Rant: insurance and sex discrimination

Today I have something that is nagging me and I just need to get it off my chest. I hope that you will forgive me for having a little rant.

I am mostly in favor of the European Union and the UK being part of it. I am strongly against discrimination and unjust practices. I am really offended by the implementation of laws that, whilst having good intentions, have not been thought through and are fundamentally flawed …

I will start with car insurance. The premium you pay depends upon many factors: driving experience, conviction history, accident history, location, health, age and gender. These are all factors that correlate to different risk levels. So, a young man will pay the highest premium, as they are most likely to make a claim. This is because they are inexperienced in both driving and life and, being male, tend to allow testosterone to affect their behavior. To me, this seems fair enough. But not to the EU.

European law says that insurance can be assessed on all the kinds of factors I mentioned, except gender, as that would be sex discrimination. Never mind the fact that male gender is a clear indicator of higher risk. And what about age discrimination? Normally, you pay more when you are young, then it goes down steadily through middle age and goes up again when you are older and have reduced reaction time etc. This seems reasonable to everyone, but it is, by these standards, discrimination.

Since I am not a young man, why do I care so much? As I have two daughters and two step-sons, my interests there balance out. My reaction is driven by two things: the lack of logic and the unintended consequences.

In a few years, I will retire. At that time I will cash in the pension plans into which I have been saving all my life and purchase an annuity, which will provide me with an income for the rest of my life. How much income depends upon various factors, but include: location, age, health and gender. Age and health are obvious factors that affect how long I will live, but so is gender – on average, women live longer than men, other factors being equal. So, currently, for a given cost, a man will get a slightly better monthly return on an annuity than a woman. But that is set to change. Madness!

Maybe there is an opportunity to simplify life here. Insurance is very complex, which makes the overhead costs high. If it were made simpler, it would also [on average] be cheaper. Perhaps it could be addressed like social healthcare. The National Health Service in the UK is paid for by a kind of income tax, which is paid as a percentage of earned income, with no consideration of an individual’s likely healthcare needs [I am over-simplifying, but this is the crux]. This means that there are winners [e.g. my late wife, who had a lot of very expensive treatment] and losers [like me – I have been lucky enough to be quite healthy so far], but most people accept that it is fair. Maybe car insurance should be a flat rate for everyone. That would eliminate all discrimination.

OK. Rant over.

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This article first appeared on the Siemens Digital Industries Software blog at https://blogs.sw.siemens.com/embedded-software/2012/11/22/rant-insurance-and-sex-discrimination/