Yesterday’s ruling by the European Courts may have stirred the general public to a wide-ranging and not altogether informed debate on the issues of gender discrimination. Less obvious, but in the long run more serious, is the fundamental challenge it poses to the way in which two pillars of the establishment – the financial …
You must dine at my club
Now taking applications to join "Sheila's Private Members' Club". Per the exclusion in equalities legislation, we are permitted to restrict membership on the basis of sex. It just so happens that a perk of membership is a free car insurance policy. Fancy that!
Whilst your right Jane...
... that this should not lead to an increase in the overall risk associated with the population as a whole, you seem to forget that insurers are, like all corporations, greedy bastards. Therefore, this will be a lovely excuse for all insurers to raise there prices appropriately.
On a relatively off-topic side note, ive always wondered how companies like Sheila's Wheels and women only gyms are allowed to operate under anti-discrimination laws. Im not against these establishments but whats the legal basis? ideas?
It's called "positive discrimination"
The MET famously only considered applicants from an ethnic backgroud. So, if you were white, your application was torn up. Of course, there would be outrage if this was done against any other group, but if you attack the "majority" it's considered fair.
Similarly, if you had a "men" only product there would be outrage - Anyone remember the "It's not for girls" slogan on Yorkie bars? Yep, that was sufficient for them all to be removed from canteens and vending machines of a former company (who shall remain nameless, but a large american motor company, with a large presence in Essex, and a blue oval as a logo)
As a male driver, I've had years of higher insurance premiums (including an amusing unexplained 30% increase this year). I have NEVER had an accident, despite spending a good few years in the "high risk" demograpic. Perhaps rather than splitting the risk between male/female, they should establish whether the owner is infact a chav? I'm sure that will be far more accurate.
All I want is to join a "ladies only" gym. So I can ogle chicks.
they should establish whether the owner is infact a chav
I can see it now on the insuance forms
1: are you trying to pimp your ride?
2: how much have you spent on "bling"?
3: how many subwoofers do you have and what is their maximum output?
The world is going mad....
How on earth is a bunch of unelected nobodies deciding what happens in a commercial transaction between bookies/insurers and punters in a different country?
What? Is a fifty year old woman driver in a Citroen 2CV with a clean license now supposed to pay the same yearly premium as a 17 year-old male with a drink driving conviction and a Subaru Impreza...
...cos otherwise it's *discrimination*.
This is as insane as the couple who were fined for getting off a train *before* it had got to the station which they had *paid* to go to.
Beware people - common sense seems to in very short supply.
I see dumb people - everywhere - walking around like normal people - they don't know they're dumb. We need to let them know how dumb they are.
You only need one question:
1. Do you like "Happy Hardcore"?
(I like your idea, though!)
nothng to stop you insuring with Sheila's wheels
They don't - I'm a male and have an insurance policy with Sheila's wheels.
Going mad? No you miss the point.
"What? Is a fifty year old woman driver in a Citroen 2CV with a clean license now supposed to pay the same yearly premium as a 17 year-old male with a drink driving conviction and a Subaru Impreza..."
Actually the male will pay more because he is higher risk due to having a higher powered car and a drink driving conviction.
You can measure the risk without asking someone's gender by only looking at factors that will have an impact of their driving such as their claims history, driving convictions, time spent driving, and the type of car. Insurers do this already so there is no need to discriminate based on biology.
In the current situation I as a man (who has a clean license, never made a claim and drive a low powered car) I pay more for insurance than my sister who drives a higher powered motor than me and has been in an accident a few years ago where her old car was written off...
That is the reality and you can't tell me that I am the higher risk driver here.
positive discrimination is still discrimination
>The MET famously only considered applicants from an ethnic backgroud. So, if you were white, your application was torn up.
This policy was also famously slapped down by the courts for racial discrimination.
The law is quite clear throughout Europe, discrimination (sex,age,race,martial status etc) is illegal weather 'pro' or 'neg'.
what's not to like? :) Hard to get good happy hardcore now, though, especially since the rise of dubstep.
This is a very good article. I would like to add to the discussion a very important distinction though. That is the difference between compulsory and non-compulsory insurance.
Motor insurance (at least 3rd party) is compulsory in the UK. This means that after the changes required by this court judgement, exactly the same pool of people will need to buy insurance. Premiums should not change on aggregate, unless the insurance industry intends to use the decision for profiteering.
