The Canadian Institute of Actuaries believes the cost of term life insurance products could rise by as much as 50% and that insurers could withdraw ailments from critical illness insurance if an anti-genetic discrimination bill becomes law. But others say underwriting has evolved to the point where relying on any single test to determine insurance eligibility doesn’t hold water anymore.
In early March, the House of Commons passed Bill S-201, An Act to Prohibit and Prevent Genetic Discrimination, making it illegal for an insurer or employer to require a person to undergo genetic testing or release the results of previous tests as a requirement to get insurance or any other contract agreement. Sharing genetic test results without written consent would also be against the law except for physicians and researchers.
Referred to the Supreme Court
But just one day after the bill passed the House of Commons, Justice Minister Jody Wilson-Raybould signalled the government wants to refer the legislation to the Supreme Court to deal with the bill’s constitutionality.
Provinces, not the federal government, look after health insurance, and organizations such as the Canadian Life and Health Insurance Association (CLHIA) as well as three provinces – Quebec, British Columbia and Manitoba – are objecting to the bill.
The CLHIA is waiting to get a clear indication from Ottawa on what it will do before knowing its next steps.
The CLHIA says insurers have already committed to never asking a person applying for life insurance to take a genetic test, nor will they ask or use genetic testing information for new life applications up to $250,000, effective the beginning of next year. The CLHIA says this covers more than 85 per cent of all applications for new life insurance policies.
In a research paper published in 2014, the CIA said the impact on the insurance industry of not allowing underwriters to have access to the results of genetic tests depends on the amount of insurance provided. For example, the paper says a threshold of $100,000 would have a “limited and gradual” impact on the industry. But at $1 million, the impact would be “substantial.”
It would particularly affect those with term life insurance products, with potential financial increases of 30 per cent for men and 50 per cent for women, said Jacques Boudreau, chair of the CIA’s committee on genetic testing.
Critical illness insurance
Critical illness (CI) insurance may also be materially affected, particularly if the level of insurance for CI is $250,000 or more. “The impact is significantly more than insurance companies could be expected to absorb without an increase in premium rates,” states a second CIA paper published in 2016.
“As more genetic tests emerge for serious illnesses, it is likely that the impact will continue to grow. If a link between a particular illness and certain genes is especially strong, insurance companies may decide to withdraw that illness from their CI products as an uninsurable risk.”
If the threshold is set at $100,000, which is just above the average amount of CI in force, then the impact on premium rates would be less, “but likely not zero.”
But Bev Heim-Myers, chair of the Canadian Coalition on Genetic Fairness, said increases in rates haven’t happened in other countries where genetic testing information is protected by privacy laws.
“In other jurisdictions, like the U.K., the European Union and Israel, the insurance industry thrives,” Heim-Myers said in an interview. “The reality is that people [in these countries] didn’t rush out and top up their insurance because they really didn’t know what they were going to die of and it wasn’t a good investment. What they did do was get normal insurance coverage – that was great. But they also took proactive steps to either treat their disease or prevent their disease going forward. The U.K. community and individuals are actually healthier.”
She also said a number of groups heard from top constitutional experts before the bill went for a vote and were told the legislation was well within federal government jurisdiction.
Heim-Myers said her group also asked all the provinces prior to the vote if they supported the legislation and they responded as being either supportive or neutral.
But CIA’s Boudreau said the insurance situation in Canada cannot be compared with other countries on an apples-to-apples basis.
First, many countries that have brought in anti-genetic discrimination laws have not given themselves enough time for policyholders with genetic-based illnesses, like Huntington’s disease, to exhibit symptoms, which may not show up for 20 years or more, said Boudreau.
Secondly, it is much more prevalent to buy individual life insurance in North America than it is in Europe. In the U.K., he said, the norm is to buy less insurance and often for a shorter period of time, such as to cover a mortgage.
Thirdly, in North America, insurance is guaranteed for the life of the contract – so that while the policyholder can cancel the contract, the insurer can’t. “In Europe, my understanding is that the contracts tend to be less often guaranteed, they are often adjustable and they tend to be for a shorter period of time.”
Group insurance is less likely to be affected by the legislation because risk is already spread among a large group and prices are set solely on the class the employees are in – executive, management or employee, said Dave Patriarche, owner of Mainstay Insurance and founder of Canadian Group Insurance Brokers Inc. (CGIB). Group insurance also tends to have smaller amounts than individual life, often ranging from $25,000 to $100,000.
Patriarche said he hopes the bill, if it does go through, doesn’t drive up rates because it will mean fewer people will buy insurance and a large part of the Canadian population is already underinsured.
“As well, there is not one thing that will make or break whether people are accepted or not. You are the sum of all your parts. So whether you are overweight, have high blood pressure or have a family history of heart disease – all those things come together for the insurance company to analyse the risk. It’s not always just one thing.”
The issue of higher costs for term life and CI may be problematic for some insurers, but not for those that have moved their underwriting processes forward, said David Stewart, executive vice president of managing general agency Financial Horizons.
Stewart said he agrees with the need to protect individual privacy. On top of that, insurance companies have become more sophisticated in how they rate their risks: long gone, he said, are the days when insurers required potential policyholders to get x-rays before approving life insurance coverage.
Manulife, for example, has stepped up with predictive analytics and has shed some previous requirements for coverage. The new tool monitors advances in medical research along with publicly available data, such as information from Statistics Canada, to help determine underwriting risks. Using this technique, Manulife became the first major insurance company in Canada last year to offer life insurance to those who were positive for HIV. Eligible people with HIV between the ages of 30 and 65 and are on a stable course of antiretroviral therapy, among other conditions, can apply for individual life insurance coverage of up to $2 million.
Sun Life announced in November that it’s eliminating the need for many of its medical test requirements and will no longer routinely require medical exams, ECGs, oral fluid samples and urine HIV tests for either critical illness insurance or life insurance. Sun Life estimates that 75 per cent of their CI clients and 50 per cent of their life insurance clients will benefit from the changes.
Given how some insurers, like Manulife and Sun Life are going forward, Stewart cautioned that having the insurance industry fight against the bill is not going over well with the public.
Industry's public image
He said he applauds individual rights and how Bill S-201 is “forcing the insurance industry to start thinking about other ways to ensure the integrity of their offerings. I hope it doesn’t lead them down the road to prohibitive pricing in the guise that without this genetic test, we’re going to have to triple or quadruple premiums,” he said.
“For me, this is just another example of change and rather than simply paint it with an increase in premium or change the pricing, why not look at how you underwrite and what you can do differently?”