Multifactorial Genetic Disorders and Adverse Selection: Epidemiology Meets Economics |
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| Authors: | Angus Macdonald Pradip Tapadar |
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| Institution: | Angus Macdonald is at the Department of Actuarial Mathematics and Statistics, and the Maxwell Institute for Mathematical Sciences, Heriot-Watt University, Edinburgh EH14 4AS, U.K. Pradip Tapadar is at the School of Mathematics, Statistics and Actuarial Science, University of Kent, Canterbury, CT2 7NF, U.K. The authors can be contacted via e-mail: and . |
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| Abstract: | The focus of genetics is shifting its contribution to common, complex disorders. New genetic risk factors will be discovered, which if undisclosed may allow adverse selection. However, this should happen only if low-risk individuals would reduce their expected utility by insuring at the average price. We explore this boundary, focusing on critical illness insurance and heart attack risk. Adverse selection is, in many cases, impossible. Otherwise, it appears only for lower risk aversion and smaller insured losses, or if the genetic risk is implausibly high. We find no strong evidence that adverse selection from this source is a threat. |
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