All other forms of insurance are optional. When deciding whether to take the insurance, a rational person will try to decide whether it is too expensive given their situation. Take retirement annuities for example. If I don't expect to live for more than a few years (for whatever reason), I'm not going to buy a retirement annuity where discrimination law means I am buying the same annuity as the average person (and hence buying an annuity which should last for much longer. A disabled person with a much shorter life expectancy (remember disability is also a protected class) is just not going to buy the annuity. This take a pool of risk out of the equation and may therefore result in increased prices for everyone else.
The tricky thing here is going to be dealing with things like age discrimination; disability discrimination; etc. Since these could have much more material effects on insurance premiums in many areas than male/female differences in car insurance.
If you have already saved up some money in a pension, then your options when you get to retirement are limited. Drawdown is an alternative to an annuity, but only if you have a very large fund.
Aggregate will change
"exactly the same pool of people will need to buy insurance. Premiums should not change on aggregate"
However the underlying risk will change dramatically, pushing the total cost up!
Boy racers will pay substantially lower premiums and will therefore be able to afford to drive more powerful cars. This will lead to more accidents, the total insurance payouts will go up, therefore the aggregate premiums will need to increase in proportion.
So to counter the "insurance as a social good" question, we need to throw in the Capitalism vs communism argument. Is it better for everyone if the aggregate is cheaper, or an individuals premium might be cheaper. Why not introduce a flat rate premium for everyone? The increased payouts due to cheaper insurance for "bad risks" would lead to a much higher average for everyone.
Experience is what makes the difference, and this will still be a major factor in determining premiums. Until the ECJ rules on that too.
Just a little insurance related factoid
"Young males are riskier on average behind a steering wheel..............Those are statistical facts"
I have always found this statement to be an odd one.
Being a young male myself, who has only been driving for 4 years, I can safely say that the only people I know who have been involved in car accidents (serious or otherwise) have been young women.
Riskier maybe, less safe? not necessarily.
...experience != population norms.
I am a male and I have had a few mishaps (from stupid stuff in a car park at sub-5mph to a head-on*). So am I proof that males are more dangerous? Nup. I am only proof that *I* am possibly more dangerous (or I driver in riskier conditions, or...)
One must be careful about abstracting generalities from a statistically insignificant set (especially one with selection bias such as yours).
*I do not recommend it one bit. Although getting run over by the cop afterwards hurt even more**.
**I really wish I was making this up.
Look at the statistics
If you look at the overall population statistics you find that young women are fractionally more likely to have an accident, but that accidents that young men have tend to cost a lot more in the insurance claim. Basically when young men crash they are more likely to have totally written off the car, and also potentially taken out another car or some other items at the same time. This increases even further when you look at young men in sporty cars vs the rest of the population. This is the reason why when a young male tries to buy a sporty car of any sort, often the insurance premium for 3rd party ends up higher than the value of the car.
Please don't make the mistake of extrapolating population trends from personal experience. If you run the statistics on that, you will find that the experience of you and a few dozen friends is a very poor predictor of population trends.
Re: Look at the Statistics
Statistically, I have a 50% chance of being female (give or take), therefore half my premium should be priced as if I were.
In the same way that individuals do not make statistics, statistics do not make individuals.
I thought that was the case (women, more but less severe incidents; men, wipe out!), but couldn't be 100% sure.
Reads like an argument for stepped car-licenses if you ask me (mandatory basic control test then low, mid and high capacity).
Reply from the OP
I was not "extrapolating population trends from personal experience." just making a statement.
Also, for the record, all of the Female oriented accidents that I was referring to were right offs.
Also also, I don't know any young people, male or female, that own a 'sporty' car as they can neither afford the initial outlay, or the ridiculous insurance.
You are missing the Big Fat Hairy Deal there.
From a motor insurance perspective (I have a couple of friends in the statistical end of the business), your young women will likely break a light or bend a wing. Your young bloke is infinitely more likely to wrap his Eurobox round a tree at 70mph while shitfaced, killing himself and most importantly, the four mates he has in the car at the time. Substitute "oncoming vehicle" for "tree" and the problem is compounded. Get thee over to the press sites and lookup all the "[n] teenagers killed in horrific crash" stories. Now note how many female drivers are represented. See?
Personal injury / death compensation claims make vehicle repair / replacement costs look pathetic.
Incidently this is why, for a young driver, the best premiums are to be had on a Smart ForTwo. The fact that it only has two occupants dramatically reduces the likely payout in the event of serious fuckup and the level of possible fuckup is significantly lower than with other two seat vehicles.
Women are more likely to have accidents, however, men have more expensive accidents.
A typical women driver accident is scraping a load of neighbouring cars while trying to park, which will cause hundreds or maybe low thousands of pounds of damage.
