THIS WEEK Sir John Sulston, vice-chairman of the Human Genetics Commission, called for a law to prevent insurance companies from using genetic information to discriminate between policyholders. Genetic analysis may indicate that Mary is twice as likely as Jane to suffer a premature death. Nevertheless, according to Sir John, insurers should be legally obliged to charge Mary and Jane the same life insurance premiums.
This proposal will appeal to many people’s sense of justice. Discriminating between policyholders on the basis of their genes, which they cannot help, would be unfair. Or, as Sir John put it: “Everybody should be treated equitably regardless of their genetic inheritance.”
Despite its initial appeal, this sentiment gets things exactly the wrong way around. It is Sir John’s antidiscrimination law that would be unfair. What is more, it would be impossible to enforce. In other words, it would be as bad as a law can be: wrong in principle and unworkable in practice.
To see why, consider the debate about telecoms pricing in Australia (trust me, it’s the same issue). When deregulation of the Australian telecoms market began, some Australians, especially the management of telecoms companies, suggested that rural customers should pay more for phone calls than urban customers, since it costs more to provide them with the service. However, other Australians, especially rural Australians, did not like the idea. They claimed that justice required telecoms companies to charge everyone the same price, regardless of where they lived. These Australians were making the same mistake as Sir John.
To keep the matter simple, suppose that, including a profit margin, it cost 10 cents to provide a one-minute call to an urban customer and 20 cents for a rural customer. Then, supposing also that there were an equal number of rural and urban customers, the one-price-for-all policy would result in all customers, urban and rural alike, paying 15 cents per minute.
The policy would thus provide rural phone users with a subsidy of 5 cents per minute. That is not necessarily unjust in itself. “User pays” has many virtues but it is not a principle of justice. No, what is unjust is that the cost of this subsidy is borne entirely by urban phone users, who must pay a premium of 5 cents per minute.
You may agree that rural phone users should receive a subsidy. Perhaps it will promote the rural economy or have some other benefit. But what on earth could make you think that the subsidy should be paid for by a tax on urban phone use? What special debt do urban phone users owe rural phone users?
The iniquity of Sir John’s proposal should now be clear. You may think that the life insurance costs of people with a genetic disposition towards fatal illnesses should be subsidised. But why should they be subsidised by life insurance customers without the disposition?
If Sir John is right in seeking such a subsidy, let it be funded from general tax revenues. Arbitrarily allocating the cost of social policies to some specific group of people — be it urban phone users or low-risk life policyholders — is, obviously, crassly unfair. For all the justice in it, you might as well fund the subsidy from a tax on the tall.
That policy would at least have some chance of working. Taxes on qualities you cannot change, such as being tall, can be avoided only by death. The tall community would surely be unhappy about funding a life insurance subsidy, but not so unhappy as to kill themselves en masse. Low-risk insurance customers, however, could easily avoid Sir John's suggested tax on them.
Indeed, I plan to get rich by helping. If the Government takes Sir John’s advice and bans discounts for genetically low-risk customers, I will start an insurance company serving British customers but based offshore, perhaps in the Cayman Islands. I will call it Genetic Life. (If you doubt that I have the wherewithal to start an insurance company, you are probably right. But there are people who do, and they will not miss the opportunity presented by Sir John’s proposed law.)
Genetic Life will serve only those who can produce documentary evidence that they are genetically low risk. This will allow it to charge much lower premiums than its British competitors, who will be legally obliged to serve both high-risk and low-risk customers at the same price. As low-risk customers begin switching to Genetic Life, onshore British insurers will be left with an increasing proportion of high-risk customers. Which means that they will have to increase their premiums, which will make Genetic Life’s prices even more attractive to low-risk customers, which will mean even more will switch to Genetic Life,which will mean British insurers have to increase their premiums yet again. This process will continue until British insurers are left with nothing but high-risk customers, who will therefore have to pay the full cost of their insurance. Sir John’s tax and subsidy will have disappeared.
Sir John will, of course, want regulators to block Genetic Life’s activities in Britain. Let them try! Genetic Life will advertise on the internet and in foreign airports. It will do deals with financial advisers to direct business to our office in George Town. We will use every trick in the global economy. Eventually, Genetic Life will find a way through to genetically blessed Brits.
Being both unworkable and unfair should be enough to sink Sir John’s proposal. But, in case it isn’t, consider one further fact. We already accept genetic discrimination in insurance. Being male is part of my genetic inheritance, yet no one seriously complains about insurance firms charging women lower car insurance premiums than men. Does Sir John really want to outlaw Sheilas’ Wheels?
Jamie Whyte is author of Bad Thoughts: A Guide to Clear Thinking
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