News Review: General Insurance
Gender ruling fails on risk discrimination the insurance industry by
Kevin Paterson, sales & marketing director, Assurant Intermediary
the decision by the european court of Justice to ban the use of gender in insurance policies sent a shockwave through the insurance industry last month. the judgement, effective
december 2012, means that insurers will be legally prevented from taking a person’s gender into account when pricing insurance. it will have a profound effect on products that take account of the risk differences between men and women (the most obvious being motor insurance) but will also impact income protection, life insurance and annuities.
has been fighting against this decision throughout the last decade. the association of British insurance has expressed disappointment saying the judgement ignores the fact that, when relevant to the risk, taking a person’s gender into account enables men and women alike to get a more accurate pricing for their insurance. others within the industry
have been somewhat stronger in their response, condemning the decision as a mistake that flies in the face of common sense. the fact that insurers use gender to calculate risk based on solid actuarial evidence and statistics based on their own experience seems to have been ignored. insurance is risk-based and most would argue risk-based pricing is not discrimination.
No claims discount for household Insurers have always tried to influence the behaviour of drivers by way of offering no-claims discounts, so why have we not seen greater use of this when it comes to household insurance? Axa announced last month that it is considering awarding no-claims discounts to household insurance customers to encourage them to take more responsibility specifically for preventing weather-related losses – and, of course, improve its book’s profile. Some industry commentators have
reacted with caution, pointing out that some homeowners could decide to ignore repairs that need to be done in a bid to claim the reward. Motorists often ignore bumps and scratches and there is a question of whether homeowners would do the same. Escape of water now represents the same
proportion of household claims as personal injury does for motor. Seasonal factors clearly come into play but there are other factors to consider. Many old houses have been split up and
16 mortgage introducer APRIL 2011 research carried out by the
aBi last autumn revealed the impact of removing gender from risk assessment. it estimates that young women under the age of 25 could see an average rise of 25% to their premium. Women could see a rise of as much as 20% in the cost of life insurance, while men could see a reduction of 10%. and the impact doesn’t
stop there. over the next 20 months, insurers will have to make large scale changes including amending policy
the ruling also sparked widespread concerns that a ban on age discrimination could follow, which could have a far greater impact on consumers and the insurance industry than the gender ruling. Watch this space.
The age old issue Age is an issue very much at the forefront of the Govern- ment’s mind.
documentation,
contacting customers with new information, updating sales and marketing material, updating and changing it systems and ensuring brokers have the right pricing information. the list goes on and it will ultimately be the consumer who pays the price.
divided into flats meaning more bathrooms and kitchens. More people have more appliances such as washing machines and dishwashers – but how many of us check to see if the pipes and hoses are in good working order? And while the increase in DIY over recent years might mean that our properties look great, the level of repairs and installations might not be up to professional standards. In my view, simply charging more for household cover isn’t a feasible long-term option – particularly in the current climate. And given the competitive pressures in the personal lines arena it wouldn’t be easy. I believe a no-claims discount on household would be a positive move if it were combined with greater incentives to encourage and reward better behaviour. One mooted suggestion is for insurers to offer discount vouchers against the cost of lagging pipes to prevent bursts after a freeze/thaw sequence. Building in additional mechanisms to promote better behaviour and then rewarding that behaviour can only have a positive impact.
The Government Equalities Office recently issued a new consultation paper entitled Equality Act 2010: Ending age discrimination in services, pub- lic functions and associations. The paper outlines propos- als whereby the Government intends to encourage action to improve access to insurance products. If a provider is unable to assist a person because of their age, they will be obliged to refer that person to an alterna- tive provider which can meet their needs or to a dedicated signposting service.
There are a lot of consum-
ers excluded from the highly commoditised web-based insurance offerings because they don’t fit the standard risk model on age. The GEO is concerned that when they are refused cover they are left to continue their search alone. The British Insurance Bro-
kers’ Association has been call- ing for greater assistance for consumers and has welcomed the signposting concept. It has an established and success- ful helpline and website that already helps consumers find insurance through a BIBA bro- ker. Maybe the member bodies in the mortgage intermediary sector could follow suit?
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