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

[Lio]

You've probably seen article like this one in the last few days, talking about how women could find insurance premiums (particularly car insurance) going up if the EU rules it discriminatory to take gender into account when setting its premiums.

A friend has asked whether this is discrimination against men, or just sound business sense? I've always thought the latter, given that the stastistics show that women have fewer car accidents and less spectacular ones than men. But if someone is told that the reason their premium is higher because they're a man, isn't that sexist?

I know there are other issues involved, such as age, but what do you think about the gender one?

[SuchProspects]

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.

[SardineQueen]

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.

[SardineQueen]

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!

[HerBeX]

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.

[SuchProspects]

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.

[HerBeX]

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?

[SardineQueen]

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.

[SuchProspects]

HerBex - If that's aimed at me I was saying that young men would pay less (on average) and young women would pay more. As the risks are aggregated so are the premiums. I would think you would see, at least initially, a slightly higher overall average rate.

Discriminating on age grounds - There is evidence that our brains are still developing (esp judgment) until around 25 so there may be grounds there. Or not. But age isn't protected in the same way that some other characteristics like sex and ethnicity are (and it isn't the same sort of characteristic) so I don't think it's a straight comparison.

[SardineQueen]

So you want to pick and choose which characteristics can be taken into account, for which insurances.

Would you want sex to be taken into account when people are buying annuities?

[cakeretention]

So, as an employer, I can see that a woman is "statistcally likely" to take more time off work (to have a baby) than a man. There is a clear correlation there. So by employing a man I am taking a lower risk than employing a woman, reducing my costs and benefitting my customers. But basing any sort of employment decision on such a correlation is quite rightly unacceptable.

Why on earth should it be any different for car insurance, or any other situation in which gender could influence a financial decision?

[SardineQueen]

suchprospects I am sure there is some evidence that the testosterone levels in young men make them drive aggressively and take risks.

How is that different from you idea that there is some evidence that the brain is still developing until the age of 25?

[SardineQueen]

cakeretention because as an employer you are actively discriminating against that individual. You are looking at them and their experience and deciding not to hire them because they have the potential to have a child.

When insurers set their underlying rates they are not doing it at individual level, they are taking attributes of entire groups and applying them across the board.

It is reasonable and factual to say that in a statistically relevant group of women a certain % will give birth in the next 5 years.

It is not reasonable and factual to look at one individual woman and hazard a guess as to whether she will have a child in the next 5 years or not (and invariably decide that she will).

[HerBeX]

In what way is age not a protected characteristic?

It is in employment law now.

Is car insurance to have its own set of protected characteristics, separate from everyone else's?

[SardineQueen]

The government use these types of statistics when planning for the future and allocating funds. How many school places, how many maternity places, how much money in the pot to recoup employers for maternity pay, that type of thing. You can see that has some value, and is not sexist, I'm sure?

If people don't like the system then it can be changed - we'd just need to pay a fixed premium of some sort to the state, and the state would provide fixed benefits in return. What you can't do is take an industry that is based on risk and probability, and tell them they are not allowed to calculate risks or use probability. There are only a finite number of characteristics that people have. Take them away and you can't calculate the risk.

If that is what people would like to see that is a reasonable position. What I cannot accept as a reasonable position is that this single pricing factor in this single insurance line is a huge problem, but all other insurances and pricing factors are fine. That is not a logical position.

[cakeretention]

SardineQueen - I could easily avoid the "individual level" by posting a job that offered a lower salary to any woman applicant because she might take time off - again clearly unacceptable. To me this remains very similar to what the insurance companies are doing.

[SardineQueen]

Yes legislation which prohibits discrimination on age is in place. The insurance industry are however allowed to take age into account when setting premiums as they have convinced the legislators of the need for it, just as they did with sex.

TBH age is more of an issue than sex for insurers, by far.

Still I think if it's one in, all in. You can't pick and choose.

[HerBeX]

The easy way to get round your problem cakeretention, is to introduce properly paid paternity leave at the same rate as maternity leave. Then that way, both sexes would be equally likely to take time off. Problem solved.

[SardineQueen]

Interestly women are routinely paid less than men for the same job. So I'm not sure where that gets us

[SardineQueen]

cakeretention do you feel the same way about all insurances, and about all risk factors?

Are you keen for "for profit" insurance to end and for the state to take over on lines which are seen as necessary?

If that is the case then I agree that your argument has merit.

[SuchProspects]

I wasn't saying that age is appropriate to use. I was saying that it may or may not be and would need considering.

HerBex - I thought age discrimination laws still allowed some employers to discriminate in some ways - there's a different minimum wage for under 21s for instance. There are some things you aren't allowed to do until certain ages, etc.

SardineQueen - if testosterone is the reason then insurers could set premiums based on testosterone levels perhaps.

[SardineQueen]

suchprospects yes - if testosterone is the reason for it, blood tests would be a logical way forward.

I can see a few problems with it though - would the motoring public opt for a policy where they had to go for a blood test or one where they didn't? I don't think it would go down very well!

Also men with high testosterone would potentially be declined insurance for life. I can forsee problems with that too.

Plus we don't actually have teh evidence that that is what is causing the crashes.

But on principle, yes, works for me!

[SardineQueen]

Would it breach some kind of human rights or something though? Is it ethical? You would be "condemning" men with high testosterone to no driving for life...

I know that insurers have held back from doing genetic testing in medical underwriting because of various possible ramifications, this strikes me as similar.

[SardineQueen]

Sorry for multiple posts...

So ratehr than the premiums ending up in the middle, some young men's premiums would come down to similar levels to females, the occasional female would go up, and a whole load of men would be barred from driving entirely.

I'm not sure that's teh result the people going to court are looking for!

And in a way its still "sexist" isn't it? Because the likelihood is that a person with very high testosterone is going to be a man. So we're back where we started.