Memorandum submitted by the Association
of British Insurers
1. The Association of British Insurers (ABI)
is the trade association which represents the views of the UK
insurance industry to the Government and to regulatory and other
agencies. The ABI represents over 400 insurance companies, which
between them account for over 96 per cent of UK insurance business.
2. The ABI has produced a number of Codes
of Practice which its members are required to comply with as a
condition of membership of the Association. These include a Code
of Practice on Genetic Testing. This is clearly very relevant
to the Committee's inquiry.
3. A key principle of commercial insurance
is that relevant information held by one party should be shared
with the other, in order that the insurance contract is fair to
both parties. The results of a small number of genetic tests fall
into the category of relevant information.
4. Whilst advances in genetic science open
up a large number of new possibilities for medical progress, their
relevance to insurance is essentially that, in a few instances,
they provide an extension of the information that insurers already
obtain from other forms of medical tests and from individuals'
5. The insurance industry has been keen
to ensure that there is a clear and evidence-based framework for
handling genetic test resultswhere people already have
them. This position is reflected in the ABI Code of Practice and
our support for the process introduced by the Genetics and Insurance
Committee, as described below.
What is the ABI's policy toward the use of genetic
test results, and what are the reasons underlying it?
The ABI's policy
6. The ABI's policy is encapsulated in our
Code of Practice on Genetic Testing (a copy is attached at Appendix
A*, and an explanatory information sheet is at Appendix B).
Its key elements are that:
(a) Applicants for insurance must not be
asked to undergo a genetic test in order to obtain insurance.
(b) Insurers may, however, ask to see the
results of certain genetic tests that applicants have already
(c ) Genetic test results need not be disclosed
in applications for life insurance up to £100,000 which are
directly linked to a new mortgage.
(d) If an insurer is considering declining
an application on the basis of a genetic test result, they must
consider how they can offer some insurance to the applicant, for
example by changing the length of the policy or offering different
(e) Insurers will only take account of the
results of those genetic tests that the ABI's genetics adviser
has concluded are reliable and relevant for insurance purposes.
Ten tests, covering seven medical conditions, currently fall into
this category. Insurers may continue to take account of these
tests until they have been considered by the Genetics and Insurance
Committee (GAIC). Only if GAIC agrees that they are valid for
insurance purposes may insurers continue to use them.
(f) If GAIC does not approve the use by insurers
of a test result, insurers will stop using it. The industry will
also re-underwrite back to 1 November 1998 (the date at which
ABI decided which tests were reliable and relevant) applications
for people who were declined insurance, or offered higher premiums
as a result of a "non-approved" test result being taken
into account. Where higher premiums have been paid, the difference
will be refunded.
(g) Insurers must have a procedure in place
to deal with complaints relating to the Code of Practice. When
the insurer responds to a complaint, they must inform the customer
of their right to invoke the adjudication system set up under
7. The ABI undertook to submit applications
to GAIC by the end of 2000. The current position is that we have
submitted full applications as follows:
(a) Huntington's Diseaseapplications
have been submitted in respect of life insurance (application
now approved by GAIC), critical illness (CI), income protection
(IP) and long-term care (LTC) insurance.
(b) Early onset familial Alzheimer's Diseaseapplications
submitted for two genetic tests (on the APP and PS1 genes) and
all four product types (life, CI, IP and LTC).
(c ) Hereditary breast and ovarian cancerapplications
submitted for two genetic tests (on the BRCA1 and BRCA2 genes)
and three product types (life, CI and IP).
8. In addition, we have provided GAIC with
our current understanding of the position regarding the remaining
tests, and we look forward to discussing this with them as soon
as possible. Bearing in mind factors such as the typical age of
onset for each condition, its relationship to the typical insurance
buying age, and the most up-to-date insurance experience, we are
concerned to ensure that even where tests remain useful indicators
of mortality or morbidity, only where their relevance for insurers
is clear should they continue to be used.
9. The issues are complex, and not all of
the considerations point one way. If GAIC reject any of the applications
submitted by ABI, or if, following our discussions with them,
we decide for the reasons given above not to proceed with any
of the applications, then:
(a) ABI will advise its members to withdraw
from using the results of these tests, and to re-underwrite back
to 1 November 1998 any cases where people have been treated less
favourably as a result of disclosing one of these tests.