A typical boy racer accident is a 100+mph head-on collision on the wrong side of the road while overtaking, which means two or three completely written off cars, medical bills and so on - claim cost will be high tens or low hundreds of thousands.
Possibly there's also a confounding factor operating.
Depending where the figures come from, it could be that the 'slightly more women have accidents' is at least partly an artifact of the way accident costs work out.
Given the costs of insurance for young males, a male who has a minor accident may be somewhat less likely to make an insurance claim than a female who had an identical accident, since it may be more expensive for him to make a claim in terms of future premiums, and/or in terms of excesses he accepted in order to get a policy he could afford in the first place.
however this highlights the case in point
There are also women who drive at 100mph wrapping their cars around lamp posts. Ive been self employed driving 100km per year for 5 years without any incident. There are 60 year olds who have never driven that amount in their lifetime with more accidents - yet my experience counts for nothing as I am a statistic.
Insurance is not based on individual risk, it is demographics.
Subjective opinions are worthless.
So one individual's personal opinion carries more weight than (government) accident statistics collected from police, hospital and mortuary records?
Here's another statistic to consider: 95% of drivers regard themselves as better than average.
Young black men
Are also more likely to have an accident. Dosen't meen they should include race/background etc in insurence.
cite your evidence
"Young black men Are also more likely to have an accident" than whom?
Old chinese women? Quite possibly due to age and gender...
Wasn't a case like this already thrown out because it would have a much bigger effect on annuity rates - women live longer and so pay a lot more for annuities - if this case goes through then won't the same logic apply?
Still you should be thankful that there is competition in car insurance.
Here when insurance was made compulsory the govt decided it must run it - so that it was available to anyone. So everybody pays pretty much the same liability part, somebody with 30 years experience and a mini pays the same as a 17year old who just got bought a Porsche by daddy. And although the insurance company isn't supposed to make a profit - it does have to cover government levels of operating costs - as you can imagine rates here aren't cheap.
Why everybody's premiums go up
The more uncertainty that an insurance company has about a risk, the greater the reserve that will have to be held. While the aggregate risk remains the same, the insurance companies will all have to hold greater reserves as they won't have as much information about the risks they are carrying. Bigger reserves mean bigger premiums.
Just because they're not allowed to make an individual risk assessment based on gender, doesn't mean they're not going to track that information and know the overall aggregate risk.
that they can still collect the data, and use it when assessing their aggregate risk. The ruling simply prevents them from applying that particular factor to the premium, not from monitoring it altogether*.
No, the real reason the premiums will go up is because the premium differentiation in this case served to _allow_ insurance companies to discriminate by increasing premiums on undesirables. From the individual company's perspective, this means they'll have to accept more high-risk customers, increasing the aggregate risk.
It is also only true that the overall aggregate risk will not increase if the pool of insured does not change AT ALL. But this is highly unlikely. There are individuals out there who do not have auto insurance because of the cost of premiums, some of whom are male. If we follow the ideal curve caused by removal of gender as a factor, premiums for men WILL decrease. That will make insurance more attractive to some high-risk individuals who currently don't have it. The marginal ones may enter the pool, thus increasing the overall aggregate risk and requiring an increase in premiums to cover it. This in turn may discourage some of those high-risk individuals, but the overall effect will be an increase in the overall aggregate risk. The increased premiums may also cause some lower-risk individuals to forgo insurance. So the premise that the overall aggregate risk will not change is at best unsubstantiated.
*A ruling preventing statistical analysis of such factors altogether would spell doom for the industry, since as pointed out correctly in your post, that would raise their uncertainty significantly.
Bookies will handle risks that insurers won't
I've heard that two years before the late Queen Mum died, one of the Cambridge colleges (or its ball committee) had its May Ball insured against being cancelled as a sign of respect if she died shortly before it; the following year, none of the insurers would touch this risk, so they went to a bookies and took out a bet that she would die in the critical period.
But can high-risk young men head down to Ladbrooke's and take out a bet that they'll crash sometime this year, and call it insurance? And are the bookies obliged to offer the same odds for men and women (I guess they are)?
Paris, 'cos she's as risky as any man.
I get discriminated against
..because I'm a single male. In comparing quotes with friends it's clear that I have to pay extra because I'm not married. What bugs me is that married folks seem to spend half their time distracting each other with petty arguments and/or driving around in a bad mood.
So when can I can expect a reduction in my premiums?
