Insurance and Genetics: The Current State of Play
| Date | 01 September 1998 |
| DOI | http://doi.org/10.1111/1468-2230.00175 |
| Published date | 01 September 1998 |
Insurance and Genetics: The Current State of Play
Onora O’Neill*
Personal insurance: solidarity and mutuality
Seen in the simplest possible terms, insurance is a way of mitigating the effects of
harmful events of uncertain incidence by pooling modest premiums which provide
the resources to make larger payments selectively to those who suffer such events.
Insurance is worthwhile for each person because the incidence of harm is
uncertain: each benefits by contributing a premium in return for assurance that if
misfortune strikes a claim can be made and met. If the incidence of harm could be
fully known in advance there would be no context for insurance: those who knew
for sure that they would not experience adverse events of a given type would not
insure against them, and insurers would not offer worthwhile terms to those who
were certain to experience such events.
These simplicities soon vanish when one considers the variety of possible forms
personal insurance can take. The most fundamental division between types of
insurance is between those based on solidarity and those based on mutuality.
Solidarity-based insurance takes no cognisance of the different levels of risk that
different individuals bring to the pool: premiums are set at a uniform level, or
based on ability to pay; entitlement to claim if the event insured against occurs is
uniform. The NHS and similar health insurance schemes in other countries are
examples of solidarity-based insurance provision. Everyone contributes, indeed the
better paid may contribute more, but those who are likely to use the health service
a lot do not pay more than the robustly healthy. Unsurprisingly, solidarity-based
insurance has to be publicly organised: it requires universal or at least very wide
participation, hence an element of compulsion (usually via the tax system), since
those whose risk is least are required to contribute in solidarity with others.
Without an element of compulsion, those with least risk would have reason to
leave solidarity-based schemes and seek private insurance which could cover their
low risks more cheaply, the average risk (and cost) of those left in the pool would
rise, and yet others would then have reason to leave.
By contrast mutuality-based insurance differentiates premiums on the basis of
the level of risk each person is held to bring to the pool. Typically commercial
insurance is based on mutuality. In this case there may be no compulsion (eg home
contents insurance), or no more than conditional compulsion to take out insurance
if one undertakes some activity (eg motor insurance). In either case there may be
no compulsion to join a particular scheme: better risks will purchase their
insurance from those who offer them lower premiums; worse risks will purchase
despite higher premiums because they can get no better terms. For example, the
UK motor insurance industry offers drivers with clean records lower premiums,
while those with bad records pay the higher premiums demanded because they can
get no lower ones. Of course, the calculation of the risk represented by an
individual is unavoidably an approximate matter: some people with adverse risk
factors are good drivers. Still, there is little objection to the practice of adjusting
The Modern Law Review Limited 1998 (MLR 61:5, September). Published by Blackwell Publishers,
108 Cowley Road, Oxford OX4 1JF and 350 Main Street, Malden, MA 02148, USA.
716
* Newnham College, Cambridge.
To continue reading
Request your trial