GWG Life Pioneers Epigenetic-Based Longevity Prediction in Life Insurance with DNA Methylation Testing

At the level of common understanding, the coding information of the genome resides in the sequence of the four nucleotide bases: A, C, G, and T. However, factors such as cytosine methylation and histone acetylation also influence phenotypes. These constitute the primary focus of epigenetics research.

Epigenetics, proposed by C.H. Waddington in 1942, primarily investigates the relationship between genotype and phenotype. The current consensus defines it as the regulation of gene expression through mechanisms such as DNA and histone modifications without altering the genomic sequence, with DNA methylation being the most common mechanism.

The human epigenome is being progressively characterized. Epigenomic information is crucial for understanding the application of gene sequences and their regulatory functions. The epigenome is less stable than the genome, making it more challenging to study. An individual’s epigenome is associated with age and tissue type, modulated by environmental factors, and exhibits abnormalities during disease pathogenesis. Research on the epigenome can provide profound insights into normal epigenetic processes and disease-associated alterations.

Research indicates that DNA methylation plays a crucial role in genomic imprinting, embryonic development, and the maintenance of normal cellular functions.Methylation can also serve as a biomarker for the early diagnosis of tumors and as an indicator for prognostic assessment, holding significant importance in tumor screening and risk assessment, early diagnosis, staging and classification, prognosis determination, and treatment monitoring.

Life insurance is, in essence, a gamble on how long policyholders will live. Now, GWG Life, a secondary-market life insurance company, is attempting to add scientific rigor to this wager by leveraging epigenetics’ popular yet still unproven technology—DNA methylation testing.

GWG Life, founded in 2006 and headquartered in Minneapolis, is a subsidiary of GWG Holdings. It is dedicated to developing disruptive innovative products and services to revolutionize the life insurance industry and is regarded as a disruptor in the secondary market for life insurance policies. The company itself proclaims, “We will break the status quo of the life insurance industry.” Its business operations cover nearly all states across the United States.

The company announced this month that it is collecting and analyzing epigenetic samples from life insurance policyholders, leveraging emerging epigenetic science to analyze cells and assess individuals' all-cause mortality risk. It has become the first company to apply DNA methylation technology in the life insurance industry.

GWG Life’s business primarily operates in the secondary life insurance market, where it continues to invest in the life insurance policies of elderly individuals who no longer wish to maintain premium payments or can no longer afford them. The secondary life insurance market exists because the cash surrender values offered by insurers for terminating life insurance policies are excessively low. Companies like GWG Life help clients avoid policy lapses or loss of coverage; therefore, the ability to accurately predict policyholders’ life expectancy would confer a significant profitability advantage.

The current life insurance industry relies excessively on policyholders’ automatic surrenders or their inability to renew premiums for profitability, leaving the sector with no internal incentive to reinvent itself. Although the U.S. life insurance market is valued at $21 trillion, insurers remain notoriously stingy with surrender values. Their teams are not composed of traditional life insurance professionals but rather of a group of financial entrepreneurs.

“We understand that the life insurance industry has established a cumbersome underwriting review mechanism, yet it has failed to truly develop life insurance products that meet consumer needs or adopt more advanced technologies for assessment.” Sabes continued his criticism of the traditional life insurance industry.

Jon Sabes, CEO of GWG Life (far left)

As of September 30, 2016, GWG Life’s growing portfolio comprised 625 life insurance policies with a total death benefit face value of $1.27 billion, for which it had paid policyholders a cumulative amount of $357 million. By contrast, had these policyholders surrendered their policies, they would have received only $26 million in cash surrender values from the underwriting insurance companies. GWG Life is undoubtedly poised to disrupt the traditional life insurance industry.

As is well known, life insurance premiums gradually increase over time, which can become a financial burden for some elderly individuals. Additionally, due to changes in their living circumstances, some seniors may no longer need life insurance. In such cases, choosing to surrender the policy or stop paying premiums would undoubtedly result in significant financial losses for those who have been paying life insurance premiums for many years. GWG Life offers solutions for elderly individuals facing these situations.

They offer seniors the following options for managing their life insurance policies:

1. Policy Surrender (Sell)

Elderly individuals can sell their life insurance policies in a single transaction, with GWG Life paying them the current cash value of the policies upfront. This is a highly advantageous deal for customers who are in urgent need of cash and no longer require life insurance coverage. GWG will conduct an actuarial assessment of the policies, and the cash payment to policyholders will far exceed their surrender value—typically five to eight times higher.

2. Policy Renewal (Keep)

Some elderly individuals still require their life insurance but are unable to afford the increasingly high premiums. In such cases, they may choose to sell a portion of their policy benefits to GWG. Under this arrangement, GWG Life will cover future premium payments for the policyholder, who in turn retains access to a portion of the life insurance benefits.

