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?

karma we're talking here about outlawing the use of sex as a risk factor - so you wouldn't get some insurers offering the blood test and some not as whatever the thing that replaced sex was they'd all have to do it IYSWIM.

You make a lot of good points - I think mine are good too - and these are the questions that insurers have to ask themselves when dealing with this.

The premise of this thread though is it should be illegal to take sex into account with motor insurance. My view is that you can't single out one factor and one insurance - if you're going to make it illegal to take sex into account then you need to look at age and disability too, and do it across all insurances. I then think that would casue a terrible headache for the insurance industry and I'm sure that some lines would have to be withdrawn as they would have no way of assessing the risk. I agree that in that case a state solution where everyone paid the same in would be a response.

I do not actually know what the overall aims are of the people bringing this lawsuit. Whether they have got in a rage because someone has said that men are statistically riskier drivers to insure than women, or because they are keen to stop a situation where anyone is "discriminated against" in insurance, or because they want to see the end of the industry and a move to state run propositions for the essential ones.

I do genuinely feel that taking into account teh sex of a person and applying a loading or discount across that whole group as a result (the loading or discount then being spread across that entire group) is a different proposition to looking at someones individual circumstances (genetic testing, hormone testing) and them beine accepted or declined based on that. No-one is declined insurance simply because they are male. But if we brought in the testosterone testing mooted earlier then men would be declined on that basis. It's this balancing of spreading risks across a group, and singling out people who represent uninsurable risks. The more is known about individuals the more it becomes a yes or no for them IYSWIM - as happens when people are medically underwritten for life insurance. In that sense life insurance which is medically underwritten is not really a "pure" insurance any more IYSWIM as the insurer is using more specific tools to hone it down to an individual level.

It will be very interesting to see the result of this case and where that will take us.

I suppose for me I don't really mind what insurers use to set their rates as long as they don't bother me too much and the reasons for use are statistically reasonable.

So if car insurers decided they didn't need to use sex that would be fine.

What does bother me is the underlying reason that this one aspect of this one insurance is being picked up. People are saying "oh no look it's sexist that's terrible stop it" but are strangely silent on whether they want annuity rates treated the same way. Also strangely silent on whether they care as much about questions on medical history or age (both of which have a much greater bearing on insurance IME). The people who aren't strangely silent seem to be indicating that using questions on medical history or age are absolutely fine, and that using sex for other types of insurance is also absolutely fine. That it is just sex with relation to car insurance that is a scandalous outrage.

That leads me to believe that the reasons for this idea aren't a drive for equality and everything being lovely, but actually a few blokes who have got the hump because they're good drivers innit and it's snoffair.

If it is the case that they only want sex taken out for this one insurance then that is sexist. And I'm not going for it

If people want me to get on board then they need to take a logical approach and explain how things will work in the future. We can't use sex, age or medical details - OK what can we use, how is it going to work then? Is it going to mean that great tracts of people are rendered uninsurable? Is that a good thing? Lifestyle choices - there is growing evidence that these things are not true "choices" but can be seen in genetic makeup - so what then? What are we left with?

Answers on a postcard

It's fun to think about it though.

I absolutely agree with you when you say this should apply everywhere or nowhere. You decide your protected attributes (I think most people would agree on sex, sexuality, race, age and disability) and protect them in all circumstances.

I guess that I feel that discriminating on these grounds in the job market or consumer markets is deemed wrong by pretty much everyone, so why should insurance be the exception?

It will be a nuisance for insurers, of course it will. It always is a pain when people have to change long used practices, but they will cope. Employers still make a fuss about how much of a burden it is and how they can't possibly employ a woman of child bearing age, but they do mostly deal with it.

I understand your point when you say that spreading the risk across a group is beneficial to society so that everyone can access insurance at a reasonable price but don't understand why that group should be defined by sex. If the benefit is justified then spread the risk across the whole population rather than across men and women.

Personally I don't think that insurers will send people for a whole suite of tests before they take them on, just apply more careful questioning. So for example they don't currently ask me to undergo genetic testing for cancer, but they do ask if I have a family history. Rather than a testosterone test for young male drivers, they'll ask questions that indicate how risk averse or loving an individual is. They'll think of them, in the same way as employers do when they want to make sure a woman is committed to the job she's applied for.

karma yes that all makes sense. You would have to find a way around people selecting against insurers - in that respect motor insurance is a good example as it is compulsory. Otherwise you get the better risks opting out due to price and that drives the price up until its unaffordable. Thinking with life insurance if you can't take age into account and the price is fixed in the middle it is seen as too expensive by low risk types (usually younger) and when you start losing your low risk people then the whole thing falls over as well as you haven't got the spread.

It's been good this conversation I really feel as if I've had a good think about all of this

Lots of people opt out of insurance already. I think extended warranties are expensive. I never take them and I don't think that's unusual. I don't take critical illness insurance or life assurance. When I do take insurance, I take the most basic level available. There must be lots of people who make similar choices but the industry continues to exist.

For life assurance I think I'd let age be a determining factor, if I get to choose. If I take it out at 30yo, I'm much more likely to live another 30 years than if I take it out at at 60yo. Age isn't acting as a proxy for something else here but as the cause of the longer life. I will live for longer in the future, because I am younger now. IYSWIM.

I like talking about insurance too. Insurance is fun. [geeky nerd emoticon]

Age is a proxy though, a proxy for various illnesses. I think it is exactly the same as the sex/motor insurance thing. The reason you are more likely to die when you get older isn't directly due to your age, but due to the fact that you are more likely to get all sorts of different things when you get older. However the illnesses will be strongly indicated by medical history and lifestyle - so an argument could be used for taking age out of the equation for all of this as well.

