A couple of months ago I wrote about the latest EU ruling which banned the use of gender in the rating of insurance products.
Here we go again I hear you say and to some extent you are probably right although there does seem to be a bit more of a split in views on this one.
Many experts are now predicting that is not a matter of if, but when, a further ruling will be made banning the use of age to determine insurance premiums.
I had assumed that such discrimination was already illegal under the Equality Act but upon examination I find that although it covers all areas like race, religion, sexuality and age insurance is listed as an exception.
The Equality Act was meant to end age discrimination yet the proposal to allow insurers to continue to operate age limits undermines the very spirit of the legislation.
My initial feelings when hearing about the latest proposals was that typically this would just mean that insurance which was previously not available due to age, such as Travel, would now become available albeit at a price.
However we need to bear in mind that some classes of insurance are actually cheaper if you are older.
Motor and Household premiums are typically cheaper if you are over 50 because statistically you are less likely to have a claim. Premiums for over 65 year olds on Household are generally cheaper because the policyholder is likely to be retired and at home in the house more often.
So, it would seem that this proposal may affect all ages groups in different ways.
It is clearly not right that at 65 it becomes very difficult to obtain Travel Insurance especially given that after retirement this is the very period in your life when you may be able to travel for extended periods.
The problem with Insurers approach is that this is blanket underwriting based on one particular risk factor – individual circumstances and condition of health are just not considered on a policy by policy basis.
For the time being Insurers will continue to price on age simply because it is easy and until the EU steps in this is unlikely to change.
I have also come across one proposal that seems to make total sense and may make insurers think twice before declining risks based on age – this proposal is called ‘Signposting’
At the moment an insurer can refuse to accept a policy because of age and no other consideration and that’s where it ends basically.
Signposting would mean that insurers are obliged to point such declined enquiries in the direction of an appropriate provider.
I think this is a great idea, so if you are old or young, if an insurer will not cover you then they must suggest an alternative.
There seems to a very real chance that this will become the compromise that is struck and may just avoid a further EU ruling being imposed – only time will.
I would be very interested to hear other views on this subject, as always there will be two points of view but again this promises to be very topical in coming months.
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{ 5 comments… read them below or add one }
I can understand this from both sides but tend to lean more towards the insurers than anyone else because they have to mitigate risk against cost and it is a balancing. If they had to offer people the same deal regardless of contributing factors to the risk then everyone would have to pay more to cover that cost. Thanks for the great post, hopefully see some more discussion on this.
I am an 18 Year old student, i have passed my driving test and have now fallen into the trap of not being able to insure a car, just lucky I never bought the car before I passed. Being a student transportation to my place of education is vital, sure buses are an alternative and yes I do take them, but are they reliable? sadly not. I Personally feel that in the past generation have had it far too easy and now our generation is feeling the brunt. Most of the insurance goes to injury claims and it is sad that the older people will still continue a life of luxury as they get older. I will be interested when they change the rules to actually prevent from unfair treatment.
Hi Andrew,
Sadly younger drivers have always been targeted by Insurers for increased motor premiums but its always been possible to get insurance – it seems we are turning a corner now where the costs are so high that younger drivers cannot now get onto the road and that is clearly wrong. Unfortunately claims statistics in the young sector do show a high volume of claims in the first 2 years of driving but unless you can get insured how can you ever prove you are a good responsible driver and start to build up a No Claims Bonus ?
The whole system is far from ideal, this may be one area that European Law finally helps us for a change.
Colin
Owning a car is a luxury, not a right. If, as a young person, you cannot afford to insure a car, then unfortunately, that is tough luck.
It has been proven time and time again that those in younger age groups cause more accidents, and those accidents cause more damage and uncurr more costs. I cannot see for a second why insurers are being banned on charging more for people in this banding.
The same goes for gender. If the actuarials can show that women have cost the insurer less money than men, then why shouldn’t the insurer charge more for men? It makes mathematical, logical sense. This is not discrimination because of beliefs, stereotyping, nor is it done with malicious intent.
I find it really disappointing. I’m 28 years old and male. I know pay 1/6 of what I initially paid for my first years car insurance. I had no issues with paying the higher fee even though it broke me financially.
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