Insurance and genetics a reinsurers perspective

1
Insurance and genetics - a reinsurers
perspective

• GAIC - HGC Joint Meeting
• 22.9.2003
• Alan Tyler
• Health Welfare Strategy Manager
• Swiss Re Life Health

2
Agenda

• Commercial realities for insurers and consumers
• The potential impact of genetics upon insurers
• The role of family history as a risk factor
• Parameters for a sustainable future

Alan Tyler GAIC-HGC joint meeting 22.9.2003
3
Agenda

• Commercial realities for insurers and consumers
• the nature of insurance and insured risk
• how commercial considerations impact upon the
  underwriting process
• how underwriting impacts upon consumers
• The potential impact of genetics upon insurers
• The role of family history as a risk factor
• Parameters for a sustainable future

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Key factors in understanding insurance

• Differences between public (social) and private
  (commercial) insurance
• Differences between individual and group
  insurance
• Differences in the nature of insured risk

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Public and private insurance

• Public (social) insurance
• obligatory, inclusive, rules set by government
• risk is subcontracted to insurers and funded by
  premiums (as opposed to carried by government and
  funded by taxation)
• Private (commercial) insurance
• voluntary, selective, regulated by government
• insurers are free to design and market products
  according to demand and their ability to assess
  the risk
• Most legislation in other countries has been
  framed in order to protect access to public
  insurance
• All UK life and health insurance is private and
  entirely voluntary (including mortgage insurance)

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Individual and group insurance

• Individual insurance
• purchased by individuals to cover themselves and
  other family members
• each risk is individually underwritten
• Group insurance
• purchased by an organisation for its members
  (usually an employer for its employees)
• for most members, coverage is automatic and there
  is no medical underwriting

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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The nature of insured risk
Critical Illness
Life
Long Term Care
Private Medical
Private MedicaI
Income Protection
Diagnosis
Death
Unable to care for yourself
Unable to work
Need for private treatment

• Each situation has a different risk dynamic
• Medical events impact differently on each risk
• The age of the applicant and the duration of
  the policy will
• influence that dynamic
• The definition of risk is different from that
  used in clinical
• practice (e.g. risk of recurrence/potential
  for cure)

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Individual life and health insurance

• Classification of risk
• Layer One Age, sex, smoker status
• Layer Two Medical history, occupation,
  lifestyle, family history, product features
  chosen, (geographic location)
• Basis of insurance
• Utmost good faith disclosure of what the
  applicant knows about their own risk profile
• Equity between policyholders everyone pays a
  premium proportionate to the risk that they bring
  to the fund
• Insurer has only one chance to assess the risk

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Trends in insurance underwriting

• With better medical and insurance data and
  improvements in clinical practice, terms can be
  quoted for lives previously considered
  uninsurable
• Rising costs mean that increasing reliance is
  placed on the answers given by the applicant on
  the proposal form
• Medical evidence is now used more to define risks
  disclosed by applicants than as a routine check
  for lives over a certain age or for amounts
  proposed above a certain level
• People still non-disclose !

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Impact of underwriting

• Underwriting decisions 1999 (38 companies - UK
  Ireland - 2.5 million lives)
• Rated/
• Standard Exclusion Declined
• Life 93.3 5.7 1.0
• Life CI 89.7 8.1 2.3
• CI 86.9 9.8 3.3
• IP 74.3 17.7 7.9
• Source Swiss Re Life Health

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Frequency of medical evidence (1999)

• GPR MER
• Life 22.8 7.3
• Life CI 17.7 5.9
• CI 31.4 5.8
• IP 42.7 10.0
• Source Swiss Re Life Health

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Reliance on proposal form answers
Application only Up to age 35

Life Critical
Illness Maximum 750,000 600,000 Me
dian 300,000 250,000 Application
only Up to age 50
Life
Critical Illness Maximum
400,000 200,000 Median
150,000 100,000 Source Swiss Re Life
Health non-medical limits survey 2001
Alan Tyler GAIC-HGC joint meeting 22.9.2003
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People still non-disclose