The medical history though is potentially a no-no due to disalibility discrimination.

I think it would be a real challenge to design underwriting criteria for a lot of things without sex, age or medical unerwriting!

On the warranties - yes they are pricey and I don't take them either. They are a bit different though in that what is being insured against is a manufacturing fault occurring - the manufacturers should know how likely that is and are pricing using that data. So there's absolutely no interest in the profile of the person purchasing the product. In that way it is a different kettle of fish to products that protect people.

Your life insurance is a good example of how it will be problematic to take this stuff out with things as they stand. If a 30yo and a 60yo both pay the same premium - the premium of a 50yo say, then you will get a high takeup from 60yo as they will see it as good value, and the younger people will fall away as they will see it as poor value. Then your claims for that book worsens as you are getting more of the high risks in and fewer of the low risks. That pushes the price up further and more low risks drop out. So in the end you have just the high risk people and their premiums equate to the amount they have insured.

In insurance you need a large group of people who have bought in to make it work - how do you get low risk people to buy it if you can't make it cheaper for them.

You could have a long debate as to whether age is a proxy or a cause (in the sense that the aging of the body is reason why certain illnesses occur) and I guess it varying from illness to illness.

Medical history and disability are quite different. So maybe someone has a medical history of heart disease and has had a number operations, but he's not disabled, as he lives his life as normal. You would have to be clear as what was a disability and what is not, but assume that there must be a legal definition already given that it's not as clear cut as sex.

Warranties are a funny case because the provider of the insurer has a better understanding of the risk than the user and usually it's the reverse. That means they should be able to price it well, but in my experience they price it very high. Odd.

Low risk people will still take insurance and high risk people will still avoid it whatever you do. The reason why people take insurance (when it isn't compulsory) is not because they are actually high risk or depite being low risk, they take it because their perception of risk is different from that of the insurer.

I would have thought that if an employer didn't give you a job because you had had heart surgery that would be a possible disability discrimination case?

I think that the legal definition of disability discrimination covers more that just people who are disabled in the having some kind of current impairment kind of way IYSWIM.

On the last point - I'm not sure. I take out life insurance to cover my mortgage. I think (hope!) that I am at very low risk of death, but the situaiton if I were to die with the house and the children is so bad it doesn't bear thinking about. I take the life insurance because of my assessment of the consequences if I don't, even though I consider it to be something that I will ever claim on. (It is not whole of life ). A large factor in this decision is that is is very cheap - a few pounds a month. If it were £50 a month that would change my view and I would jack it in. So I think the anti-selection/rising premiums thing is very real.

This is fun isn't it

Oh no DH is talking about it now as well

He thinks that compulsory insurances should be not for profit and run by the government...

The interesting thing will be if they do decide to apply it retrospectively. Can you imagine the cost of recalculating every insurance premium on unisex rates!!!!

The whole thing would be utter madness and lose lose for everybody. Apart from the actuaries as demand for their services and therefore probably their salaries rise >The cost of insurance would rise across the board.

They couldn't do it retrospectively? Surely?

I went to a presentation at a conference about the legal challenge and apparently retrospective application is part of it. talk about cutting their nose off to spite their face!!!

Christ almighty

So the people bringing this legal challenge - are they some men who are upset at being seen as bad drivers? Or are they keen for sex to be removed from consideration when buying other things like annuities as well? Or are they aiming for removal of all consideration of "discriminatory" factors in pricing - sex, age, medical? Do you know the background?

My perfect Friday night in!

The calc you do when you take out insurance is

[Size of potential payout] x [perceived risk] = [price you will pay]

The insurance company is doing the same calc to work out the price to charge. They are also trying to get a more accurate assessment of perceived risk than the one you have. That's difficult because you know more about your health, lifestyle etc than they do.

For your life insurance, potential payout is huge so that makes it worthwhile even if they think risk is higher than you do, so low risk people are unlikely to withdraw from the market.

Retrospectively??!

It's a Belgian consumer group Test-achat bringing the case to court. I'm afraid I don't know more about the background.

OP here just to say thanks for all your interesting thoughts. I had also been thinking about what might happen if one's sex were ignored in every type of insurance (which is a point that has been made more elegantly by others). There are some illnesses that are exclusive, or near exclusive, to one sex, so it would seem nuts to disregard that information. It's all a bit of a head twist.

I believe the advocate general threw out the bit about retrospective application due to the effect it would have on future premiums. At least she had one sensible decision!!!

try here something from the ABI about it

I liked these bits:

"The Judges did not make a summary of their opinions, but rather addressed the following the questions to the submitters:
? Test-Achats were asked what their views were on the use of age in insurance. Taken aback with this question, they responded that the case at hand was about the use of gender and they were not in a position to respond to this question."

and

"The Court did not ask any more questions of the submitters, although the questions that were asked did display a certain lack of understanding about how insurance works."

Oho.

A few blokes who are pissed off that insurers think they are worse drivers than women, then, when everyone knows women can't drive for toffee

Or have I misread it and it's the Court who don't seem to understand how insurance works?

In that case Houston we may have a problem .

It's hard not to let the fact that it's only £39.50 extra to add me to my husband's insurance colour my view tbh.

I do though believe it's the same as judging by age, job etc. You're lumped in with others of the same category without any personalisation.

That's brilliant Sardine. That's why I haven't managed to find anything on their reasons for bringing the case, cause they don't bloody well know themselves!!!

Equality gorn mad at any cost.

But they only want equality when it benefits them...

Imagine my surprise

May I add that I am so glad I wasn't here last night for this discussion - it was like Accountants Anonymous round here

Excuse me,I am NOT an accountant!!!! I am far more boring than that!!!