Select Committee on Science and Technology Minutes of Evidence

Memorandum submitted by Co-Operative Insurance Society Limited (CIS)


  1.1  CIS is a major player in the UK financial services industry managing in excess of £26 billion on behalf of our 4.5 million customers. Our business strategy has tended to concentrate on personal lines business and we enjoy notable strength and presence within the UK's life assurance, pensions and unit trust markets as well as in the UK's general insurance market.

  1.2  CIS is part of the Co-operative Group of member-owned businesses and we take very seriously the responsibility of being the UK's only Co-operative insurer. Our unique status both enables and requires us to focus principally on the needs of our customers. This can be seen, in financial terms, through our returning the whole of the profits of our business (after making the necessary reserves and payment of minimal interest on our very small paid-up share capital) to our customers in the form of bonuses and discounts. It can also be seen, in service terms, from our provision of home service to those many customers who welcome it. No doubt it is also an important factor in our recently being voted best insurer and best life insurer by readers of the Daily Mirror.


  2.1  CIS believes it is important to preserve the fundamental principle of insurance business under which each party to a contract discloses to the other(s) all relevant information before the contract is concluded. In particular, it fears that the concept of insurance would break down if the practice of individuals taking out insurance on the basis of inside information were to become widespread. However, it accepts that the way in which business is conducted must also be sensitive to other public interest needs.

  2.2  Genetic testing is in its infancy and developing fast: consequently it is difficult to predict how effective genetic testing might become as a predictor of insured events or how the public's attitude may evolve. CIS supports the ABI Code of Practice on Genetic Testing, which lays down minimum standards for members whilst allowing individual insurers to make concessions wider than the ABI minimum. CIS has a social accountability policy and, as a consequence of that policy, believes that it is appropriate for it to go beyond the ABI minimum. Against this background, and taking into account the problem of under-provision of life assurance amongst many sections of the public, CIS has taken the view that, it should, for the time being at least, neither require applicants for life assurance to disclose existing genetic test results nor use to their disadvantage any such results which are disclosed.

  In reaching this conclusion, CIS has also taken into account that the usage of genetic testing for insurance purposes is an emotive issue and that even where positive results are obtained, other medical advances could mitigate the effect of the disease in due course. Furthermore, since the ABI code does not permit insurers in any circumstances to require an individual to undergo a genetic test, CIS is also concerned about the possible conflict for individuals between undergoing a test as recommended by their medical advisers and not doing so because of the potential adverse effect for insurance purposes.


  3.1  Before addressing the specific issues raised by the Committee, we should give a brief description of the Society's Social Accountability policy.

  3.2  CIS operates a different social agenda from some of our peers by employing policies and practices tilted more towards inclusion than exclusion. These policies reflect the diverse socio-demographic make-up of our customer base and our commitment to upholding the basic principles and traditions of the co-operative movement. In spring 1999, CIS became the first UK insurer to commit to an independently audited programme of social accountability. This programme has provided further clarity and direction in terms of meeting the wide-ranging financial and social needs of our stakeholder groups.

  3.3  Against this background we have observed very closely the developments taking place within the field of genetic science. Our existing policy in relation to genetic test results was reviewed and modified during 2000 in the light of our social accountability policy. Our current policies on this issue (which are explained further within this memorandum) thus reflect both our existing business strategy and our wider social objectives.


  4.1  Mr Farrar's letter of 11 January 2001 asked us to include in our memorandum answers to four specific questions.

 (i)   What is your policy toward the use of genetic test results and what are the reasons underlying it?

  4.2  For life assurance business, our policy is not to require the disclosure of genetic test results and, if such results are disclosed, not to use them to the disadvantage of the customer. For critical illness and permanent health insurance, we do require disclosure of genetic test results and may take them into account in underwriting decisions.

  4.3  The reasons for this policy are:

    (a)  The principle that, before entering into a contract, each party to the contract should disclose to the other(s) all relevant information is fundamental to insurance business (and indeed other business). It has stood the test of time as a sound and fair basis for insurance business to be assessed, even within the context of "pooling risks".

    (b)  Nevertheless, we recognise that there are important public interest considerations which should be allowed for in the conduct of insurance business. In particular, insurers should endeavour to avoid practices which risk harm to individuals or other interests (such as research).

    (c)  Genetic testing is a major new development with great potential for public good. Because it is in its very early stages and developing rapidly, it is impossible to predict beyond the very short term how the situation may develop. We believe that the general public does not yet understand the nature of genetic tests nor the issues surrounding them sufficiently to make informed decisions concerning them.

    (d)  Having regard to the foregoing considerations, we do not think that there is sufficient evidence at present that information on existing genetic test results is essential to the sound conduct of our life assurance business. There is, however, a stronger case for the access to and use of such information for other types of business: for example, it could not be reasonable if an individual could obtain insurance against a specific medical condition (as in critical illness insurance) in the knowledge that he was predisposed to develop that condition, without sharing that information with the insurer.

  4.4  There is a considerable amount of market research to support the view that the British public is underinsured and under-protected. Whilst there are various reasons to explain this position, our social inclusion perspective leads us to pursue policies that aim to broaden the reach of insurance protection. It is our opinion that the widespread use of genetic test results for insurance purposes without general acceptance or understanding of these tests by the general public would increase this problem of under-insurance.

 (ii)   What scientific advice have you based your decisions upon, and how reliable do you consider it to be?

