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Journal Article

Estimating Adverse Selection Costs from Genetic Testing for Breast and Ovarian Cancer: The Case of Life Insurance

Krupa Subramanian, Jean Lemaire, John C. Hershey, Mark V. Pauly, Katrina Armstrong and David A. Asch
The Journal of Risk and Insurance
Vol. 66, No. 4 (Dec., 1999), pp. 531-550
DOI: 10.2307/253862
Stable URL: http://www.jstor.org/stable/253862
Page Count: 20
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Since scans are not currently available to screen readers, please contact JSTOR User Support for access. We'll provide a PDF copy for your screen reader.
Estimating Adverse Selection Costs from Genetic Testing for Breast and Ovarian Cancer: The Case of Life Insurance
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Abstract

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.

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