The health secretary has announced that insurers will not be able use genetic test results to deny people policies.

John Reid made the move to extend the current moratorium to 2011 in response to fears that the use of predictions of possible future illness would deter patients from taking crucial health tests.

Following negotiations with the Association of British Insurers, the minister reached an agreement with the industry which he unveiled on Monday.

Under the deal results can only be used for insurance of more than £500,000 for life insurance and £300,000 for critical illness and income protection insurance and if first approved by the government's genetics and insurance committee.

Over 97 per cent of all policies are for much less than these amounts.

Reid said the policy had removed a further barrier towards harnessing genetic technologies.

"Choosing to have a predictive genetic test can be life saving, and nobody should be put off having such a test because of fears it will be used against them by insurers," he said.

"Genetic tests that may predict disease have only recently been developed, but this framework sets out a stable and sensible environment to help support the future development of genetics.

"Advances in genetics will have a profound impact on healthcare. We have been working hard to ensure these benefits can be realised throughout the NHS.

"As part of our commitment outlined in the genetics white paper we are investing £18m specifically to expand laboratory capacity for genetic testing. By 2006, patients tested for a known gene mutation will have their results available within two weeks.

"The NHS, with its basis of universal health care funded by taxation, is ideal for capturing the benefits of genetic advances. By dispelling fears over how predictive genetic tests will be used, we are removing barriers to realising those benefits."

ABI director general Mary Francis also welcomed the deal.

"The concordat will provide welcome clarity and reassurance for both insurance companies and our customers, well in advance of the end of the current agreement next year," she said.

"Because the existing moratorium works well, and the number of people currently taking relevant tests remains low, we felt confident about proposing to the government that it should be extended. I'm delighted that ministers responded so positively to our suggestion."