(b) The decision to ignore genetic test results
will apply equally to positive and negative results.
(c ) Applications may be brought forward
at a later date if changes in insurers' experience, in customer
behaviour or other developments (for example in the science or
technology) suggest that the practical value of these test results
for insurance purposes has changed.
10. The ABI Code of Practice also includes
provisions relating to the duties and responsibilities of insurance
companies' Chief Medical Officers and Nominated Genetics Underwriters
and the ABI's Genetics Adviser, the details of an adjudication
mechanism for dealing with complaints about insurers' use of genetic
test results, and guidance on ensuring confidentiality of the
personal information provided by genetic test results, in line
with the Data Protection Act, the Access to Medical Reports Act
and other relevant legislation.
The reasons behind ABI's policy
11. There are several principles underlying
the ABI's policy. Private insurance is based on the concept of
"mutuality"namely, the pooling of similar risks
and the achievement of broad equity between persons of similar
circumstances who are in an insured risk pool. Amongst such people
there is an "equivalence of value" between costs and
benefits. Underwriting is the process used to determine the "equivalence
of value". It enables premiums to be set at a level broadly
commensurate with risk, with any cross-subsidies being small enough
not to distort insurance purchasing patterns.
12. A different approachsolidarityis
reflected in the universal health provision in the NHS, which
is funded from taxes. The essential difference is that with the
risk pooling form of mutuality, an individual is allocated to
an insurance pool where he/she pays premiums based on the degree
of risk in that pool. In contrast, a system based on universality
requires individuals to pay either a flat rate, or premiums based
on the ability to pay, irrespective of their level of risk.
13. Private sector insurance, based on the
principle of mutuality and the requirement for commercial viability,
cannot meet everyone's needs. There will always be a section of
the population whose level of risk, whether or not genetically
determined, will be so great as to render them commercially uninsurable.
Exactly the same considerations apply in general terms to applicants
for motor insurance, for example.
14. ABI is concerned that both policy and
practice in relation to the use by insurers of genetic information
should be based on sound science. We therefore fully support the
role of the Genetics and Insurance Committee in determining whether
particular genetic tests are clinically and actuarially relevant,
and also accurate.
15. The legal position is that applicants
for insurance must give all material information to the insurer
when the contract is made. Information is considered material
if it would influence the judgement of a prudent underwriter and
affect the underwriter's decision when deciding to insure the
risk and setting the appropriate premium.
16. The reason behind this principle of
"utmost good faith" is that only if the insurer has
access to all material information regarding an applicant's risk
status will it be possible for the insurer to allocate the applicant
to the correct risk pool, and thus calculate a fair and equitable
level of premium to be charged. If there is not an equivalence
of information between the applicant and the insurer, the latter
will be unable to set the correct premium level.
17. In particular, if an individual had
taken a relevant genetic test and knew the result, this could
have a significant impact on their insurance purchasing behaviour.
If the test result was negative (ie they had not inherited the
defective gene), their level of risk would be lower and they might
consider purchasing a lower level of insurance or not purchasing
insurance at all. If the insurer did not have access to this result,
they would not be able to offer the applicant standard rates (as
might have been possible if they were aware of the result).
18. If, on the other hand, the test result
was positive, the individual's level of risk would be higher.
This might provide an incentive to seek to purchase insurance
at a level or of a type that they would not otherwise have considered.
If the insurer did not have access to this result, they would
not be able to set the premium at a rate that fairly reflected
19. This problem is known as "adverse
selection". It is unfair to the other customers of the insurance
company. Over time, the cost of meeting claims from customers
who have adversely selected against the company will exceed the
premiums received from them, and the difference will have to be
met by increasing the cost of premiums for all other policyholders.
20. The increased incidence of adverse selection,
as would be likely to occur if insurers were not permitted to
see any genetic test results, therefore has the potential to increase
financial exclusion, since it is primarily the poor who will be
least able to afford to continue to insure themselves if premiums
rise generally. The ABI is in active discussion with the Government
and other bodies on a range of measures aimed at reducing financial
exclusion. In this context, it is very willing to discuss all
aspects of the issues raised by genetic testing and will, for
example, be participating in the insurance-related work of the
Human Genetics Commission.
