Could advances in medical technology make risk cover unaffordable?

medical technologyLast week I attended the Momentum Risk Summit and one of the things that struck me was the extent to which medical technology will be able to predict our future health outcomes.

We know that if we have an existing illness such as diabetes, we will pay more if we apply for life or disability insurance. If we are found to have indicators of future health risks, such as high cholesterol, that too affects our premium. And now we have insurers incentivising their clients by offering premium discounts for living a healthy lifestyle due to the direct link between our lifestyle choices and our health.

Momentum showed research, provided by reinsurer MunichRe, which found a correlation between the number of steps you take each day and mortality levels – the more you walk, the longer you live. Which is why insurers like Momentum and Discovery are offering discounted premiums if you wear an activity watch and reach certain targets.

The next step in medical technology will be to determine genetic predisposition to certain illnesses and even possibly predict major health events such a heart attack. The question is: what will the insurance industry do with this information? Will we reach a point where the underwriting will require genetic markers?

In that case, if you have great genes, take 10 000 steps every day and eat well, your premiums will come down. The problem is that when genetics comes into play, you may find that your premiums go up despite your healthy lifestyle.

As this technology becomes available there may be some regulatory intervention, such as has occurred with medical schemes which are no longer allowed to price on health risks. But Stephen van Niekerk, head of retail insurance products at Momentum, says that even without that regulatory move the industry should be circumspect about over-rating. He cites the experience in the UK where short-term insurers were no longer allowed to risk rate based on gender (women were receiving lower premiums).

Van Niekerk says that against expectations, when the risk rating for gender was removed, the number of people insured actually increased as the premiums for those higher-risk individuals came down, making insurance more affordable. A risk-rating system which ends up heavily penalising large segments of society based on their lifestyle and genetic disposition could see a reduction in the number of people who can afford cover. On an ethical level one could argue that while individuals could be risk-rated based on lifestyle choices they make, should they be risk-rated on genetics beyond their control?

Van Niekerk believes the risk of innovation around health actually lies with the insurance companies as individuals can start to anti-select. In other words, if an individual knows that they have a genetic marker for a specific illness, they can increase cover for that event. Alternatively, an individual who believes they are at no risk can opt out of cover, removing risk-pooling ‒ which is the essence of insurance. Already there are companies offering online genetic marker tests where you simply send in a cheek-swab; and soon, the research collected through all those medical wearables (fitness watches) will be able to predict a heart attack.

The upside of all this knowledge is that we will be able to make better, more informed decisions about our health. The more we know about our genetic make-up, the better we can monitor and adjust our lifestyles accordingly. The longer we live, and the healthier we are, the better for insurers.