Does this genetic testing bill threaten the insurance industry?

A genetic testing bill is winding through Parliament, keeping the Canadian insurance industry on tenterhooks.

Bill S-201, the Genetic Non-Discrimination Act, seeks to revise the Canada Labour Code and the Canadian Human Rights Act to make it illegal for employers, insurance companies and anyone else entering into a contract or providing goods or services to require anyone to undergo genetic testing or to disclose the results of a genetic test.

The bill was designed to protect Canadians from discrimination on the basis of genetic information. For example, a person who tested positive for the Huntington’s disease gene could be fired or denied employment — or insurance — based on their test result. Proponents of the legislation, put forward in 2015 by Liberal Sen. James Cowan, have argued that fear of repercussions can prevent people from receiving genetic tests that may otherwise benefit them.

The insurance industry, however, disagrees with the bill. It argues the legislation would impede Canadians’ access to insurance and severely compromise the industry’s viability. In theory, someone who discovered that her genetics put her at a greater risk of getting sick or dying early wouldn’t have to tell her insurer and could purchase millions in life insurance at what are essentially discounted rates.

“The concept of equal information is absolutely at the core of insurance,” says Stephen Frank, senior vice-president, policy, at the Canadian Life and Health Insurance Association (CLHIA). “The rule is, if we’re going to offer you insurance, both of us need to understand the risk that we’re taking, so that we can enter into this in good faith. And this type of approach would break that chain.”

Read: Life insurance in the age of DNA testing

If the bill passes, argues the industry, the result would be higher premiums for everyone. “You’d have to write a lot of $300,000 policies to make up for a couple million dollars of unexpected loss,” says Frank. He points to a Canadian Institute of Actuaries study that estimates the bill’s passage would result in a 50% increase in premiums for women and 30% increase for men over time.

Others argue that the bill’s potential impact is much less: the Office of the Privacy Commissioner of Canada, citing 2011 and 2012 studies, has concluded the legislation “would not have significant adverse impact on the viability of the life and health insurance industry,” and that premiums would likely rise about 3% overall, an increase the industry could absorb.

Dr. Michael Hoy, an economics professor at the University of Guelph who specializes in insurance market information, says no one can predict the precise impact of such legislation. He says the insurance industry is justified in arguing that people possessing devastating genetic information would be prompted to buy more insurance.

“But the thing is,” he continues, “there aren’t very many people in the population who have such devastating information that they can keep [it] private from insurance companies.” Given that applicants would still have to disclose personal and family medical histories, insurance companies would know if someone had a strong family history of, for example, breast cancer or Huntington’s disease, and would rate policies accordingly.

“So, if you spread those extra costs across the entire insurance pool,” continues Hoy, “they probably won’t lead to very substantial increases. I’m not saying that 30% or 50% increases couldn’t someday be a sensible set of assumptions, but I think that’s very far down the road.”

Read: Genetic testing and your insurance

Toronto insurance consultant David Wm. Brown is less sanguine. “Genetic testing is at its embryonic stage. Eventually, we’re going to be able to test for everything,” he says. “If we get to that point, and applicants can have more knowledge than insurance companies on almost every question they ask, then it completely skews a system based on mutual disclosure of information.”

Frank says insurers have voluntarily agreed not to ask applicants or existing policyholders to undergo genetic testing. And as of January 1, 2018, CLHIA members will no longer ask for results of genetic tests for policies under $250,000 — which accounts for approximately 85% of policies. Above that threshold, however, “we would still want to understand why you are asking for so much coverage.”

He says the measures account for the importance of genetic privacy to Canadians. “It’s a compromise that will allow the industry and the market to be sustained at a price point that people find affordable, but that will protect industry from being taken advantage of by people who have information they are not disclosing.”

The legislation, as is, would not allow insurance companies to ask applicants for the results of genetic tests. Should the legislation pass in its current form, says Brown, it puts advisors into murky territory in terms of both disclosure and ethics. Insurance applications, he points out, ask agents directly if they know of any factors that might affect underwriting.

“If I know that somebody has had genetic testing, then I personally believe I am obligated to inform the [insurance] company that I do know that information. We have a certain fiduciary responsibility to both the provider and the purchaser, and I think anyone who wants to do the right thing has to disclose what they know. How [the legislation will] deal with that, I don’t know,” he says.

Liberal MP Randy Boissonnault has put forward several motions to amend Bill S-201, effectively removing the insurance industry from its scope. The amendments and the bill are up for vote in the House of Commons in early April.

In the meantime, the Genetic Non-Discrimination Act points to a more systemic problem for the insurance industry: a public that still sees insurers as predatory.

“It’s a bit of a mis-perception from the advocates, that we use genetic tests as a way to say no,” says Frank. “Insurers want to write business. We’re in the business of covering people. So we’re never going to be looking for reasons to say no.”

Brown agrees. “People still don’t understand the concept of insurance as a spread of risk among a common ground of people,” he says. “All they see is, ‘The bad insurance companies want to get more information in order not to pay claims.’” Bill S-201, he argues, could pass based on this emotional argument — a move that, ironically, could have negative repercussions for the industry and consumers alike. “We need to do a better job of explaining insurance to the public.”