Canada’s insurance industry is falling in line with the new Genetic Non-Discrimination Act, even as its industry association continues to fight against it, with some warning of anti-selection and major disruption to the established way insurance is bought and sold.
“This is a disaster for all consumers,” Gord Tulk, president of Slate Insurance Inc. in Red Deer, Alberta, says about the new Act. “This will cause massive upheaval in the insurance industry.”
Tulk says the new Act is a “complete abandonment” of the long-standing agreement between the insurance industry and consumers that both must be equally informed about the client’s past and current medical, accident, family and hospitalization history. If the client fails to provide honest information, then the insurer has been within its rights to decline coverage, he says.
The new Act went into effect May 4, 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. Breaking the law could mean a prison term of up to five years and a $1-million fine.
But Tulk says under the new Act “it’s like a horse race where the jockey and the trainer and the owner know how much the jockey weighs but nobody else in the racetrack is allowed to know.”
The law does not pertain to genetic information insurers collected before the Act went into force on May 4 for policies already in force. Insurers will still ask for medical information.
A number of insurance companies have begun sending out notices to financial advisors, telling them about the new law and how it will affect business going forward.
Insurers say the notices include a clear directive to doctors not to include the results of any genetic testing, complying with the new Act, says Rino D’Onofrio, president and chief executive officer, RBC Life Insurance. “Everyone is making changes to all their forms,” D’Onofrio said in an interview.
Many insurers have told advisors that in accordance with the new law, they will not require members of group or individual plans to disclose genetic test results.
“Although applicants are required to disclose medical test results, this no longer applies to genetic tests,” Sun Life Financial states in a note to advisors. “We’re … working as quickly as possible to change all affected applications, tele-interview and paramedical forms to help prevent the inadvertent collection of genetic test results.”
At least one insurance company is telling advisors that clients who have already been declined for coverage based on their genetic test results, can now reapply without having that previous genetic information taken into account. Standard underwriting processes would be used to then assess insurability.
Stephen Frank, senior vice president, policy at the Canadian Life and Health Insurance Association ( CLHIA), said different insurers may be taking different approaches to comply with the Act based on their individual circumstances.
The Act may still undergo a legal test in the courts. Even before it was given Royal Assent at the beginning of May, the Justice Department had signalled the government will refer the legislation to the Supreme Court of Canada because of issues dealing with constitutionality. The CLHIA as well as Quebec, British Columbia and Manitoba, are objecting to the new laws and will seek leave to intervene. One of the main reasons for their objection stems from the fact that the provinces, not Ottawa, look after health insurance.
Principle of equal information
But also of great concern to insurers is that the Act is not consistent with the principle of “equal information,” also known as anti-selection or adverse selection.
“This is a fundamental change for the industry and can involve significant changes to business practices, procedures and operations to comply with the Act,” Frank said.
D’Onofrio, who is also chair of the parent organization of global insurance associations LIMRA and LOMA, said most people believe the Act will be ruled unconstitutional. “[But] I think this is a little bit of the toothpaste is going to be out of the tube anyway.” Even if it is deemed to be unconstitutional, he said Ontario has already talked about making genetic anti-discrimination rules. “I think it’s just going to happen. I think it’s going to be the new norm,” he said. “Ultimately, it creates the risk of anti-selection.”
The CLHIA has said that 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 said this amount covers more than 85% of all applications for new life insurance policies.
In two separate reports, the Canadian Institute of Actuaries (CIA) has said not allowing underwriters to have access to the results of genetic tests could mean higher premiums for consumers anywhere from “limited and gradual” to “substantial” depending on the amount of insurance purchased.
Particularly hard hit could be those buying term insurance. The CIA estimates price increases could hit as much as 30% for men and 50% for women. Critical illness (CI) insurance may also be affected and if experience shows an increase in the number and cost of a certain illness, insurers may decide to withdraw that illness from their CI products as an uninsurable risk.
Many of those in favour of the new Act say countries where laws are similar to the new Genetic Non-Discrimination Act have not experienced a massive influx of requests for coverage and residents in those countries have instead taken proactive steps to either treat or prevent a disease discovered by genetic testing.
Others say the industry has already moved forward with new methods of how they underwrite insurance, including new algorithms and analytics that take into account readily available public statistics.
RBC’s D’Onofrio said it will take the industry some time to determine how prevalent a risk is, noting it could take years before some genetically based illnesses show symptoms.
“I think experience has to emerge. I think you have to see cases where people have had a genetic test and they bought life insurance. I think where you’re going to see the biggest potential challenge is more in critical illness insurance first.”
He gave the example of actor Angelina Jolie who had a genetic test showing an 80% chance of getting breast cancer and had a double mastectomy to reduce her risk. “If an average consumer found that out [for themselves] will they get a critical illness policy that covers cancer? Maybe. And that is an anti-selective environment.”
A note from Great-West Life said it is reviewing potential changes to its underwriting, pricing and products for individual and living benefits insurance and for group life, critical illness and disability insurance products that require underwriting “in order to address the increased risk of adverse selection that will arise as a result of the new legislation.”
Editor’s note: At a recent Economic Club presentation in Toronto, Manulife Canada president and CEO, Marianne Harrison also raised the possibility that critical illness insurance pricing might need to be raised. See article, Manulife looks to add Vitality program to group offering.