwent a test out of interest in potential carrier status and ancestry, and about one in 75 people (1.3 per cent of the population) carries a gene variant that can lead to early death and morbidity.
One of the main drivers behind more genetic testing has been technological developments. However, such developments are a two-edged sword. While this technology holds significant promise for personalised medicine and preventative healthcare, it also raises concerns about potential discrimination against individuals based on their genetic information.
One of the main industries that is front and centre of this debate is life insurance, which is at a crossroads in the wake of advances in genetic testing, according to Dr Fei Huang, Senior Lecturer in the School of Risk and Actuarial Studies at UNSW Business School. Dr Huang is an expert in discrimination practices in the insurance industry and has co-authored a number of research papers that explore related issues such as the impact of artificial intelligence and related technologies in insurance.
Genetic testing and life insurance: what the law says
There are currently two related laws – the Insurance Contracts Act 1984 and Disability Discrimination Act 1992 – that address potential discrimination on the part of life insurers against individuals who have undertaken genetic tests.
Under the Insurance Contracts Act 1984, Dr Huang says consumers have a responsibility to provide information requested by life insurers, including any genetic testing results. Life insurers can subsequently use this information for underwriting.
Under the Disability Discrimination Act 1992, she said that discrimination on the grounds of disability (including a disability that may exist in the future because of a genetic predisposition) is unlawful in many areas of public life, however, there are exceptions relating to the provision of insurance. Under section 46 of this law, for example, she said discrimination in insurance and superannuation products (including life insurance) is permitted in the following circumstances:
1. Where the discrimination is based on actuarial or statistical data on which it is reasonable for the discriminator to rely; and the discrimination is reasonable having regard to the data and other relevant factors; or
2. Where no such actuarial or statistical data is available and cannot reasonably be obtained – the discrimination is reasonable having regard to any other relevant factors.
“Note that based on the two Acts above, insurers can request details regarding family medical history and genetic testing results to inform their life insurance underwriting,” Dr Huang said.
A moratorium on genetic testing in life insurance
In 2016, the Parliamentary Joint Committee on Corporations and Financial Services inquiries into the life insurance industry examined the use of genetic testing results in life insurance. The Committee expressed concerns that the use of genetic tests in underwriting life insurance was adversely impacting the public’s willingness to participate in health research projects that involve genetic testing in their final report in 2018.
Following the inquiry, Dr Huang said the Financial Services Council (FSC) introduced a moratorium on the use of genetic testing in life insurance, known as FSC Standard 11: Moratorium on Genetic Tests in Life Insurance, which came into force on 1 July 2019. The moratorium aimed to “facilitate an efficient life insurance industry, while also recognising a social responsibility to not hinder the adoption of new medical technologies that could improve health outcomes” according to the recent Federal Treasury consultation paper on Use of genetic testing results in life insurance underwriting. In October 2022, Dr Huang said the FSC undertook a review of the moratorium and extended the Moratorium indefinitely.
The A-GLIMMER report on genetic testing and life insurance
The government’s consultation paper provides a good review of the historical Australian regulatory development of genetic testing in life insurance, as well as concerns about the effectiveness of the Moratorium based on the A-GLIMMER report. This report is a research project which aims to monitor the impact and effectiveness of the moratorium on the use of genetic test results in life insurance underwriting in Australia. “The report noted that the current moratorium is deterring individuals from potentially lifesaving genetic testing, as well from participation in genetic research, for fear that it might impact their ability to obtain affordable life insurance,” Dr Huang observed.
The primary risk of further restrictions on the use of genetic test results is information asymmetry (when insurers have more or superior information compared to policyholders) and adverse selection concerns that may impact the life insurance market, she added. “Like the purchase of life insurance, the decision to undergo genetic testing is voluntary,” she said.
