Adverse selection, genetic testing and life insurance - lessons from health insurance in Australia

Abstract

The use of predictive genetic tests in setting premiums for life insurance is a controversial issue. Critics argue inter alia that this is ‘discriminatory’, that it will lead to the creation of a ‘genetic underclass’, and that it can lead to individuals being coerced to obtain information that they might not otherwise wish to have. Advocates argue that it is necessary in order to avoid creating serious asymmetric information in the insurance industry with consequent adverse selection. This paper is concerned with the adverse selection argument. Show more