  4.5  We rely, as appropriate, on the advice of the ABI's Genetics Adviser (Professor Raeburn) and our own Principal Medical Officer and, of course, we abide by any rulings of the GAIC (or of the ABI where the GAIC has not yet given a ruling). We consider this advice to be very expert and reliable in relation to the current state of knowledge.

 (iii)   The GAIC recently approved the use of results from the Huntington's Disease genetic test in the assessment of life assurance policies. If you generally accept the use of such results in assessing risk, do you anticipate using other test results in the future and if so, when? In particular, would you consider using test results for diseases which are not single gene defects, or where there are non-genetic influences (for example heart disease)? What factors would you base your decision upon?

  4.6  As previously stated, we do not currently take into account any genetic test results when underwriting applications for life assurance (except to the extent that a negative result enables us to grant standard terms in cases which would otherwise attract premium loadings or be declined on the basis of a relevant family history—Huntington's Disease falls in this category). For other types of insurance, we would consider taking into account only those tests approved by the ABI or GAIC (as appropriate): these do not yet include any tests other than single gene tests, nor do we think it likely that they will do so in the near future.

 (iv)   How effective do you feel the current regulatory system is?

  4.7  We strongly support the ABI's Code of Practice on Genetic Testing and believe that it sets out satisfactory minimum standards. For the reasons given earlier, we would not generally favour additional regulation, which could easily turn out to be inappropriate. However, there may well be a case for granting those with adverse genetic test results the same protection in relation to insurance (and indeed employment) as is currently afforded to those with "disabilities" under the Disability Discrimination Act 1995, provided that rulings of the GAIC were included in the evidence on which insurers might reasonably rely in justifying any adverse decisions.


  5.1  It will have been noted that our policy of disregarding genetic test results in respect of life assurance business does not extend to critical illness and permanent health insurance. There are several reasons for this.

  5.2  The most important is that the effect of a genetic predisposition on the claims experience is likely to be much greater for these other types of business than for life assurance. There are two aspects to this. The first is that, where the genetic condition does develop the normal sequence of events will be:

    (a)  genetically predisposed but symptom free;

    (b)  first symptoms and diagnosis;

    (c)  illness; and

    (d)  lastly (in some cases) death.

  A critical illness (CI) claim will arise as soon as the diagnosis is made and income replacement claims may commence as soon as illness develops. Thus claims on such business are more likely and will occur earlier. The second aspect is that knowledge of the predisposition will result in closer monitoring of the individual's health both by the individual and by his doctors: this will lead to earlier diagnosis (and so earlier payment of a CI claim) but may, through earlier and better treatment, delay or prevent death.

  5.3  A second reason is that inability to obtain life assurance cover is more likely to have serious consequences for an individual than is inability to obtain CI or permanent health insurance cover. Thus, in striking a balance between financial prudence and social inclusion, there is a stronger case for a concession on both sides of the equation in the case of life assurance.

  5.4  Also, in the critical illness and permanent health insurance markets we depend to a considerable extent on advice from our re-insurers, who have much greater experience of those products. Their advice is that it would be necessary to charge all customers significantly higher premiums for those products in order to cover the higher claims rate that could arise if genetic test results were ignored in the underwriting. Our view is that the disadvantage to the many of such higher premiums could not be justified.

  5.5  One concern for insurers generally is that adverse selection could undermine their financial stability. If individuals who know that they have, or are highly likely to develop, a serious medical problem could take out unlimited insurance against those conditions without having to tell the insurers that their risk was higher than for the average member of the public, then it is possible that many of those in that position would seek to take out large amounts of cover at premiums inadequate to cover the risk.

  5.6  However, CIS is satisfied that there are for the time being too few genetic tests of significant predictive value with respect to mortality for adverse selection through knowledge of genetic test results to be a serious danger to our life assurance business. Furthermore, it may be noted that insurers undertake not only medical underwriting but also financial underwriting and this will help to limit the risk arising from adverse selection.

  5.7  Another concern for insurers is that special measures in respect of genetic test results may spread to other areas to an extent which could undermine the financial stability of the industry. That could happen in two ways. One is that other special interest groups will press for similar special treatment to be accorded to them. The other is that medicine will evolve rapidly, with many diagnoses being established on the basis of genetic tests rather than existing medical tests and/or clinical findings: this could have the effect of extending the boundaries for any concessions granted in respect of genetic test results far beyond what was intended.

  5.8  Although we have not been asked specifically to comment on this point, we think it appropriate to confirm here that, even before this was a requirement of the ABI Code of Practice on Genetic Testing, we had decided not to ask any applicant for insurance to have any genetic test as a condition of acceptance.

  5.9  It may be that, in the long run, genetic test results will become routine and be accepted by the public, the medical profession and insurers alike as just another form of medical evidence. If that happens it should produce a satisfactory outcome, provided we have avoided installing special arrangements which are difficult to remove.

  5.10  Finally, it should be noted that, although these issues are of great theoretical importance and interest, they are not yet of great practical importance in insurance. This is illustrated by the appended statistics. These analyse the 14 genetic test results seen by CIS in connection with applications for life assurance, critical illness or permanent health insurance business since April 1997. During that period we have processed more than 460,000 applications for such policies, so cases where we see a genetic test result are at present extremely rare. To date, CIS has used test information to adversely rate one case for critical illness.

previous page contents next page

House of Commons home page Parliament home page House of Lords home page search page enquiries index

© Parliamentary copyright 2001
Prepared 3 April 2001