What scientific advice has the Association based
its decisions upon, and how reliable do we consider it to be?
21. The ABI's primary source of scientific
advice on genetics issues is our Genetics Adviser, Professor J
A Raeburn of Nottingham University. Professor Raeburn is a clinical
geneticist who works at the Regional Genetics Centre in Nottingham.
Professor Raeburn is retained by the ABI on a part-time basis
to advise us both in relation to broad issues of policy, and in
particular cases where a member company requires scientific advice
in order to determine the appropriate underwriting decision.
22. The ABI believes that the advice it
receives from its genetics adviser is of high quality and reliability.
This is because Professor Raeburn is a respected clinical geneticist
who is actively engaged in dealing with these issues every day.
It is therefore vital for him to have up-to-date and comprehensive
knowledge of the science of genetic testing.
The GAIC recently approved the use of results
from the Huntington's Disease genetic test in the assessment of
life insurance policies. Does ABI anticipate that our members
will use other genetic tests in the future, and if so, when? In
particular, does ABI believe they would ever consider using test
results for diseases which are not single-gene defects, or where
there are non-genetic influences? What factors would they base
their decision upon?
23. ABI has submitted material to GAIC relating
to the various genetic tests that we currently consider to be
relevant for insurance purposes. When and if any of our applications
are subsequently approved by GAIC, ABI members will continue to
request that the results of those genetic tests are disclosed
to them by applicants.
24. At this point in time, the advice that
ABI has received is that neither the science nor the technology
of genetic tests for multifactorial conditions is sufficiently
advanced for the results of such tests to be a reliable indicator
of an individual's mortality or morbidity risk. There are therefore
no tests for mulitfactorial conditions amongst the ABI's list
of those genetic tests considered relevant for insurance purposes.
25. However, this is an area of rapid scientific
and technological progress. It cannot be ruled out that, for a
small number of multifactorial conditions, genetic tests may be
developed in the future that do provide a reliable indicator of
the level of risk that such conditions present, and are therefore
relevant for insurance purposes. This would suggest that it will
be important to maintain in place the robust and evidence-based
mechanism for approval which has been developed by GAIC.
26. The factors upon which ABI would base
any decision to consider the use of the results of a genetic test
for a multifactorial condition are essentially those already laid
down in GAIC's application process, and already being applied
to monogenetic disorders. That is, both we and GAIC would need
to be convinced that the test was accurate, clinically reliable
and actuarially relevant. We consider that the depth of GAIC's
considerations over our application relating to the use of Huntington's
disease test results in underwriting life insurance indicates
the value of GAIC's approach and the quality of its processes.
How effective does ABI feel the current regulatory
system to be?
27. In our view, the current regulatory
system, which principally comprises the ABI Code of Practice on
Genetic Testing and the GAIC process, has proved an effective
mechanism for dealing with this complex and rapidly-evolving issue
in a way that protects the individual from unfair discrimination
whilst upholding the justifiable needs of insurance companies
to be made aware of all relevant information by insurance applicants.
28. The ABI Code is the first of its kind
in the world, and put the UK insurance industry at the forefront
of developments on this controversial issue. Whilst we would not
wish to pretend that the Code solves every problem, we believe
that the introduction of the Code, along with the compliance regime
which accompanies it, provides effective regulation in this area.
29. A major advantage of a regulatory mechanism
such as the ABI Code is the ability to update it rapidly to reflect
relevant scientific and technical developments. As the technology
develops, genetic testing will continue to raise an increasing
number of issues for insurance. The UK industry has been concerned
not to ignore the fact, but to have discussions now about the
implications of such information, both for the industry and for
its consumers. The ABI is committed to frequent reviews of the
Code, and will be reviewing it later in 2001. The review will
take into account the outcome of GAIC's considerations, the work
of the Human Genetics Commission, and any relevant conclusions
which this inquiry reaches.
22 January 2001
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