BBC Science Correspondent James Wilkinson reports

The announcement follows concerns that some companies could increase premiums if they believe people might develop an inherited disease such as breast cancer.

The panel will now scientifically approve genetic results before insurers can make use of them.

"What we are seeking to do with the new regulations is to make certain that those tests are fair, said Science minister Lord David Sainsbury

"At the moment it's not a problem. What we want to make certain is that it doesn't become a problem in the future."

Expertise

The government announcement is a response to a report issued at the end of last year by its advisory body on genetics, the Human Genetics Advisory Commission (HGAC).

Lord Sainsbury: No problem at the moment

It called for a two-year moratorium on genetic testing by insurance companies because it considered the technology to be still in its infancy - tests only indicate risk and cannot say for sure that an individual will develop a disease.

The HGAC was concerned that insurance companies did not have the expertise to interpret the tests.

The HGAC and the insurance industry will now work together to set up the new evaluation panel as part of the government's existing Advisory Committee on Genetic Testing (ACGT)

Insurability

The panel will decide if a particular test provides a sound and accurate basis on which insurance companies can make decisions about people's insurability.

Lord Sainsbury explains why the panel is necessary

If the new evaluation system finds that no clear link exists, test results will not be approved for use by insurers.

In answer to a HGAC request, the government is also considering how to strengthen the appeals procedure for people who believe that their genetic information has been used inappropriately or misinterpreted by the insurance industry.

"Our objective is to put in place a robust system that will meet both the needs of consumers and the insurance industry; and which will also be responsive to developments in genetic science in the future," said Lord Sainsbury.

Participate

Vic Rance, a spokesman for the Association of British Insurers, said the use of genetic information by member companies was limited.

Vic Rance and HGAC member Martin Bobrow discuss the issues

"At the moment there are just eight conditions for which genetic tests are taken into account by insurance companies," he said. "They're all NHS, single-gene tests, and even then they are only considered by the top underwriter in a company in association with medical advisers."

BBC Science Reporter Pallab Ghosh reports on the setting up of the new body

He welcomed government's announcement and said the industry would be very happy to participate in the panel.