Sometimes, sexism is a good thing
Car insurance costs are set to be studied by the Competition Commission after the Office of Fair Trading (OFT) said the market was ”dysfunctional”, blaming credit hire charges among other things, for a hike in premiums.
No surprises there then – I’ve been saying ‘I told you so’ for years, and banged on here about it enough too. No, I thought the OFT would be having a moan about the latest attempt at political correctness. I suppose the need to be politically correct means they are not allowed to.
By Christmas this year, insurers will not be able to take into account gender when calculating premiums. We have the European Court of Justice to thank for this. Previously, insurance companies were allowed to differentiate based on gender when pricing insurance policies, on condition that the use of gender as a factor in the assessment of risk was based on relevant and accurate statistical data.
Despite all the old jokes about women drivers, historically women have enjoyed lower motor insurance premiums than men, hence the success of insurers such as Sheila’s Wheels. And from this one can conclude that there were adequate statistics to prove that women were a less costly risk.
Age is obviously an important indicator in the pricing of private motor insurance, where there is an understandable reluctance to take on the highest risks, particularly the youngest drivers who are – as a generalisation on statistics – 10 times more risky than 35 year olds. But insurers are still allowed to put age restrictions on covering young drivers for certain types of car. I would have thought that under the Equality Act this might also change but I’m relieved to see that – if I have read it right – the Act allows that ‘direct age discrimination may be permissible if the different treatment can be justified to meet a legitimate aim’.
Of course, insurance companies take account of many factors other than age and gender when calculating premiums. Things like medical record, lifestyle, geographic location, social group, and annual mileage. How long will it be before one or more of these factors also become unacceptable?
If, as I have been assured in the past, a fleet’s insurance premium is set purely by focussing on the type of car on fleet, the number of accidents, and the cost of those accidents, then – provided they have their accident rate under control – fleets have rather less to worry about than retail punters, since age and gender allegedly were not taken into account anyway.
However, my gut feeling is that most fleets are paying higher premiums per car overall than the average (middle-aged, family saloon driver) Joe Public, presumably on the basis that we are told two-thirds of all accidents involve someone driving for work?
So from December, insurers will not be allowed to set premiums based on one of the most statistically-sound factors. And motor tends to run at a loss compared with other forms of insurance, with the cost of claims paid out often exceeding premiums paid. That’s going to make calculating premiums even more tricky, especially alongside ongoing pressure on the insurance industry to reduce the cost of claims already exacerbated by credit hire, expensive repair costs, whiplash claims and referral fees. They surely are under pressure.
Will retail premiums eventually be calculated in the same manner as fleets, or will it work the other way around? Will we see further withdrawal of insurers from the market, and if premiums continue to soar, will we see more uninsured drivers, despite the best efforts of Continuous Insurance Enforcement, Motor Insurance Bureau et al? Who’d be in insurance these days?