Select Committee on Science and Technology Appendices to the Minutes of Evidence


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' family histories.

  5.  The insurance industry has been keen to ensure that there is a clear and evidence-based framework for handling genetic test results—where 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).[7] 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 taken.

    (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 cover.

    (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 the Code.

  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 Disease—applications 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 Disease—applications 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 cancer—applications 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 approach—solidarity—is 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 the risk.

  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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