Life Insurance Market

Once we live in Gattaca, we’ll all know our genetic code and its implications for our personal life expectancies.

But the government could end up restricting life insurance companies from using that information to adjust their rates. (They already restrict health insurance companies, as discussed the last time I mentioned Gattaca on this blog.) There’ll eventually be a term coined for a genetic condition that the insurance companies can’t officially notice. A “gray” condition?

I think that would open a window of opportunity for people to buy life insurance at bargain rates.

If you’re an entrepreneur, you find someone who’s genome suggests that he’ll die younger than most people with his habits, career, and family history. The insurance companies, restricted to using their traditional actuary tables, would have to sell the life insurance priced as if they didn’t know about this genetic condition.

Then you buy life insurance for this guy, with yourself as the beneficiary. There’d be brochures:

#34522231 is a non-smoker, with no known family history of cancer. He’s got an elevated chance of developing lung cancer before he’s 60, but the insurance companies can’t act on that information. He’s currently 36. This is a serious bargain, folks. 36 year olds are cheap cheap cheap to insure. Come and get it!

If there’s a limit to how much insurance can be bought for one person, then there could be a whole market, selling shares. I’ll sell you 40% of my stake in #55444482. He still hasn’t had his first heart attack, so buy now before his value tanks.

And you’d have all the theories. Some people LIKE to buy shares after the first heart attack, figuring the raised insurance price is worth it, ’cause the guy could die any minute.

And you’d have the big announcements, like a new treatment for stroke. Suddenly, everyone holding shares in people at risk for stroke begin selling like crazy.

3 Responses to Life Insurance Market

  1. BruceS January 14, 2008 at 1:09 pm #

    ISTR that when I bought life insurance, they asked all sorts of questions about what family members died of particular causes. Surely that was a sort of genetic predisposition screening. Now, I can’t buy a new life, disability or health insurance policy. More discrimination. Discrimination is always bad, right?
    I love the bit about speculative life insurance. There would probably be secondary markets, like options. Don’t sell yourself short!

  2. weeklyrob January 14, 2008 at 3:28 pm #

    But asking about your relatives is unlikely to become criminalized.

  3. BruceS January 14, 2008 at 7:37 pm #

    One other thing I forgot to mention: when you get sick, there’s no opportunity to play the other side of the actuary tables betting game. That is, even though the insurance company thinks you’re likely to die soon, they won’t put their money where their mouths are. IMO, the payback rate on an annuity with lifetime payments should be much higher for someone they don’t expect to live long. Turns out, this only works for age-based risk of death.

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