Family health history affects life insurance pricing because certain characteristics impacting health and longevity are hereditary.
Hence, the applicant is asked to provide information about the ages and state of health of parents and brother and sisters if they are living. If deceased, the applicant is asked to provide their ages at death and the causes of death.
As the physical build follows family lines so do structural qualities of the heart and other organs. A greater than average susceptibility to infectious diseases may also be inherited. Therefore, family health history affects life insurance pricing and looked at when determining an applicant’s life insurance application rating.
Long-lived parents and siblings at one time were looked at as assuring a long life for an applicant. Despite reasons that may say otherwise, such as he or she being somewhat overweight. And also regardless if the applicant had some other impairment that would normally have been placed in the category of borderline risks.
On the other hand, an applicant from a short-lived family – unless the deaths resulted from accidents – had to be better than average in other respects in order to be insured at standard rates.
Except for cardiovascular-renal diseases and to a lesser (and declining) degree, tuberculosis, considerably less emphasis is now placed on family history with the exception of preferred-risk programs. This is because of the unreliability of family history details recited by the applicant and the difficulty of tracing the influence of heredity.
There is a tendency, which can be demonstrated statistically, for the applicant to exaggerate the ages of family members when they died. Unless his or her parents and siblings are dead or dying, the applicant generally reports them to be in good health. Instances of hypertension, diabetes, and other impairments that would be regarded as significant by the home office underwriters are usually not disclosed.
Furthermore, it is not feasible to follow up on the applicant’s family record. Even if the facts were accurately reported, there would still be insufficient evidence to measure the true impact of heredity or longevity. Moreover, the influence of heredity may not have an impact until an individual is aged 60 or older, which is too late to be useful in evaluating the application of a younger person whose family record is relatively immature.
The best group shows a mortality reflects a mortality of about 115 percent. Therefore companies usually give a credit of 15 points for a very good family history and a debit of 15 points for a very poor history.
Despite the foregoing inadequacies, it has been determined that if a group of applicants– all free of any known personal qualities that would adversely affect their longevity–is divided into classes on the basis of their family histories as revealed in their applications, the lowest mortality will be found in the class with the poorest record.
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By Edward E. Graves (Editor, McGill’s Life Insurance, 9th Edition)
Republished with permission from The American College of Financial Services