Genetic Data the Key to Hyper Personalised Life Insurance? 

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

Personal health is now vulnerable, and people from developed nations cannot rely on the safety cushion of governmental support if they become ill because the accumulation of hospital and pension fees, from the U.S. to Japan, have exploded into a global debt of monolithic proportions. 

Reactive Insurance Is on the Way Out

For the struggling life insurance industry, which sits squarely at the precipice of capital markets, gaining relevance from stakeholders and customers will involve an acute focus on hyper-personalised protection-oriented products. 

The McKinsey report further suggests that future growth will be driven through product bundling and operational unbundling – paving the way for third-party investment and partnerships to hold a bigger stake in underwriting and technology.

There is a catalogue of coverage types offered by life insurers, from set 15-year terms to permanent plans, the majority of which are underwritten using diagnostics like age, smoking status, BMI, and familial and personal medical history. These factors present a picture pertinent to deducting future protection, but not necessarily a future risk. 

The current business model is ready for renovation, and foresight into the future and potential health issues will play a bigger role in the underwriting system. In the health tech sector, disruptors like G42-Healthcare, 23andMe and Sequencing, are experimenting with the use of genomics and DNA data to get a better understanding of underlying health conditions and the likelihood of it affecting people in the long run. 

Governmental organisations like the FDA, as well as VC funds like Red Sea Ventures and Parkwalk Advisors, have already lent their confidence to genomics, tapping into the opportunities it could afford in the health and telemedicine fields. 

Genetic Testing Is Not Popular in Insurance

In L&H insurance, however, the use of DNA data is highly contested, with a piecemeal of regulation built around it, both in the UK and globally, informing what life insurers can and cannot use genomics for. The Association of British Insurers’ (ABI) ‘Code on Genetic Testing and Insurance’ is an agreement between the members of the ABI and the Government on what is asked of life insurance customers regarding the use of their genetic data. 

Insurers under the code cannot require customers to provide a predictive or diagnostic genetic test, under any circumstances, nor can they use the genetic test results of a person applying for insurance – the only exception being if the insurance is over £500,000 and you have had a predictive genetic test for Huntington’s Disease.

The laws in the U.S. are less stringent, with the Genetic Information Nondiscrimination Act (GINA) of 2008 prohibiting health insurers from using genetic testing in underwriting, but not life insurance.

More regulation is being pushed for genetic testing, with the main opposition stemming from genetic discrimination and giving policyholders higher premiums for diseases they only have a risk of getting. 

Is there a use case there? 

Ruling out genomics entirely for insurance purposes is not the answer to improving products and operations. Genetic data can be useful to insurers in ways that are not invasive or discriminatory to customers. 

“Life insurance is a commodity now,” said Efi Binder, the Co-Founder and CEO of Futura Genetics, an insurtech that has developed a genomic data-powered health platform for life insurance customers. “What do you [the policyholder] care about who issues your $1,000,000 cheque to your relatives after you die? Why do you care if it’s company A or company B? It’s all the same, and if it’s all the same then I would just go and buy the cheapest policy possible. This is a problem for the industry, and companies today are looking for ways to differentiate.”

Differentiation has been a heated topic in the fintech industry as a whole, with incumbents and startups merging and now offering a slew of similar services – experimentative products grab attention. Futura Genetics is part of a nubile wave of insurtechs experimenting with genomic data and its available application in the insurance industry. 

Birthed in the city of Tel Aviv, in 2019, the startup was founded by Binder and Ram Warsha, both ex-military for the Israeli Air Force with storied careers in biotechnology, business, and finance respectively. The goals of the company are simple, to provide personalised preventive care to people through insurance.  

To achieve this relationship, where the medical data can pinpoint exactly what predispositions they have, without sharing it with insurance companies, Futura has billed itself as a “regulatory firewall” – an intermediary between insurers and customers. For policyholders, the work starts with specific, health-orientated, actions.

“Having good genetic testing and bioinformatics means nothing if we don’t have the ability to get the person to perform an action,” explains Binder. “This is a lesson I learned in my previous company, just providing the insights is not enough.” Futura’s approach is singular and more focused on providing incentives than coaching. 

Instead of laying out a routine health plan for customers to stick to and keep a record of, the company uses genetic data to specify a person’s highest predispositions to 3 underlying health conditions, and recommend the most clinically beneficial actions that customer can perform, whether that be going to your doctor for a colonoscopy exam, or getting in contact with a cardiologist for blood treatment. 

The platform itself covers 93% of natural mortality causes, with a non-invasive test spanning 36 diseases and over 200 genetic conditions. A licensed genetic counsellor is also provided before people see their results, both to give context to what the data shows and to provide personal agency to customers regarding the platform.  

Futura Genetics’ focus on driving action is saving lives and reducing insurance claims. Last year, the company’s proof of concept with AIG showcased its ability to save lives and reduce insurance claims through early diagnosis and preventive treatment. According to actuarial calculations, AIG is poised to see a 15X return on investment on $500K life insurance policies. “This service is more than paying for itself,” says Binder.

The Potential of Medical Compliance Data

“Once you complete an action, you can see a change in your risk profile, getting that instant gratification, and you can get the next set of actions if there are any to do, so it’s almost a step-by-step programme as  we first want you to do to what has the most impact on your health, then the next thing, and so on.” 

These actions build a policyholder score of medical compliance, which is the only information that will be given to insurers on behalf of Futura, and the criteria they will use to provide discounts effectively. Thus, insurers would have access to data specific to assessing a customer’s behaviour, without having access to their genetic or medical information, ensuring policyholders’ privacy. Not so much bypassing regulation, but working around it to consolidate a behaviour that insurers can measure and operationalise. 

Genomic data seems like a natural progression from the current wellness craze currently dominating life insurance hegemony. Major players like Vitality, Legal&General, and Aviva have invested in supplementary wellness programmes and gamification reward techniques for their insurance plans. From health counselling to nutritional support, the ambition of these programmes is to make customers more aware and active about their lifestyle and behaviours. 

Vitality, for example, also provides customers with discounts on gym memberships and fitness products along with their policies. These additions, along with the neurosis brought about by COVID, have primed a consumer conscience about health, FitBit saw a record 111 registered million users in 2021, adding 13 million in the year. The wellness programmes and solutions offered by the likes of Vitality use the data points collected by wearables and in-platform records to determine the pricing of insurance policies. Futura thus extrapolates from this model, where insurers work from compliance data where policyholders fulfil pointed actions. 

Using Data for Personalised Life Insurance

“For people who are sceptical of wellness programmes, the daily engagement and the idea of running every day, if they started from a clinical side they might be incentivised to consider those programmes and vice versa,” said Binder. “If people are already taking care of their health, and sharing their steps with their insurance carrier, why not more.” 

Utilising structured data is becoming more of a priority throughout the insurance sector, whether that be for accurate risk assessment for cars or pricing life insurance policies. 

In their 2023 Insurance Outlook report, Deloitte references the reactive approach insurers have taken in the last couple of years as a response to the pandemic and suggested that to sustain interest from the market, they need to take more active roles and start offering personalised products to specific demographics. Consumers in the U.S. prefer human agents, while for those in the Asia-Pacific region, online channels are a must for life insurance. 

Achieving personalisation in such a congested industry will be a challenging task, but robust customer data will be a pivotal part of that. As the proliferation of wellness data is widely used by insurers, the concept of medical compliance data derived from genetic testing would be an added bonus to determine a customer’s willingness to engage with their health. This approach funnels into the measures of preventative care, where conscious customers make a concerted effort to mitigate potential predispositions, and insurance carriers can mitigate the number of claims.