Transformers and genetic testing
When I was a young boy, my parents bought me a toy car about the size of a cell phone. It was cool because I could place it on the floor, pull it back to wind up the gear mechanism and then release it to roll across the floor. It would roll on the ground for a few seconds before flipping into a Transformer (an action figurine). I loved it. Back then there were good Transformers and bad Transformers. This holds true today within the insurance industry.
The transformer being discussed in government right now is the genetic testing Bill S-201. There is a lot of debate about it being a good or bad transformer. This legislation would prevent insurers (and others) from either requiring a genetic test or requesting the results from an applicant. If enacted it will prohibit companies and insurance advisors from asking about genetic testing and using these results in the underwriting process. This dramatically changes the risk to insurance companies. In the past, they could look to statistics and have a pretty fair guess of how many people live and pass on at each age given their conditions. However, there is now a barrier to them accessing information.
Fundamental to insurance is the concept of equal knowledge between the insured and the insurer. If people applying for insurance can keep genetic test results private and confidential, they may use those results to go out and purchase more insurance than they normally would. This is called anti-selection. This puts the insurance company at a disadvantage. The insurance companies can protect themselves in two main ways. First is to drive up the cost (premiums) to purchase a product to create a larger buffer for claims. To bring some reality to the magnitude of increase the Canadian Institute of Actuaries recently reported that if this bill passed, premiums may increase by 30 per cent for males and 50 per cent for females, regardless of whether someone has been genetically tested or not. The second strategy would be to modify or eliminate products altogether.
You might ask how common genetic tests are. Well, just to give you some history; in 2003 scientists first mapped the human genome. Then there were 100 genetic tests for diseases or conditions. In 2013, just 10 years later, the number of tests had jumped to 2,000. Today that number has skyrocketed to almost 35,000, with tests available for more than 10,000 conditions. With such a focus on medical advancement, these genetic tests are going to become more predictive of potential onset and the severity of an illness.
Although Bill S-201 looks like it is rolling out, it has not yet flipped into full transformer mode yet. I encourage you to speak to your professional team of advisors to determine if it is a good or bad transformer for you.
If you have the time or want to be up to speed with this bill, check out this government link: https://openparliament.ca/bills/42-1/S-201/
Steve Meldrum B.Mgt. CFP® CLU® is the founder of Swell Private Wealth Ltd. For over a decade he has specialized in helping individuals and businesses expand protect and perpetuate their wealth. For further information or tailored advice, contact him at 403487-0490, steve@swellwealth.com or connect on social media.