Friday, July 02, 2010

A New Problem for Insurance Markets

An article in the Wall Street Journal notes that scientists have identified genetic markers for the proclivity to live a long life.  This raises a host of interesting economic questions:
  • Will insurance companies start offering better life-insurance rates to those with these markers? 
  • Will they require annuity purchasers to take this test and offer the long-lived worse rates? 
  • If insurance companies do not use these markers, perhaps because of regulation, will the availability of these tests cause the markets for life insurance and annuities to unravel because of increased adverse selection?
  • In light of the above considerations, what should public policy be toward insurance companies using these tests?
  • To the extent that public policy is  motivated by utilitarian concerns, should there be redistribution based on the outcome of these tests?
  • If so, in which direction should it go?  Away from those who are long-lived and can work a long life, or toward them, as they have longer periods of old age and retirement to finance?