Wednesday, March 26, 2008

Genetic Science and Life Insurance Companies: An Unholy Alliance?

As the science of genetics advances to a level where someone’s future health status and life span can be calculated with unprecedented degrees of accuracy. As these tools will be utilized by life insurance companies. Will the establishment of a voluntary code of conduct in the rate - making procedures of life insurance providers be the norm rather than the exception?

By: Vanessa Uy

In a typical contemporary life insurance company, the actuary knows only that ultimately that the policyholder will die. The factors governing the event as they apply to any given individual-the when, the why, and the how-are still a mystery beyond casual prediction. Insurance experts must therefore draw up their actuarial tables entirely from death statistics, separating into categories of such subdivisions as age, sex and occupation. The expert thus starts with known statistics and from these, works out the probabilities. As always in the case of probability, the greater the sampling, the more accurate the resultant forecast will be.

Recent advances in genetic science can now allow scientists to predict with ever increasingly accurate forecasts of the probable characteristics of even the unborn. Characteristics such as height, weight, intelligence, even longevity. These tools now in use routinely by genetic science has become increasingly harder to be overlooked by life insurance actuaries. Surely, the element of gambling can be eliminated if the customer’s premiums are like the proverbial “money in the bank” since the life insurance company will now be less likely to pay out with most of their policyholders are now living as long as sequoia trees.

Will life insurance policies in the future be tailored to the individual customer’s “genetic endowment”? The sad news is that it will be a definite certainty despite the resulting resentment that will be harbored by a working underclass. To me, this is where a voluntary code of conduct should be adopted by “mainstream” life insurance companies to avoid the increased customer exclusion that would result if life insurance actuaries adopt a method that by all intents and purposes is unfair. But the bad news is life insurance companies primarily are a business entity that’s primarily concerned with their “bottom line”. If life insurance actuaries see that an unjust method of customer exclusion or insurance policies can fatten up their bottom line, then surely, they will accept it with open arms despite of the ensuing social turmoil.

No comments: