Business Economics and Public Policy Papers
Document Type
Journal Article
Date of this Version
12-1999
Publication Source
The Journal of Risk and Insurance
Volume
66
Issue
4
Start Page
531
Last Page
550
Copyright/Permission Statement
Genetic testing is a concern for insurers if they cannot use test results in underwriting. We model adverse selection in an insurance market with genetic testing for breast and ovarian cancer. Increased forces of mortality resulting from a family history of cancer or a positive test for a BRCA mutation are calculated. Using a Markov model, we estimate costs of adverse selection, assuming various testing and insurance purchase behaviors. Adverse selection should be controllable if companies apply strict underwriting rules, requesting cancer history and onset age for all first-degree relatives. If insurers fail to correctly identify the family history of the application and use it in pricing, adverse selection costs could become unbearable.
Recommended Citation
Subramanian, K., Lemaire, J., Hershey, J. C., Pauly, M., Armstrong, K., & Asch, D. A. (1999). Estimating Adverse Selection Costs from Genetic Testing for Breast and Ovarian Cancer: The Case of Life Insurance. The Journal of Risk and Insurance, 66 (4), 531-550. Retrieved from https://repository.upenn.edu/bepp_papers/5
Included in
Business Commons, Economics Commons, Public Affairs, Public Policy and Public Administration Commons
Date Posted: 27 November 2017
This document has been peer reviewed.