A rise in the number of people taking genetic tests could pose a serious threat to the life insurance industry, a paper presented at the Actuaries Institute summit warns.

“The current view is that genetics is an emerging risk but is not seen as a large threat at the moment,” it says. “However, if the use of such tests grows, it would become a threat.”

Advances in test interpretation could lead to different outcomes based on the same original test, the institute says.

“This means that customers may only need to take one genetic test in their lifetime for their results to remain valid and updated over time.

“Therefore, while the impact of genetic tests over a single-year period is small, cumulatively over time the impact would be larger because the results remain persistent.”

At present, only a small number of people have obtained genetic tests in Australia, with a negligible impact on the life industry.

But the paper says if 2-5% of the population took genetic tests, this could force life companies to reconsider product design, pricing and underwriting.

It would raise issues around insurers becoming more selective about providing cover, although the paper says this could be managed through the underwriting process.

“However, the risk of selective lapsing on the inforce book may be more difficult to manage because there are fewer actions available.

“It would be challenging to retain customers if their perceived need for insurance changes if they have greater awareness of potential future health state.”

Genetic tests could be used by insurers to assess a potential client’s health risks, but most life insurers have not invested the resources to undertake complex analysis, the paper says.

“In the long term, investment in such capability may depend on the perceived threat of genetics and how the industry wishes to deal with it.”