Is it sexist for the insurance industry to take gender into account when setting its premiums?

suchprospects at the moment (from what I have heard) is that the premiums for very young male drivers are so high that many young men simply wait until the are that bit older and premiums drop. I also think that some insurers already automatically decline this group?

So if you put the price in the middle between the very high risk and the lower risk, that will price further people out. As soon as you start having a smaller group of insured people, it starts getting more expensive. You don't have the savings of scale, and as the pool is smaller each claim has a bigger impact. There is no reason to assume that insurers will think it is worth their while. That's before you've even thought about the ones who won't quote - they're hardly going to start because of this.

It is very possible that young persons cover would become a very niche and extremely expensive insurance - driving when young would be a hobby for the rich.

You can't make insurers take on risks that theyt don't want to.

Like I say, I haven't seen the numbers, but that isn't some kind of wild impossibility. The premiums seen by young male drivers at the moment indicate that insurers aren't really interested in having them on their books - one nudge and they might just cut it.

So you are saying that all young people would pay a higher rate?

But then they would be discriminating on grounds of age, surely? Why is that OK then?

There's no reason to think they would refuse to take all young drivers because they're too risky if they are currently prepared to take on the drivers they consider to be the higher risk group.

That would make no business sense. If they can charge the high risk premium to men, they can charge an overall rate to young drivers commensurate with the overall risk of young drivers. Or (more likely) they'll start looking at other factors in order to segment the market. What would hurt them is if they were required to take on all people at the lower rate, but the ruling doesn't do that.

I am actually beginning to come round to this idea.

If it means tht it keeps boy-racers off the road because they won't be insured, that's actually a very good thing.

Of course, I feel sorry for all the young men and women who aren't boy racers, but hey, they can wait until they're 21 to drive and it would get more cars off the road and improve congestion and lower emissions.

Super.

And the low risk group as well, otherwise they'd be breaking the same rules.

So they might say that everyone under 21 including women are uninsurable.

I don't know if they would say that - I don't know what the numbers are like!

The other alternative is that they withdraw insurance completely for under 21s or something along those lines. Depends on how the sums come out.

The people who are bringing this assume that they will get cheaper premiums, it might backfire on them spectacularly.

Have you just skipped over my repeated assertion that I think it should be acceptable where cause, not just correlation, can be shown? And given that, how is my position contradictory?

I know the insurance industry make the case they can't operate if they are constrained like other businesses. I tend to think they will adapt. They survived before they had all the data they now have, they'll keep going with a few tables out of their reach and they may be forced to look a little further at factors that give a more accurate picture. Like most industries they increase their products' reach by segmenting the market as much as possible. Allowing them to use protected classes like this is not the only way they can do it.

"There is also the small matter of all the money and jobs sloshing around in this industry which will be lost." That's a very poor reason for keeping structural discrimination.

I'm interested in your point that causal elements are easily identified in motor insurance.

So what are they and how are you going to dig them out?

What questions would you ask, as a motor insurance company, in order to get at whether a person was a high risk for a crash or not, then?

You can't use age or sex, nor ask anything that is unduly intrusive, or that people will be able to easily lie about (eg do you like to break the speed limit), and you can't use any methods that are disproportionately expensive.

Assume the people we are looking at here (the young men new to driving) have no driving convictions or claims experience.

How are you going to do it?

But you seem to be arguing that in some cases rating on sex may be acceptable, and on others not. While at the same time saying that you have a general principle that it is absolutely wrong to rate on sex. I see that as contradictory.

The reason that insurance companies are allowed to use protected characteristics when assessing risk is because they have agreed to abide by a strict set of conditions that mean they must be able to prove that there is an objective and statistically significant reason for it. When the equalities legislations were mooted and then enacted at EU level and enacted at local level the insurance industry was there arguing its case that it be allowed to do this and so far teh legislative bodies have agreed. As long as there is a good statistical reason then they are allowed to do it. And the reason that they have won this argument (so far), and are allowed to do it, is that without it whole lines of business will be withdrawn which will have an overall negative effect on society. If there is no possibility for obtaining life insurance then that is not a benefit to people in general, it is a loss to them. It would potentially mean that the state would have to set up many more lines than it already runs and people would not have the option to "top up" (again thinking things like life insurance). There is also the small matter of all the money and jobs sloshing around in this industry which will be lost.

I think the point is that if this "general principle" is found to be correct - that things like sex, age, medical situation - are not allowed to be considered then it will have wide ranging implications for the whole industry and so far the people legislating for this have not been inclined to cause that much disruption etc.

SardineQueen - There is nothing contradictory about using a specific case as an example, but needing to be more generalized when talking about the wider general principal. I'm glad about this particular case because of the implications for other types of insurance and other protected classes. How that actually plays out in each particular case won't necessarily be the same.

