Posted in: Commentary,
by Gregg Laskoski on Jan 3, 2013 06:00 AM
A European court ruling has gone into effect that bans gender-based insurance pricing, an equalizing measure which auto insurers say will inflate costs for women across the European Union, who are traditionally charged less than men.
EU Justice Commissioner Viviane Reding said the ruling was a civil rights issue, calling it “an important moment for gender equality in the European Union.”
She even went so far as to say "It is now clear that an insurance company must not distinguish between women and men; all customers must be treated equally. This is a matter of respect for fundamental rights. It is now also becoming a matter of good business practices."
Troubling, to say the least. Are you concerned that American auto insurance companies might be prodded into following this nonsense?
If European women think this is progress they may want to reconsider. The Association of British Insurers (ABI) said that young women will see the harshest spikes in coverage costs, estimating that female motorists under 25 years old could see an average jump of 25 percent in their auto coverage premiums.
In the U.S., risk-based pricing has been paramount to how insurers rate their customers; a move toward equalized rating would require lower-risk populations to subsidize the costs of higher-risk populations, a scenario that will essentially play out “at least in the short term” in Europe because of the ruling there, according to Dave Snyder, PCI vice president of international policy, for Property Casualty Insurers Association of America (PCI), one of the nation’s largest insurance trade groups.
“The judicial opinion creates real winners and losers that don’t really have anything to do with the cost of insuring them,” Snyder said in an interview with Online Auto Insurance News. “For insurers, there’s an inherent unfairness in rates when social values are put in the place of risk as it comes to pricing insurance.”
Risk-based pricing provides a more sensible, reliable way of charging policyholders, according to Snyder, who said that research has consistently proven that male drivers are linked to more hazardous behavior behind the wheel.
In 2010, he said, men constituted 69 percent of fatal crashes in the U.S., a trend that has “held true since 1975 until 2010,” even as total crash rates have fallen since then.
“Accident rates have declined, and the gender gap has narrowed somewhat, but there is still a significant difference between men and women because male drivers more often engage in riskier driving like speeding, drunk driving and other behaviors that insurers see as unsafe,” he said.
Could the U.S. see efforts here to make insurance pricing gender-neutral?
Snyder says that on a national level, the basic decision was made that rates should be loss-based, and this was the best definition of fairness rather than trying to have rates subsidized in one way or another by a social determination,” he said. “If women have better losses—and they do by and large—they should have better rates.”
Snyder said that the U.S. is unlikely to revisit the issue on a national level, even in light of the recent EU ruling.
However, the issue has surfaced more than once. One of the more recent cases of significant legislative discussions about gender-based auto coverage pricing was in Kentucky in October 2001. At the time, lawmakers quizzed industry experts about why younger men paid more in liability and collision auto coverage than their female counterparts.
And in a National Association of Independent Insurers (NAII) study presented during a joint hearing of the state Committee on Banking and Insurance, it was showed that, if a statewide gender-based pricing prohibition was enacted in the state, young women would pay 6.8 percent more in premiums for liability and collision coverage, subsidizing a 6.1 percent drop in the same premiums for male drivers.
During the hearing, Rep. Robert Damron (D-Jessamine) alleged that use of gender in rating policyholders amounted to sex discrimination.
At that same time, Robert Hearns of the NAII asked how auto insurers would react to being subject to state civil rights laws that would throw out gender-based pricing.
We've seen 'political correctness' spread like a cancer. Don't be surprised if the logic (that allows U.S. insurance firms to share the risk among those most likely to incur it) succumbs to politics and social agendas.