“When a potential policyholder has information about his or her health that is not shared with the insurance company, this could lead to anti-selection, where poorer risks purchase more insurance and better risks purchase little or no insurance. From an insurer’s viewpoint, one solution would be to allow insurers to require genetic testing, just as they are allowed to evaluate other aspects (e.g., weight, hypertension, and so forth) of a person’s health,” said Dr Huang, who noted that there is mixed evidence on the impact of adverse selection on the behaviour of consumers or the risk exposure of life insurers.
Importantly, Dr Huang said the A-GLIMMER project’s overall assessment was that the Moratorium is inadequate to address and prevent genetic discrimination in life insurance and that self-regulation is an ineffective regulatory model to address genetic discrimination. The final report recommended that:
1. The Government amend the Disability Discrimination Act 1992 to prohibit insurers from using genetic or genomic test results to discriminate between applicants for risk-rated insurance, and consider amendments to the regulation of financial services to ensure insurers are subject to a positive duty to not discriminate.
2. The Government allocate responsibility and appropriate resources to the Australian Human Rights Commission (AHRC) to enforce, promote, educate and support individuals and all relevant stakeholders to understand and meet the new legal obligations under the Disability Discrimination Act 1992.
In view of this, Dr Huang said the consultation paper lists a range of options for regulatory intervention, including “no government Intervention”, “legislating a ban”, and “legislating a financial limit”. “The consultation paper also notes the importance of effective enforcement to ensure consumer confidence in the protections afforded to them and lists two potential enforcement bodies: the Australian Human Rights Commission (AHRC) and the Australian Securities and Investments Commission (ASIC) for consultation,” she said.
What do Australians need to know about life insurance and genetic testing?
From a life insurance policyholder perspective, Dr Huang said there are a number of important implications in terms of testing and how the results of such tests might be used. The Moratorium and Life Insurance Code of Practice outline limits on how insurers can use genetic test results, for example:
• an insurer will not ask or otherwise encourage applications to take a genetic test as part of their application (underwriting process)
• an insurer must not use a person’s genetic test results unless that person chooses to declare them or when the insurance cover exceeds the limits outlined below
• an insurer may only request or use the results of a genetic test if the total amount of cover a person would have – including both the cover being applied for and any existing individual and group insurance cover with any life insurers in aggregate is more than:
• $500,000 of lump sum death cover
• $500,000 of total permanent disability cover
• $200,000 of trauma and/or critical illness cover
• $4000 a month of any combination of income protection, salary continuance or business expenses cover.
(Note that the numbers above are below the average sum insured of individual policies (exclusive of any group cover) based on APRA data and are considered too low based on the A-GLIMMER final report).
Dr Huang said that if the insurance cover exceeds the financial limits outlined above, an insurer may ask for and use previously taken (or planned) genetic test results for the relevant cover. “Insurers take into account both favourable genetic test results (if the consumer chooses to disclose them) and evidence-based preventative treatment they have undertaken that reduces their possibility of developing an illness that runs in their family,” said Dr Huang, who also noted that life insurers must comply with privacy law regarding sensitive information in asking for, using, and retaining genetic test results in their life insurance operations.
Genetic testing lessons from life insurance industries overseas
The challenges faced by the life insurance industry locally have also been faced in other countries, with some jurisdictions taking the lead on issues around discrimination based on genetic testing. “Information from genetic tests is potentially sensitive,” said Dr Huang. Following the structure in her co-authored research paper, The Discriminating (Pricing) Actuary, she said the main reasons are because genetic tests are not under the control of an individual, nor, in most cases, do they change over time. “This is similar to the reason that race, ethnicity, and religious affiliation are generally considered as sensitive attributes for insurance applications,” she said.
Statistical and actuarial association is another important consideration in determining sensitive attributes. Dr Huang explained that a variable should have some predictive value of an underlying risk. If it does not, then she said it is generally viewed as unacceptable for insurance purposes. “At least for the time being, genetic information is in most cases neither statistically nor economically significant for risk assessment from the insurance companies’ point of view. The exceptions are the rare single-gene diseases, such as Huntington’s disease, which inevitably or very likely result in death,” she said.
