According to academic research from Heriot-Watt University published in the journal Astin Bulletin, "We quantify the overall impact of genetic information on the insurance industry using the bottom-up approach, in which detailed models are constructed of representative major genetic disorders. We consider six such disorders, namely adult polycystic kidney disease, early-onset Alzheimer's disease, Huntington's disease, myotonic dystrophy, hereditary non-polyposis colorectal cancer; and breast/ovarian cancer."
"Actuarial models based on the epidemiological literature exist for all these except MD. We parameterise a suitable model of MD, then synthesize the results from all six models to estimate the adverse selection costs arising from restrictions on insurers' use of genetic information. These are all very small, only in the most extreme cases rising above 1% of premiums. In the worst case - females displaying extreme adverse selection in a 'small' critical illness insurance market, with the use of family history banned - the cost is about 3% of premiums. Our model includes the most common single-gene disorders relevant to insurance, and includes representatives of most important classes of these disorders .While the bottom-up approach could be continued by modelling more and more diseases, we suggest that our model is adequate to draw robust conclusions."
There are problems with the study:
- Insurers are mostly banned from taking genetic information into account
- No insurer ever writes business as on an actuarial model
- The model assumes a spread of risk, that individual insurers do not get
- The model ignores the EU laws on gender equality – so whether or not the customer is female can no longer be taken into account
- The model assumes that insurers do not decline any proposal.
The reason that there is a ban on insurers using genetic information is that it prevents their knee-jerk reaction to what they believe is higher risk, despite the absence of any such proof, of either refusing to offer any cover, charging higher premiums, or restricting cover.