• 1999 Swiss Re non-disclosure study (10 insurers
  in UK and Ireland - 9,500 lives)
• Only covered those applications for which medical
  evidence was obtained routinely
• Rates of non-disclosure varied by company from
  3.2 to 12.2 (6.2 overall)
• Non-disclosure more prevalent amongst older age
  groups and for health insurance compared to life
  insurance
• Some non-disclosure severe enough for risk to be
  unacceptable

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Commercial realities for insurers and consumers

• The competitive nature of the market exerts
  continuous pressure on costs
• Time (and cost) pressures limit the amount of
  information that can be requested from the
  applicant or obtained from other sources
• Applicants are grouped into similar risk
  categories and charged according to the risk that
  they bring to the fund
• Treating undisclosed risks as if they were not
  there (as with the current moratorium) has
  implications for all policyholders
• Low risk consumers exert pressure for the best
  deal
• Insurers wish to grow the market not reduce it

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Removing the right to underwrite

• If no underwriting were allowed and each person
  in the United States simultaneously applied for
  the same amount of coverage the premium needed
  for each person would be 90 higher than the
  current premiums for standard applicants
• Source American Academy of Actuaries as
  reported by Canadian Institute of Actuaries,
  November 2000

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Bearing the cost of undisclosed risks

• 1000 lives aged 35 - 50,000 life insurance for
  10 years

3 200 50
100,000 150,000
Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Agenda

• Commercial realities for insurers and consumers
• The potential impact of genetics upon insurers
• The role of family history as a risk factor
• Parameters for a sustainable future

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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The potential impact of genetics upon insurers (1)

• At present the risk to insurers is largely
  confined to relatively rare single gene disorders
• For most diseases, positive tests indicate only a
  predisposition to disease not certainty
• Complex interactions exist between genetic and
  environmental factors
• Genetic testing, gene therapy and
  pharmacogenetics offer the possibility of better
  prevention and treatment
• Improved mortality and morbidity would lower
  premiums and make insurance more affordable
  BUT...

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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The potential impact of genetics upon insurers (2)

• Whilst the ability to identify predisposition to
  disease is improving, very few preventive/curative
  strategies have been identified
• The gap between identifying risk and implementing
  prevention may impact significantly upon the
  purchase of insurance
• Consumers appear to attach more predictive value
  to tests than is actually the case
• Vulnerability to fraud and smart shoppers will
  grow the longer insurers are denied access to
  information known to the consumer

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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The potential impact of genetics upon insurers (3)

• No insurance data is being collected during the
  moratorium
• The growth of home testing may create issues for
  insurers and clinicians
• Further restrictions on access to family history
  information would raise premiums and threaten the
  viability of Critical Illness

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Agenda

• Commercial realities for insurers and consumers
• The potential impact of genetics upon insurers
• The role of family history as a risk factor
• how the information requested differs from FH
  taken by a geneticist
• not just a proxy for genetic information
• turning clinical data into insurance terms
• Parameters for a sustainable future

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Typical proposal form question

• Have any of your near relatives (i.e. parents,
  brothers or
• sisters) died or suffered from any of the
  following before
• age 65?
• i) heart disease/disorder Yes/No
• ii) high blood pressure
  Yes/No
• iii) a stroke Yes/No
• iv) diabetes Yes/No
• v) kidney disease/disorder Yes/No
• vi) cancer (include type of cancer if known)
  Yes/No
• vii) any form of eye disease/disorder Yes/No
• viii) multiple sclerosis Yes/No
• ix) any form of paralysis Yes/No
• x) any hereditary/familial disease/disorder
• such as Huntingtons chorea?
  Yes/No
• If YES, please give full details including ages
  of family members
• when first diagnosed.

