Welfare Effects of Banning Genetic Information in the Life Insurance Market: The Case of BRCA1/2 Genes

24 Pages Posted: 27 Aug 2007

See all articles by Michael Hoy

Michael Hoy

University of Guelph - Department of Economics

Julia Witt

University of Melbourne - Melbourne Institute of Applied Economic and Social Research (MIAESR)

Abstract

We investigate whether regulations that ban insurance companies from access to individuals' genetic tests are likely to lead to substantial adverse selection costs for the specific example of the so-called breast cancer (BRCA1/2) genes. Using a data set including economic, demographic, and relevant family background information to simulate the market for 10-year term life insurance, we find generally only modest adverse selection costs associated with such a regulatory ban. However, for family background groups that are at high risk for carrying one of these genes, the efficiency cost of adverse selection may be significant should the test become widely adopted.

Suggested Citation

Hoy, Michael and Witt, Julia C., Welfare Effects of Banning Genetic Information in the Life Insurance Market: The Case of BRCA1/2 Genes. Journal of Risk & Insurance, Vol. 74, No. 3, pp. 523-546, September 2007, Available at SSRN: https://ssrn.com/abstract=1009729 or http://dx.doi.org/10.1111/j.1539-6975.2007.00223.x

Michael Hoy (Contact Author)

University of Guelph - Department of Economics ( email )

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Guelph, Ontario N1G 2W1
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Julia C. Witt

University of Melbourne - Melbourne Institute of Applied Economic and Social Research (MIAESR) ( email )

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Parkville, Victoria 3010
Australia
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61 3 8344 2111 (Fax)

HOME PAGE: http://www.melbourneinstitute.com/people/witt/home.html

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