The use of predictive genetic tests in setting premiums for life insurance is a
controversial issue. Critics argue inter alia that this is ‘discriminatory’, that
it will lead to the creation of a ‘genetic underclass’, and that it can lead to
individuals being coerced to obtain information that they might not otherwise wish
to have. Advocates argue that it is necessary in order to avoid creating serious
asymmetric information in the insurance industry with consequent adverse
selection.
This paper is concerned with the adverse selection argument