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Use of family history information

• Australian survey
• 7,949 life health insurance applications
• 558 (7.0) had significant family medical history
• 349 (4.4) - family history either confirmed the
  applicants personal health history or resulted
  in a more favourable decision
• 106 (1.3) - family history a contributory factor
  in increasing premiums or declining the risk
• 103 (1.3) - family history the determining
  factor in increasing premiums or declining the
  risk
• Source Investment Financial Services
  Association (IFSA) - Australia - October 2002

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Clinical data - Family history of colorectal
cancer

• Lifetime risk of developing colorectal cancer
• Population risk
  1 in 50
• One 1st degree relative affected (age gt45) 1 in
  17
• One 1st one 2nd degree relative affected 1 in
  12
• Two 1st degree relatives affected
  1 in 6
• Dominant genetic pattern - Hereditary
• non-polyposis colorectal cancer (HNPCC)
• positive - Amsterdam criteria
  1 in 2
• Familial Adenomatous Polyposis (FAP) 1
  in 1
• Sources Itoh et al, 1990 St John et al, 1993
  Watson Lynch, 1993 Fuchs et al, 1994 Marra
  Boland, 1995 Vasen, 2000.

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Clinical data - Family history of premature
ischaemic heart disease

• Relative risk
  of developing IHD
• Age of applicant lt65 65 to 75
  76 to 85 gt 85
• IHD FH before age 60
• - 1 relative affected 2.0 1.5
  1.3 1.0
• - 2 relatives affected 4.0 2.5
  2.0 1.0
• Sources Roncaglioni, 1992 Marenberg et al,
  1994 Jousilahti et al,
• 1996 Leander et al 2001

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Life insurance terms - Family history of
ischaemic heart disease

• 
  Men Women
• IHD FH prior to age 60
• - 1 relative affected
  Standard Standard
• - 2 or more relatives affected (both under age
  60)
• - applicant aged under 65 50
  Standard
• - applicant aged above 65 Standard
  Standard
• - More than 2 relatives affected or
• FH at very young age
  Individual consideration
• Source Swiss Re Life Health

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Critical Illness terms - Family history of
ischaemic heart disease

• 
  Men Women
• IHD FH prior to age 60
• - 1 relative affected
  Standard Standard
• - 2 relatives affected (both under age 60)
• - applicant aged under 65 75/50
  25
• - applicant aged above 65 Standard
  Standard
• - More than 2 relatives affected or
• FH at very young age
  Individual consideration
• Source Swiss Re Life Health

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Agenda

• Commercial realities for insurers and consumers
• The potential impact of genetics upon insurers
• The role of family history as a risk factor
• Parameters for a sustainable future

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Insurers approach to use of human genetic data

• Fair access to information known to the applicant
• No testing for insurance purposes
• Supportive of the science
• no wish to obstruct testing for health purposes
• happy to follow its usage in clinical practice
• need to watch development of private testing
• wish to work in partnership to understand
  implications for insurance risk assessment and
  consumer behaviour
• Need to address consumer fears and help them deal
  with the realities

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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The right to underwrite
Expert risk assessment
Benefits to policyholder
Benefits to Insurance
Equity between policyholders
Keep within mortality assumptions
Accurate and sustainable pricing
Spread the risk
Competitive premium rates
Access to insurance
Shared risk
Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Consequences of disturbing the underwriting
balance

• Higher premium rates for all
• More cautious approach to higher risk lives
• Products withdrawn or curtailed
• Critical Illness at high risk (First launched in
  1986 - now more than 4 million policyholders)
• Fewer people able to afford insurance - a
  financial underclass
• More people dependent on personal savings or
  government support

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Parameters for a sustainable future (1)

• Access to information known to the applicant
• some lives unacceptable but majority will benefit
• no reason why declinatures should increase
• in time, greater knowledge and improvements in
  clinical practice will extend the range of risks
  acceptable

• Access to current research and expert opinion
• data quantifying the impact of human genetics on
  mortality, morbidity, diagnosis and treatment to
  improve the insurance evidence base
• information on consumer behaviour towards human
  genetics

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Parameters for a sustainable future (2)

• Development of solutions for at risk lives

• Development of cost-effective services which
  reduce the risk for both consumers and
  insurers
• Continued adherence to ABI Codes of Conduct and
  Best Practice standards

Alan Tyler GAIC-HGC joint meeting 22.9.2003
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Insurance and genetics - a reinsurers
perspective

• GAIC - HGC Joint Meeting
• 22.9.2003
• Alan Tyler
• Health Welfare Strategy Manager
• Swiss Re Life Health