The growth of direct-to-consumer DNA kits is a big deal with significant ramifications for the life insurance industry. Direct-to-consumer DNA kits, commonly used to track ancestry roots, increasingly allow individuals to assess their potential health risks by predicting genetic illnesses. Now, Google-backed 23andMe and Ancestry.com offer DNA test kits for $99, which can be ordered online with the click of a button. The DNA reports can recognize genetic variants associated with an increased risk of developing certain health conditions, including Alzheimer’s, Parkinson’s, and the BRCA1/BRCA2 genes, which are linked to increased risk of ovarian and breast cancer.
For life insurers, an industry that relies on its ability to manage risk-taking when it comes to health, this new DNA era could mean an information disadvantage compared to the consumer. Making matters more complicated for insurers, almost half of the states have enacted laws regulating how insurers either request genetic tests or ask for genetic information during the underwriting process. The laws are more expansive than the federal Genetic Information Nondiscrimination Act (GINA) enacted in 2008, which prevents genetic discrimination in the health insurance sector. For example, California state law both (1) regulates how an insurer may use genetic information obtained during the underwriting process (Cal. Ins. Code § 10143) and (2) restricts insurers from requiring applicants to undergo genetic testing (Cal. Ins. Code § 10148). Several other states have passed similar laws. These laws were largely enacted in the 1990s and 2000s, and they were formed on the premise of protecting genetic results as a form of private property.
Most regulation regarding genetic information was enacted long before the widespread dissemination of direct-to-consumer DNA kits, which have exploded in popularity in the last year or so. Given such regulation, most, if not all, life insurers have steered clear of the issue by not asking for genetic information or requesting genetic testing regardless of the jurisdiction. With applicants gaining the upper hand, however, insurers may be prompted to take a different approach by asking for available genetic information during the application process. The challenge will be for insurers to appropriately navigate state laws governing use of genetic information during the underwriting process.
In the meantime, there is an argument that the non-disclosure of unrequested genetic information could constitute fraud, giving rise to rescission of a life insurance policy. Life insurers rely on the honesty of applicants. The validity of a policy depends upon the full disclosure of all material information. It would seem manifestly unfair for an applicant to know that she has the BRCA1 gene, which she recently learned of through a 23andMe test, and then not disclose that information on a life insurance application. Although life insurance applicants generally have no duty to disclose unasked-for information, varying types of questions could conceivably be interpreted as seeking genetic information. For example, general questions such as “Are you in good health?” or “Have you ever received advice?” regarding a disease could arguably trigger an obligation to reveal a genetic predisposition. Similarly, questions about “family history” could arguably require disclosure of genetic information. That said, there is sufficient vagueness and ambiguity in this area that would probably undermine a rescission claim. Specifically, vagueness in an application question and its answer creates a difficult situation requiring the reconciliation of two competing standards: (1) the requirement to interpret questions in a light most favorable to the applicant; and (2) the general rule that individuals with knowledge of an omitted condition are more likely to have committed fraud. Given that rescission in most states hinges on “intent” to deceive the insurer, it is unclear whether the non-disclosure of genetic information to a non-specific application question could actually be used to prove intent to deceive. To date, this legal question is untested in the courts.
As genetic information becomes so easily accessible for individuals, the life insurance industry will need to address what is becoming an uneven playing field. Changing underwriting practices and application questions will be challenging given the patchwork of state laws regulating the use of genetic information. Rescission arguments arising from the non-disclosure of genetic information in life insurance applications will also remain murky until these complex legal questions are resolved in the courts, presumably in the near future.