3. Healthcare Service Transformation (Care)

For elderly individuals concerned about future medical expenses, GWG Life enables them to convert their life insurance policies into home care or assisted living services. This humane approach is particularly beneficial for seniors who no longer require life insurance but are focused on their health status, as it alleviates additional financial burdens while providing access to long-term medical care.

4. Gift

If seniors wish to leave a substantial legacy for their families or charitable organizations, they can donate their life insurance policies through GWG Life and cease paying subsequent premiums. The donation of the life insurance policy can be either full or partial; if donated to a charitable organization, the senior will receive a tax deduction for the donated amount.

According to VCBeat, their services primarily target individuals aged 65 and older. In the absence of serious health issues, the typical client is over 75 years old; however, younger policyholders may also qualify for their services subject to a health status assessment. Regarding life insurance types, GWG has stated that it imposes no restrictions. The specific value of an insurance policy depends on many factors, but the three most critical ones are:

1. Life expectancy of the insured;

2. Policy Face Amount;

3. Current account limit of the policy.

Given that the latter two are highly intuitive metrics, the first point becomes particularly critical; if GWG Life can accurately predict customer longevity, it would secure a significant profitability advantage.

For companies like GWG Life, their profit model is, in fact, built on the grim reality of client mortality. Consequently, accurately predicting the lifespan of each policyholder is crucial to their profitability. They aim to avoid paying out benefits to individuals who may live exceptionally long lives, as this would significantly delay their path to profitability.

So here’s the question: They are not good at predicting human lifespan.

“For the past 10, 15, and 20 years, these companies have struggled to predict customer longevity. Many of the individuals whose premiums they pay out live longer than anticipated,” noted Steve Weisbart, an economist at the Insurance Information Institute, whose research focuses primarily on life insurance.

GWG Life acquired 315 life insurance policies last year, marketing them with the pitch: “We’ll pay your premiums for life, but we’ll also be the beneficiaries of your death benefit.” Starting last month, GWG Life has required policyholders to provide saliva samples. The cells in these samples can be used to analyze epigenetic markers—specifically, methylation levels. The company plans to conduct DNA methylation testing on the samples, which, in layman’s terms, means analyzing whether specific gene loci are activated or silenced.

Collect saliva samples using a cotton swab

Theoretically, this analysis can help the company predict customer lifetime.

“This test is more predictive than whether a person smokes, drinks alcohol, or has other lifestyle habits,” said Mark Rothstein, a bioethicist at the University of Louisville, whose research also focuses on the application of epigenetic genes.

Jon Sabes has long believed that there is a better way to predict customer lifetime. Therefore, in 2015, he tasked his team with developing a technology called “InsUber,” aiming to play a role in the life insurance industry similar to the one Uber has played in shared transportation.

For this task, Sabes consulted Steve Horvath, a biostatistician at UCLA, who has dedicated his research to uncovering the fundamental causes of aging at the DNA level and pioneered a predictive method now known as the “Horvath clock.” In 2013, Horvath reported that he had developed a statistical model to estimate the physiological age of biological tissues by using methyl groups as chemical markers to assess methylation status at 353 specific sites in the subject’s DNA. Although the scientific community widely regards this model as interesting and groundbreaking, it is still considered to be in its early stages.

Last September, Horvath co-hosted a meta-analysis that completed statistical analysis of DNA samples from over 13,000 individuals and evaluated several epigenetic clocks (some of which were developed by his own laboratory) to verify their accuracy in predicting lifespan. They selected an optimal algorithm from these, believing it had the ability to more accurately predict lifespan across a broad population, and GWG quickly adopted it.

Prof. Steve Horvath

Jon Sabes commented, “By applying epigenetic technologies to the field of longevity prediction in underwriting, we have rapidly transformed this theoretical discipline into an applied technology. We plan to leverage it as supplementary information to enhance our traditional life insurance business. Professor Steve Horvath has demonstrated that science is not merely theoretical; it can also be commercialized. Its impact extends beyond our company alone, influencing the entire life insurance industry. It can significantly improve our operations in terms of accuracy, speed, and cost. We can clearly foresee a future where life insurance consumers will no longer be burdened by the traditional, cumbersome underwriting process.”

As a recognized expert in anti-aging and epigenetic technologies, Brian Chen is a key developer of the algorithm and a primary collaborator on this meta-analysis, maintaining a long-standing close partnership with Horvath. Recently, Chen entered into a collaboration agreement with GWG Life to lead the development and refinement of novel methods for applying DNA methylation technology to life insurance underwriting. Currently, GWG has not yet utilized its collected saliva samples to set premium rates, as it continues to calibrate and optimize the model’s algorithms.

