Is genetic data the key to hyper-personalized life insurance?

Last November, McKinsey released ‘Global Insurance Report 2023: Rethinking life insurance” – it discussed the recurring trends found in the industry as a result of episodes of pandemics, environmental and political disasters of the last decade.

Personal health is now vulnerable, and people in developed countries cannot rely on the airbag of government support if they get sick, because the accumulation of hospital and pension contributions from the US to Japan has become a global debt of monolithic proportions.

Reactive Insurance Goes Away

For the life insurance industry, which is right on the brink of the capital markets abyss, gaining relevance from stakeholders and customers will require special attention to hyper-personalized protection-focused products.

The McKinsey report also suggests that future growth will come from product bundling and unbundling operations, paving the way for third-party investments and partnerships to increase share in underwriting and technology.

There is a catalog of types of coverage offered by life insurers, from fixed 15-year terms to permanent plans, most of which are guaranteed using diagnostic data such as age, smoking status, BMI, and family and personal medical history. These factors present a picture suitable for deducting future protection, but not necessarily future risk.

The current business model is ready to be upgraded and future foresight and potential health issues will play a larger role in the underwriting system. In the medical technology sector, innovators such as G42-Health, 23 and me And Sequencingare experimenting with the use of genomics and DNA data to better understand underlying health conditions and the likelihood that they will affect people in the long term.

Government organizations such as the FDA, as well as venture capital funds such as Red Sea Ventures and Parkwalk Advisors, have already placed their trust in genomics, leveraging the opportunities it can provide in healthcare and telemedicine.

Genetic testing is not popular in insurance

However, in L&H insurance, the use of DNA data is highly controversial, and part of the regulation is built around it both in the UK and around the world, telling what life insurers can and cannot use genomics for. Association of British Insurers (ABI) “Code of Genetic Testing and Insurance” is an agreement between ABI members and the government on what is required of life insurance customers regarding the use of their genetic data.

Insurers under the code may not require customers to provide a predictive or diagnostic genetic test under any circumstances, nor may they use the results of a genetic test of an individual applying for insurance, except in cases where the insurance exceeds £500,000, and you had a predictive genetic test for Huntington’s disease.

Laws in the US are less strict. Genetic Information Non-Discrimination Law (GINA) of 2008, which prohibits insurance companies from using genetic testing in insurance, but not in life insurance.

Genetic testing is becoming more regulated, with the main resistance coming from genetic discrimination and giving policyholders higher premiums for illnesses they may contract.

Is there a use case there?

Removing genomics entirely for insurance purposes is not the answer to improving products and operations. Genetic data can be useful to insurers in a way that is not invasive or discriminatory towards customers.

“Now life insurance is a commodity,” said Efi Binder, co-founder and CEO Futura Genetics, an insurtech company that has developed a genomic data-driven health platform for life insurance clients. “What do you [the policyholder] care about who will give your $1,000,000 check to your relatives after you die? What do you care if it’s company A or company B? It doesn’t matter, and if it doesn’t matter, I’d just go and buy the cheapest policy. This is an industry problem, and companies today are looking for ways to stand out.”

Differentiation has been a hot topic in the fintech industry in general, with actors and startups merging and now offering many similar services – experimental products are getting attention. Futura Genetics is part of a young wave of insurers experimenting with genomic data and its affordable application to the insurance industry.

Founded in Tel Aviv in 2019, the startup was founded by Binder and Ram Varsha, former Israeli Air Force soldiers with storied careers in biotech, business and finance, respectively. The company’s goals are simple: to provide personalized preventive care to people through insurance.

To achieve a relationship where medical data can pinpoint what their predisposition is without sharing it with insurance companies, Futura has billed itself as a “regulatory firewall” – an intermediary between insurers and customers. For policyholders, work begins with specific health-focused actions.

“Good genetic testing and bioinformatics mean nothing if we don’t have the ability to get a person to perform an action,” Binder explains. “This is a lesson I learned at my previous company, just providing information is not enough.” Futura’s approach is unique and focuses more on providing incentives than coaching.

Instead of creating a typical health care plan that clients must follow and keep a record of, the company uses genetic data to indicate a person’s greatest predisposition to three major health conditions and recommend the most clinically beneficial actions a client can take, whether that be seeing a doctor. for a colonoscopy or see a cardiologist for blood treatment.

The platform itself covers 93% of natural causes of death with a non-invasive test covering 36 diseases and over 200 genetic conditions. A licensed genetic consultant is also provided before people see their results, both to give context to what the data shows and to give clients personal leeway with regards to the platform.

Futura Genetics is focused on saving lives and reducing insurance premiums. Last year, the company’s proof-of-concept with AIG demonstrated its ability to save lives and reduce insurance claims through early diagnosis and preventive treatment. According to actuarial calculations, AIG is ready to receive a 15-fold return on investment on $500,000 life insurance policies. “This service doesn’t just pay off,” says Binder.

The Potential of Medical Compliance Data

“Once you take an action, you will see a change in your risk profile, getting that instant gratification, and you can get the next set of actions if there are any actions, so it’s almost a step-by-step program, as we first want to you did the one that affects your health the most, then the next, and so on.”

These actions allow policyholders to obtain a medical compliance score, which is the only information that will be provided to insurers on behalf of Futura, and the criteria they will use to provide discounts effectively. In this way, insurers will have access to data related to customer behavior assessment without access to their genetic or medical information, which will ensure the privacy of policyholders. Not so much bypassing regulation as bypassing it to reinforce behaviors that insurers can measure and implement.

Genomic data seems like a natural extension of the current health craze that currently dominates the life insurance hegemony. Major players such as Vitality, Legal&General and Aviva have invested in additional wellness programs and gamification methods for their insurance plans. The goal of these programs, ranging from health counseling to nutritional support, is to inform clients about their lifestyle and behavior and to keep them active.

Vitality, for example, also gives customers discounts on gym memberships and fitness products along with their policies. These additions, along with the neurosis caused by COVID, have made consumers think about health, according to FitBit. 111 million registered users in 2021, adding 13 million a year. Wellness programs and solutions offered by companies such as Vitality use data points collected by wearable devices and platform records to determine the price of insurance policies. Thus, Futura extrapolates this model, where insurers work with compliance data and policyholders perform certain actions.

Use of data for individual life insurance

“For people who are skeptical about wellness programs, daily routines and the idea of ​​running every day, if they started on the medical side, they might be interested in considering these programs and vice versa,” Binder said. “If people are already taking care of their health and sharing their steps with their insurance company, why not.”

The use of structured data is a growing priority in the insurance sector, whether it’s accurate car risk assessment or life insurance policy pricing.

In their Insurance outlook for 2023 In the report, Deloitte cites the reactive approach that insurers have taken over the past couple of years in response to the pandemic and suggests that in order to sustain market interest, they need to take a more proactive role and start offering personalized products to specific demographics. Consumers in the US prefer human agents, while in the Asia-Pacific region, online channels are a must for life insurance.

Achieving personalization in such an overloaded industry will be a challenge, but reliable customer data will be a key part of it. Since the dissemination of health data is widely used by insurers, the concept of medical eligibility data obtained from genetic testing will be an added bonus for determining a client’s readiness to take care of their health. This approach is reflected in preventive care interventions where conscientious customers make a concerted effort to mitigate potential predisposition and insurance companies can reduce claims.