Your Money | Melanie Bien

Insurance needs a genetic code

The emotive subject of genetic testing and its effect on insurance policies reared its head again last week as the Association of British Insurers recommended a five-year ban on insurance companies asking customers for the results of genetic tests.

This is excellent news, even if – as with many things the ABI does, including the Raising Standards initiative – it is a voluntary rather than a compulsory code. In reality, few of the 400 insurers that belong to the ABI are likely to flout the recommendations; to do so would compromise their membership of the association.

The ABI has recognised that many of the genetic tests currently available are not reliable enough. It may not be possible to determine when, or even if, somebody is likely to get cancer, for example, simply because a member of their family did.

However, one test – for Huntington's disease – is still approved by the Genetics and Insurance Committee (GAIC) as suitable for use in underwriting life insurance plans. Insurers can continue to ask for Huntington's results on life policies over £500,000, although the ABI says policies this size account for just 3 per cent of all life policies. Yet in March, a parliamentary select committee questioned the relevance of Huntington's test results to life insurance applications and asked the GAIC to reassess its decision.

The moratorium, while welcome, needs to be used as a starting point for further debate rather than as an excuse to ignore the subject completely for the next five years. Because if that happens, when the five years are up, advances in science are likely to lead to new and much more reliable genetic tests. And if insurers are then no longer prepared to ignore such tests, we'll be left with a genetic underclass who can't get life insurance.

Some insurers, such as the Co-operative Insurance Society, which last October issued a total moratorium on the use of genetic testing for life insurance, are arguing for a private/public solution to address the problem. It is unrealistic to expect insurers to absorb the full costs, or for the Government to foot the whole bill – there needs to be some middle ground.

The ABI has also promised that an impartial complaints mechanism will operate to ensure that people have adequate redress if they feel they have been unfairly treated by insurance companies. But there is little detail to indicate how such a procedure would actually work; it needs to have teeth and be truly independent of the industry.

Companies' compliance with the moratorium will also be monitored by the ABI, but a question mark always seems to hang over self-regulation. Unless the ABI does take action as and when it is required to do so, last week's encouraging pronouncement will be an empty one.

m.bien@independent.co.uk