Today, Dr Huang noted that it is likely that including results from genetic testing will not materially impact the insurance industry, as evidenced by the study of Cambridge Centre for Health Services Research on the UK insurance industry. However, things can change over time, she added. “Predictive ability of genetic testing will likely increase over time and will likely become salient in at least the life, disability, critical illness, and long-term care insurance marketplaces,” Dr Huang observed.
In policy debates, arguments have also been made for the position that genetic information is special and must therefore be treated differently from other types of medical information (sometimes known as genetic exceptionalism). “Empirical evidence shows that fear of genetic discrimination has led individuals across the globe to refuse to participate in genetic research projects or to fail to undergo recommended clinical testing, which is also observed in the A-GLIMMER report,” said Dr Huang.
Some international conventions also recommend restricting the use of genetic information for insurance purposes. For example, she said the Council of Europe’s Convention on Human Rights and Biomedicine prohibits the performance of genetic testing as a condition for entering into an insurance contract. In 1997, the United Nations Educational, Scientific, and Cultural Organization issued a Universal Declaration on the Human Genome and Human Rights. Dr Huang said this was followed by a 2003 declaration that argued that genetic data and biological samples should not be accessible by insurance companies, among other actors.
In addition to the evolution of science behind genetic testing, she said insurance regulation of genetic testing continues to evolve. “Several jurisdictions have passed or are considering legislative changes in the use of genetic testing information in underwriting insurance,” said Dr Huang. For example, Canada passed federal laws in 2017 banning the use of all genetic information for business purposes. Within the United States, in July 2020, Florida passed a law that prohibits life insurers and long-term care insurers from cancelling, limiting, or denying coverage or establishing differentials in premium rates based on genetic information.
Future trends and challenges
Technological developments are generally years ahead of government regulation, which often struggles to keep up with industry innovation. This trend creates tension around issues such as genetic testing and life insurance, and Dr Huang said this will likely continue over the coming years. “With the advent of technological developments, the industry is redefining how they do business with the increasing capacity and computational abilities of computers, availability of new and innovative sources of data, and advanced technologies that can detect patterns that were previously unknown,” she said.
“I believe that the two main aspects of challenge in the coming years are privacy and discrimination (indirect or proxy discrimination),” said Dr Huang. On the privacy front, she said some detailed information is provided voluntarily by individuals to insurers, which suggests to some that it should not be treated as sensitive. “This includes, for example, information from Global Position Systems that we put in our cars that underpin telematics, comparable devices for our homes (the Internet of Things), devices that we wear to improve our health, and so forth,” she said.
Still, insurers may also use other information that is not provided directly by individuals, Dr Huang added. “Privacy issues are raised any time a carrier classifies risks on intimate, personal information, like HIV status, marital status, sexual orientation, or genetic information,” she said.
Discrimination is another issue that requires joint efforts and close attention both now and into the future, according to Dr Huang. On one hand, she said technological development does not alter the fundamental issues of discrimination. On the other hand, indirect and proxy discrimination (using proxies or more complex and opaque algorithms) are raising more concerns as insurers’ extensive use of data and computational abilities evolve.
“Indirect discrimination occurs when a person is treated unfairly by virtue of implicit inference from their protected characteristics based on an apparently neutral practice such as using proxy variables from the nonprotected characteristics of policyholders (i.e., identifiable proxy) or opaque algorithms (i.e., unidentifiable proxy),” said Dr Huang, who noted that this phenomenon has recently attracted the attention of insurance regulators all over the world.
For example, her co-authored research paper, Anti-discrimination Insurance Pricing: Regulations, Fairness Criteria, and Models, reviewed indirect discrimination in the insurance domain. The paper then goes on to introduce some fairness criteria that are potentially applicable to insurance pricing, match them with different levels of potential land existing anti-discrimination regulations, and implement them into a series of existing and newly proposed antidiscrimination insurance pricing models. In conclusion, Dr Huang notes in her paper: “Despite the explosion of interest and volume of work that has been produced and published in recent years, the theory and application of discrimination-aware machine learning is still in a nascent state, especially in the context of insurance practice.”