Brian Chen stated, “Much like precision medicine, we are now developing ‘precision insurance,’ which allows for more customized and personalized pricing for customers. For some individuals, premiums may be higher, while others can enjoy lower premiums. I believe customers have the right to choose better insurance products based on their individual circumstances.”

Epigenetics is dedicated to studying biological changes resulting from modifications in gene expression, rather than alterations to the genetic sequence itself. Consequently, an individual’s epigenetic information evolves over time, which holds significant value for insurance underwriting.

“At the epigenetic level, environmental factors in your life will influence your gene expression,” Sabes explained the mechanism. “For instance, if you smoke or live under chronic stress, these environmental factors will be reflected in epigenetic information at the molecular scale.”

GWG also announced that it has hired insurtech expert Tom Nodine and a team from KPMG to assess the commercial value of this new technology in the life insurance industry. Tom Nodine is a recognized expert in insurtech, having served as Senior Vice President of Strategic Operations, Technology, and Innovation at Allstate Insurance, and leading the insurance practices at KPMG and Booz & Company. Commenting on this, Jon Sabes stated, “Tom is working closely with our team to quantify opportunities and formulate strategic deployment plans. As we begin to integrate technological solutions into our business operations, his extensive experience in both technology and insurance is invaluable to us.”

Although this is a new technology that only emerged four or five years ago, and GWG was a pioneer in applying it to the life insurance industry, Sabes firmly believes that the entire sector will soon follow suit. “We feel that we may have inadvertently pioneered a technology with profound implications for the entire life insurance industry,” said Sabes.

This technology has now passed peer review and was published in the September 2016 issue of the journal Aging. In the article, they pointed out that specific levels of DNA methylation biomarkers have been proven to be predictive of all-cause mortality in individuals, helping to improve the accuracy of life expectancy predictions for policyholders.

However, several independent scientists have questioned whether this technology is ready for market launch.

John Greally, a geneticist at Albert Einstein College of Medicine and an expert dedicated to DNA methylation research, questioned: “I am highly skeptical that this technology can provide accurate lifespan predictions—I mean, accurate enough to be practically useful.”

As for Horvath, he told the media (STAT) that he is not a businessman and therefore it would be inappropriate for him to comment on the commercial value of his work.

Brian Chen and Sabes also acknowledged that their algorithm is not yet perfect. However, Sabes noted that it does not necessarily need to be flawless. He stated, “In most other applications, a prediction must achieve a relatively high level of accuracy to possess commercial value. But in the life insurance industry, even a slight improvement in predictive accuracy can drive significant progress, because we are dealing with the law of averages. The question now is not whether this technology can predict all-cause mortality, but rather how to translate it into actuarial science and apply it to life insurance pricing.”

GWG Life is currently attempting to review policyholders’ medical records, examine their prescription drug histories, and conduct telephone interviews to comprehensively predict their life expectancy. Even with the integration of epigenetic testing, the company still takes these factors into account. When individuals purchase life insurance for the first time, they are typically required to complete a family medical history questionnaire or undergo urine and blood tests.

At the U.S. federal level and in most states, laws prohibit employers or health insurance institutions from requesting individuals’ genetic information or discriminating against them on the basis of such information. However, a recently passed congressional bill, H.R. 1313, grants employers the right to access employees’ genetic test results, with financial penalties imposed on employees who refuse.

However, for life insurance companies, there are few obstacles to using genetic testing. If faced with public criticism, they need only persuade national regulators that the use of specific genetic factors in the insurance industry is scientifically grounded. For instance, if a client’s medical records indicate a positive test result for gene variants associated with breast and ovarian cancer, the insurer would have justification to adjust premiums accordingly.

Canada recently passed Bill S-201, which aims to protect individuals’ genetic information and their right to refuse genetic testing. Consequently, discussions surrounding genetic testing have become highly prominent in Canada. The legislation stipulates that it is illegal for any organization or individual to require another person to undergo genetic testing or disclose previous test results as a condition for obtaining or renewing life insurance.

Sabes dismissed this concern, emphasizing that epigenetics and genetics are two distinct scientific fields, and it would be foolish to ban the application of epigenetics altogether. He stated, “Epigenetic information changes over time, no different from your blood pressure or body mass index (BMI). It can help insurance companies effectively mitigate risks.”

Sabes sincerely stated, “Of course, I fully understand this as well. We do not wish to ‘discriminate’ against individuals based on immutable facts. I recognize that policymakers aim to protect the public. However, they also need to appreciate the remarkable benefits that new technologies can bring to consumers.”

Over the past month, GWG purchased life insurance policies from approximately 40 individuals and collected saliva samples from them using sponge-based devices. Sabes stated that only a small number of people declined this request.