Fetch the bread - I can hear bacon flying overhead :(
Similar Story Here
I am a named (occasional) second driver on my girlfriend's car. She was told that the total premium would be less if we lived together. In other words, were we to be in a situation where I would likely drive the car _more_, it would cost less. This is daft, considering I am a "young male" who insurers hate!
Just an example of how statistics can be abused by insurers (i.e., they apply them incorrectly).
Wow! You've just spotted a brilliant opportunity. Cash in by starting your own insurance company, based on these wonderful insights (insurers are still, I believe, allowed to discriminate based on marital status).
Or maybe, just maybe, the insurers have done their statistical analyses rather than pulling hypotheses out of their rectums. Given the vast gobs of cash involved that's what I'd have done if I were them, but hey, everyone else in the universe is a fool, right?
So number of accidents is out then!!!
Think about it: if men have more accidents than women, and this is a "statistical fact", then you cannot use having an accident for the premium. So this will work very well.
And if more men have driving convictions than women (or the other way round) you cannot use those either.
This is great! Soon car insurance will be the poll tax: flat rate. Sounds...interesting.
Everyone's initial premiums will start at some fixed flat rate. People who have accidents will see their premiums go up. People who don't will see their premiums go down.
Seems perfect, no?
Could you use that?
I'm not sure. If I have a lot of accidents then statistically that means I'm probably a man, and so this is gender bias. It depends on how silly they get with this, but previous accidents that you have had might well not be admissible.
One reason premiums could rise...
Insurance is effectively unaffordable for many young males in the high risk groups. So a significant percentage don't dive until they are older and safer. If insurance becomes affordable for them then more drive and there are more accidents (and road deaths and injuries) insurance payouts go up and so on.
On the other hand there will presumably be fewer uninsured young male drivers about if insurance for them becomes cheaper.
The calcs won't be simple of course, because increased premiums will probably discourage more young females from driving or at least buying insurance, so a safer group comes out of the stats. How it will balance out goodness only knows.
Insurance being so marginal on profit anyway the smart money is that insurance companies will tend to err on the expensive side for premiums until they see what the changes in risk are on the ground...
Maybe I've missed something. The ruling is about explicit gender discrimination as per Shiela's Wheels et al.
The author appears to consider that outlawing direct discrimination is some kind of "gateway drug" to outlawing indirect discrimination. But I don't see any evidence that this kind of indirect discrimination is going to be outlawed. In fact, as author points out, there are good reasons not to outlaw it (for example, age and experience are correlated, but that doesn't make it "ageist" to discriminate based on experience).
The whole argument therefore seems to be something of a strawman against the current legislation, which is about direct discrimination, and not about indirect discrimination at all.
Maybe the author should save this article for when what she's arguing against is actually proposed.
The law is an ass
In the discussions of this ECJ ruling I have heard time and time again 'Insurers are just greedy bastards' and words to that effect.
Insurance, and re-insurance, is just a business. It needs to make profits to survive just like any other business. And, like all other businesses insurers are in direct competition with other insurers.
So, unless you can prove collusion and price fixing within the industry each insurer must try to keep their costs, and thus premiums down to the minimum that they can. This is simple business sense.
Another, often voiced, claim is that insurers think that one group of people are 'better' or 'worse' drivers than another group. this is just untrue. The insurers _know_ that one group of people is a higher risk than another. And another group is a much lower risk than others. Yes this is based on statistics. And it is based on actual experience.
If I do a SELECT on my claims database, and group the output to show total payments, broken by age ranges, and split by gender, then the output, from a history of actual claims, is obvious. Younger males are a greater risk than older females. This is a fact. I don't care if you scream discrimination, all motor insurers will be able to show the same outputs from their own data. Facts do not discriminate. They are just facts.
So, this judgment is purely social engineering. Trying to ignore reality and impose a world view on to facts that doesn't fit, damages, not only the businesses it relates to, but the people who use those businesses.
If we take into account age as well, then similar data mining will show the obvious results. Women, on average, live longer than men. Don't blame me for this, it too is a fact. On average men have different medical histories than women. No matter how loud you demand that these be made equal, it won't happen. These are facts. And facts do not care what social engineers think.
Statistics vs Individuals
"If I do a SELECT on my claims database, and group the output to show total payments, broken by age ranges, and split by gender, then the output, from a history of actual claims, is obvious. Younger males are a greater risk than older females. This is a fact."
Statistically, across the entire population of insured persons, that is true. However, pick a male at random and a female at random from your database. Can you guarantee that specific female will be less risky to ensure than that specific male? It should be obvious that the answer is "no".
This is the crux of the problem - applying broad statistics to individuals doesn't always work.
