Wednesday 2 March 2011

ECJ makes Insurance Industry go ex-reason

The decision by the ECJ has no doubt caused many an actuary a sleepless night, the court is after all ruling that using statistical analysis to help price a market is unfair and should be stopped.

The actual text of the judgment suggests there is more leeway than the industry and media have so far alluded too. The judgement is concerned that gender cannot be the sole basis as this is discriminatory and there is room for National Governments and companies to prove that it is only part of a calculation.

This won't help Sheila's Wheels who are clearly discriminatory.

Really though, what is the point, the market for insurance is massively competitive with hundreds of companies many of whom go bust (a good sign of a competitive market) each year. Statistics is the art of taking many factors into consideration; I fail to see how a court can really intervene. I can see a case for in say, Health Insurance, the market failing when people get really ill and the Government having to step in because support is really uneconomic and only justified on humanitarian grounds - but car insurance?

This should be another test case for the Government where national legislation should be used to confuse this ruling and so heavily reduce its impact. The Government has18 months to come up with a plan, I hope they make the right move and think of the poor actuaries!


Old BE said...

I haven't read the judgement so I may be talking rubbish, but surely there is a big difference between saying "we won't take your custom because you are male" and saying "you are a slightly higher risk, so your premium will be a bit higher"?

Steven_L said...

I read the judgement as there being a 5 year period from 2007 where national governments could allow single sex policies, and inform the Commission, which ends 2012.

Come 2012 car insurance and pensions will have to be offered 'unisex' (i.e. presumably the underwriter will not know whether they are insuring a man or a woman?) because the ECJ has decided it is discriminatory.

I only skimmed through it and know very little about how Lloyds / Insurance works, but that was the impression I got.

Woman on a Raft said...

National legislation can't be used to confuse the ruling; it's from the ECJ.

Besides, Hattie was very keen to get the Equalies Act 2010 through before she was booted out, and this would probably have had the same result if the question had been asked here.

Under protocol 7 of the Lisbon Treaty, we had an opt-out from some of this rubbish, although the form of words was merely a fig-leaf to make it possible to sign. The opt out said we had to comply only as far as custom (note, custom) and legislation permitted.

The Equalities Act renders this opt-out ineffective as it puts all the legislation in place.

The government can't get round it. It can possibly repeal the Equalities Act, but Theresa May has shown no evidence of understanding that the big wooden pony is not a sensible piece of legislation; it's a Trojan horse and she's left it inside the gates instead of hauling it out and setting fire to it.

Dick the Prick said...

I have a feeling that actuaries won't be too upset. I have a sneaking feeling that they can fool a few budget holders that they're embarking on a terribly complex programme of work which could require a bit of a pay rise, a few 'away days' at some quickly cobbled together paradise venue and a bit of time and space to get their head around it. Hmm....nah, I think they'll be fine.

A lad at college went into it - to be fair he was one of those maths freaks and he started off on £40 in Hong Kong at 21 years old and for every exam he passed he got a £2k bump and there were about 30 of them. Fair play to the lad - my mum's chums with his and apparently he threw the towel in and has semi retired to day rates / contract work. Well done to the fella.

andrew said...

There are conflicting rulings on pensions - ( annuity and commutation factors )
This is just an opportunity for lawyers to be paid to provide useless advice and insurance companies to fatten their margins

The simple fact is that women are safer drivers and do live longer than men.

Mark Wadsworth said...

Agreed. This is madness. Question is, who stands to benefit from it?

measured said...

This is part of a bigger picture. We are all about to be homogenised in a giant food mixer.

Bill Quango MP said...

Stan: I want to have babies.

Reg: You want to have babies?!?!

Stan: It's every man's right to have babies if he wants them.

Reg: But ... you can't HAVE babies!

Stan: Don't you oppress me!

Reg: I'm not oppressing you, Stan. You haven't got a womb! Where's the foetus gonna gestate? You gonna keep it in a box?

Laban said...

OK, what's driving the existing price increases ? My small hatchback has a 19 year old and a 21 year old.

2009 renewal - £860
2010 renewal - £1149
2011 renewal - £1500.

And they've both driven for 2 years with no accidents - admittedly only evenings and weekends - it 'really' is my car.

I refuse to believe young men are trashing cars at nearly twice the rate they used to just 3 years ago.

Is it

a) the huge number of people who insure an additional driver who's actually the main driver? Some of my son's uni friends have their cars at uni - but their mother's the 'main driver'.

b) or is it the crash-for-cash phenomenon ?

I wonder how long it will be before some clever lawyer works out that charging for insurance by postcode constitutes indirect discrimination, given that minorities will tend to live in high-premium areas ?

Nick Drew said...

Mr Q - I think 'Reg' solved his problem a different way ...

Timbo614 said...

It's a stupid ruling and that's the end of it!

Statistically: Women live longer.

Observably: Women are less aggressive slower drivers (not necessarily better)
hence less accidents/less damage.

Anyone fancy a smoke while driving?...