Money: Letting the gene out of the bottle

Genetic tests may not affect your insurance premiums - yet. Tom Tickell reports; Widespread genetic testing may mean higher premiums for some but better terms for everyone else

Your fate may not be in your hands but your genes, and some insurers want to know more. Last week, the Association of British Insurers set out guidelines on genetic testing that look bland now but may just be the start.

Under these guidelines, anyone applying for life insurance will be required to give details of any genetic testing they have had - if asked to do so. At the moment companies guarantee to ignore the results when setting premiums if you want a policy giving enough insurance to cover a mortgage of less than pounds 100,000. But this agreement will only last for two years, when the industry will look at it again.

Very few people actually have genetic tests now, because they will only show up illnesses like cystic fibrosis or Huntingdon's Chorea, which reflect defects in a single gene. But as research improves, forecasting the risk of other problems like rheumatoid arthritis and diabetes may become possible. Even testing a propensity to cancer or heart disease may be just a few years off.

Big insurers including Standard Life, Scottish Widows, Commercial Union and Royal Sun Alliance have been quick to announce that they are not going to ask whether potential customers have had genetic tests.

Doctors maintain that forced disclosure could easily ensure people do not take tests in the first place - as happened with HIV tests and Aids. Eventually, questions on whether people had had an HIV test disappeared from insurance forms, under pressure from the British Medical Association.

Peter Robertson, assistant general manager at Standard Life, says: "If anyone wants to take out an endowment policy designed to pay out pounds 100,000 or more, we'll usually want a doctor's report. It will contain details of height and weight, the age at which their parents died and so on. That provides most of the information genetic testing would give us."

Bupa and PPP, which together make up 70 per cent of the private medical insurance market, are taking the same line. PPP insists it will not ask for the results of genetic testing for the foreseeable future.

Genetic testing is relatively crude at present, but insurers' attitudes may change as it becomes more sophisticated. That said, environment and lifestyle play such a part in triggering illness that it will not be easy.

As things stand, 95 per cent of people get life insurance on standard terms while 4 per cent have premiums loaded for the extra risk they represent. One applicant in a hundred gets turned down. Widespread genetic testing may increase the number paying extra premiums, but it will also allow companies to offer better terms to everyone else.

Even now, working out the extra costs you face as a result of a problem such as diabetes is almost impossible. "Loadings depend on the insurer, the kind of life insurance you want and how serious your diabetes happens to be," says Penny O'Nions, a doctor turned independent financial adviser. "If you take out a 'term' policy to pay out if you die within a fixed 10 or 15 years, you may pay 10 to 25 per cent more than usual.

"Endowment plans are different as most of your funds go into investment, and relatively little into providing life insurance. That ensures insurers will not load premiums nearly so heavily."

Actuaries spend their lives putting figures on risk levels - but even if genetic testing could find a cancer gene, that would not necessarily help them. For instance, cancer of the prostate usually hits older people - often after their life insurance policy has finished its term.

Last week's announcement by the ABI was a holding operation. Many people in the insurance industry say privately that if genetic testing becomes so sophisticated it can spot risk levels on serious illnesses, it may become as standard as a blood test in 10 to 15 years' time.

Even now, anyone with a potential medical problem should probably deal through a specialist independent financial adviser rather than buy life cover direct from a company. If one insurer rejects you, others may follow. And in the brave new world of genetic testing, specialist help will be still more important.

q Contacts: Penny O'Nions (de Havilland Amersham), 01494 726688; George Connolly (Healthcare Matters), 01300 320222; John Joseph Medical Partnership, 0171 487 4111.