Memorandum submitted by Virgin Direct
Personal Financial Services
1.1 Virgin Direct was established in 1995
to provide straightforward, low cost, flexible and transparent
financial products that meet the majority of most people's financial
needs. From the outset, our policy has been to make these products
accessible to anyone. Both in distribution (telephone and now
internet) and product design (no middlemen, sales pressure or
1.2 Life insurance was added to the product
range in 1996 in the form of three competitively priced "term
insurance" products, each designed to meet a specific need
(repayment of a mortgage, life cover etc).
1.3 These products broke new ground by being
fully underwritten over the telephone, based on the customer's
answers to a range of medical and lifestyle questions. Most customers
could therefore be offered a guaranteed premium after a conversation
of just 10 minutes or less. This was in sharp contrast to the
weeks or even months taken by the traditional industry to confirm
the customer's premium after processing written answers to a similar
list of questions.
2. OUR POLICY
2.1 Our policy from the outset has been
clear. We do not ask applicants about genetic testseither
whether they had one or what the result was. We have no plans
to change this policy in the foreseeable future. If a customer
volunteers that they have had a genetic test, we only take account
of the result if it is favourable to the customer. In this instance
we would adjust the premium accordingly to give the customer the
benefit of the favourable result.
2.2 In order to assess risk, therefore,
we use the customer's family history of relevant medical conditions
to provide the information needed. Family history is a tried and
tested method of determining the risk of the applicant suffering
a hereditary illness. It is always included in the medical questions
of fully underwritten life insurance and so is acquired by all
insurers anyway, including those who now use genetic testing.
2.3 We have adopted our stance for three
2.3.1 First, and most important, the industry
has a moral responsibility to do nothing that would discourage
people from taking genetic tests. We do not oppose genetic tests
per sethey may become very useful in treating hereditary
illness, and they need to be developed. If people begin to feel
that taking such tests will make them uninsurable, or put at risk
their family's financial security, this important medical development
will be severely restricted.
2.3.2 Secondly, the industry is in no position
to start imposing these tests on customers. After ripping many
of them off over personal pensions and endowment policies, we
believe the industry might perhaps better focus its energies on
rebuilding consumer trust.
2.3.3 Finally, acquiring the results of
genetic tests at this very early stage in their development does
very little to improve our ability to underwrite risk. The improvements
would be marginal at best.
2.4 We are very disappointed by that stance
taken by the majority of the UK industry and advocated by the
Association of British Insurers (of which we are not members).
Their policy of actively seeking genetic test results in our view
reflects not only excessive self-interest but ultimately commercial
3. OUR RECOMMENDATION
3.1 In the light of the above, we believe
the most sensible way forward at this stage would be to hold a
more comprehensive moratorium for three years prohibiting all
insurers asking applicants whether they have had a genetic test
and from making use of the results to increase premiums. In three
years time this issue could be again reviewed and either the moratorium
continued or lifted should the scienceand customer acceptance
of itbe progressed to an appropriate level.
19 January 2001