>>"Can you guarantee that specific female will be less risky to ensure than that specific male? It should be obvious that the answer is "no".
This is the crux of the problem - applying broad statistics to individuals doesn't always work."
'Risk' is inherently probabilistic.
If you have particular items of information about the male and female, (or even if you have no information beyond the gender) then the best estimate of the risk is obtained by looking at the statistical data and seeing what kinds of outcome came from insuring people like them in the past.
I assume your doctorate isn't in statistics or a related discipline.
You're right that applying broad statistics to individuals doesn't work, and if you operated an insurance business on only 2 individuals you'd risk severe difficulties. But insurance companies insure large numbers of individuals and so the statistics are (almost) certain to work for them.
Just as when I toss a fair coin I know there's a 50% chance of heads - but on any individual toss I can't predict the outcome. If, however, I toss the coin a thousand times I know that it's (almost) certain that I will see between 400 and 600 heads. If I insure a thousand each (comparable) male and female car drivers, I will almost certainly pay out more in claims on the male drivers.
I don't have a PhD. Nor am I a Trekkie. I simply couldn't think of a better name when signing up. (aren't the intarwebs great!)
However, after implying that my reasoning was flawed, you then state that it is impossible to determine the outcome of a fair coin toss - that was exactly my point!
Yes, it makes economic sense for the insurers to charge men more, but that doesn't mean that _every_ man will cost them more. For the sake of being concrete, consider the following example:
There a 1m men and 1m women insured by company X. 0.5m men and 1m women have a risk factor of 0.2 and the remaining 0.5m men have a risk factor of 0.6. This means that men have a risk factor of 0.4 and women have a risk factor of 0.2. Statistically, men's premiums should be double that of women's. However, the reality is that the 0.5m high-risk men should have premiums three times that of everyone else.
I understand that insurers use a lot of metrics to try and determine an individual's risk factor, but the set of metrics they do use fall far short of what is required to give a "reasonably fair" insurance premium.
Just to be clear, I have no problem with insurers using gender as a metric to determine risk, but it should not be weighted as strongly as is currently the case.
>>"I understand that insurers use a lot of metrics to try and determine an individual's risk factor, but the set of metrics they do use fall far short of what is required to give a "reasonably fair" insurance premium."
If someone was confident they could reliably separate the high risk males from the low risk ones, I imagine they could do fairly well out of the low risk males by charging them lower rates than they'd pay elsewhere, and by bumping up premiums for the high risk males to either make them pay their way or go elsewhere.
I can certainly see where the gender factor is valid, for example on a new driver, but then it shoudl stop.
I have 20 years no claims, the wife has 5.
I'm older (but far from the higher risk over 70's)
I'm in a lower risk job.
Yet why is it, her car insurance is STILL about 10% less on the same cars?
Now that has no justification other than blatant sex discrimination.
The problem here
Is simply that the insurance companies have decided to only discount accident free experience a certain amount - generally 5 years of no-claims is the maximum you can get. The reasons for this could be 2-fold. Firstly, it could be that your probability of having less accidents if you have 5 years without an accident could be negligibly different from if you have 6 years without an accident. The second reason could be that if they reduced costs further for 20 years without an accident, the additional cost for 0 years without an accident would make it harder for insurance companies to get new customers. Either could be true, it might even be a combination of these factors.
The reason is not discrimination though. The reason is just that for commercial or statistical reasons, your difference (20 years no claims vs 5 years no claims) has fallen outside the scope of the actuarial tables.
In 2003, I had the maximum no claims bonus (NCB) after going 14 years without an accident or claim, My wife, had never had any car insurance of her own.
When she was quoted for her first car, they said, include me as a named driver and she would qualify to use my NCB, which cut 70 per cnet off her first premium. Since then, I have have made no claims, nor incurred any points on my licence, while she has had one car written off in accident (not her fault, hit from behind while stationary at a zebra crossing).
But my premiums have significantly increased in that time for the same class of vehicle, by around 30 per cent, while hers have risen only 10 per cent. Insurers are just swindlers of the second highest order, just below the bankers.
I certainly feel discriminated against for being male.
"Why the ECJ insurance judgment might not be the right road after all"
Agreed fundamentally stupid decision. I don't subscribe to a political ideology that seeks manage everything for the 'greater' good, i accept the limits of what the state can and should do, and i accept the consequences of the occasional death in order that everyones right to do dangerous 'stuff' is not curtailed.
That means it's ok to discriminate against high risk insurance groups, just as it's ok to let 'dangerous' under-25 males drive cars, because life is risky.
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