On whether risk factors are causal or correlated - correlation is a useful proxy and used often by many people. But protected classes have a history of discrimination that is not justified so insisting on cause is a good way of ensuring individuals are not continually paying for the lifestyle "choices" that have been pushed on the class as a whole. Why should the insurance industry be allowed to use a protected class as a proxy for other factors when we don't generally allow other industries to? What's so special about them?

Where there is a causal relationship it could be detrimental to the industry as a whole to ignore it since selective purchase could skew risks badly (ironically less so with driving than with most types as driving insurance is mandated).

Why are men so keen to lose such large amounts from their pensions? Simply because they won't have it that statistically young men are a bad risk for car insurance? It's a bit silly really, the people bringing this lawsuit are cutting off their nose to spite their face.

That's contradictory though.

If you care about general principle then it doesn't make sense to single out one class of insurance. Or indeed one single protected characteristic.

On whether risk factors are causal or simply a correlation - again you will find that throughout the industry very few risk factors are directly causal, most show a strong correlation. Again, if you remove the ability of insurers to use risk factors based on strong correlation, then the whole thing falls over. I can think of very few situations where direct causality is in play - medical underwriting is one of them. Your plan would knacker the travel insurance industry for a start.

The OP (and the court case the OP is about) singles out one class of insurance and one characteristic. So that is what my specific comments were about. My general position is that of the second paragraph in my last post. Sorry I wasn't clearer.

I don't care a great deal about driving insurance, but I do care about the general principal.

But it makes no sense to single out one class of insurance and one protected characteristic. Either it's wrong or it isn't.

So I guess the question is why have men people got their underpants knickers in a twist about this single thing? Yet all other types of insurances and potential discrimination does not cause the same (any) outrage or alarm. Hmmmmm I wonder...

SardineQueen - No. I was simply pointing out that my post where I said "The insurance industry won't fall in if they aren't allowed to use sex as a factor because they can price on a whole host of other factors that are also correlated with risk." was specific to sex and driving insurance.

Where sex (or another protected class) has a causal relationship with risk, then I think it is a valid factor to include (though only to the extent it is a factor). However, given the insidious way discrimination has previously made it difficult for people to break out of socially assigned roles, I think it ought to be incumbent on the industry to prove that such discrimination is in fact wholly necessary to the good running of the industry. They shouldn't just get a pass because they can show a correlation.

suchprospects so your argument is that only sex is a problem when used as a risk factor and only in car insurance?

That is not a logical position. You can't say that you don't want sex taken into account for car insurance (which would benefit young men) but you do want it taken into account in annuity prices (oh funny that means men benefit there too). You can't say that it's totally unfair to load a rate because of risk factors relating to someone's sex but it's totally fair to load a rate because of risk factors relating to someone's age or medical profile.

bluegrass I have not come across any type of policy where racial characteristics were used in assessing risk.

What is asked for and used: country of residence, overseas travel and the like. Obviously different countries have different risks associated residing there, ditto overseas travel.

There are certain medical conditions which are more prevalent amongst different ethnic groups, and this risk factor will come out on medical underwriting.

There are some things that they are not allowed to assume eg not allowed to assume homosexual men are at higher risk of various STDS instead they have to ask questions about specific sexual practices and condom use.

SardineQueen - I was only talking about sex and specifically in the case of driving insurance. I don't totally disagree with using protected classes in insurance pricing, but I do think causation should have to be proved in order to do so. And in particular they shouldn't be used as a proxy for lifestyle choices.

Quick question, do insurers also racially profile when assessing risk? Is for example life insurance more expensive for a young black man than a young white man? Presumably the answer is yes.

Risk is relevant to many businesses. If statistics show that black people, or women, or ginger haired people are more likely to default on loans this is presumably a valid reason to charge higher interest, or to refuse a mortgage or a loan altogether?

Perhaps this happens, but it does seem to cut close to public policy on equality if you are allowed to point to "statistics" as the reason for you discriminatory business model.

The issue is not that statistically "men are worse drivers than women."

The issue is that young men are statistically worse drivers than just about everyone else.

I really don't have any issue with charging high insurance premiums to the most dangerous, inexperienced group of drivers on the road. They're bad enough in bloody 1.1 Saxos, can you imagine what it would be like if they could afford to insure proper cars?

Well, I don't need to imagine it - lived in the US long enough where the weird insurance regulations in many states mean that you get 16 year-olds driving around in completely unsuitable vehicles with the inevitable carnage that results.

suchprospects

Please elaborate.

I would be grateful if you would tell me how you would go about pricing a life insurance policy if you are not allowed to take into account:

• Sex
• Age
• Medical history
• Medical underwriting

I am keen to find out what these "other factors" are that they could use when assessing this risk.

Thank you.