Will Genetic Test Results Be Monetized in Life Insurance?

Oytun Hacariz, Torsten Kleinow, Angus Smith Macdonald, Pradip Tapadar, R. Guy Thomas

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)
48 Downloads (Pure)


If life insurers are not permitted to use genetic test results in underwriting, they may face adverse selection. It is sometimes claimed that applicants will choose abnormally high sums insured as a form of financial gamble, possibly financed by life settlement companies (LSCs). The latter possibility is given some credence by the recent experience of “stranger-originated life insurance” (STOLI) in the United States. We examine these claims, and find them unconvincing for four reasons. First, apparently high mortality implies surprisingly high probabilities of surviving for decades, so the gamble faces long odds. Second, LSCs would have to adopt a different business model, involving much longer time horizons. Third, STOLI is being effectively dealt with by the U.S. courts. Fourth, the gamble would be predicated upon a deep understanding of the genetic epidemiology, which is evolving, subject to uncertain biases, and cannot predict the emergence of effective treatments.

Original languageEnglish
Pages (from-to)379-399
Number of pages21
JournalRisk Management and Insurance Review
Issue number4
Early online date28 Nov 2020
Publication statusPublished - 11 Jan 2021


  • adverse selection
  • genetic tests
  • life settlement
  • one-shot gamble
  • stranger-originated life insurance

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics


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