Is Age Going to Follow the Gender Discrimination Ruling?

While insurers are still recovering from the surprise of the European Court of Justice ruling on gender discrimination, plans to wipe out similar discrimination based on a persons age have also now been revealed by the government in the UK.

With the dust only just settling from the European Court’s decision, the Government’s latest proposals will make it difficult for insurance companies to use a customers age as a rating factor when determining prices.

Equalities Minister Lynne Featherstone said at the announcement of the proposal: “It’s high time we put an end to outdated stereotypes based on age and recognised the valuable contributions that people of all ages can make to our society and economy.

“When older people are turned away from the market place through unfair treatment, the economy misses out on increased business and revenue.”

Insurance companies rating has always used previous claims experience as a starting point for setting their rates, and in nearly all classes of insurance, age is a major factor to claims cost and frequency.  In order to be able to provide insurance for people whose age may present a hugely increased risk, prices realistically have to be set at a higher level.

If the legislation takes effect in April 2012 as announced, and with the gender ruling coming into effect some eight months later, insurers face enormous challenges during 2011 to design new and reliable pricing structures.  The end result will mean that almost everybody will suffer from increased premiums rather than receiving a price based upon the risk they bring to the insurer.

A spokesperson for Think Insurance, a leading motor trade insurance broker, warned of the potential price hikes: “In the motor insurance sector, age, gender and location have always formed the main part of insurance pricing.

“It is still fair to say that age can still be used to underwrite the risk and calculate the end price, these proposals put a massive pressure on insurers to be able to provide evidence that the factor of age does effect claims statistics.

“Vast changes will have to be put in place, which are likely to change insurance as a whole, aside from the potential costs involved in implementing these changes.

“If you take an 18 year old motor trader as the example.  Most even less cautious underwriters will usually run a mile, but if they have flakey claims results to back up their reluctance to provide cover, does this mean they would be obliged to take on the risk?”

And to add more fuel to the fire, Featherstone has stated that the “economy misses out on increased business and revenue” due to age-related penalisation, yet the proposals will allow benefits for certain age groups to continue, such as free bus travel for over 60s and holidays for under 30s.

So does the Government sincerely have the interests of people who feel they are discriminated against at heart, or is this simply a scheme to boost the economy?

Think Insurance is a leading provider of Motor Trade Insurance in the UK.
For more information regarding this article, or to compare Motor Trade Insurance quotes, contact Think Insurance on 0844 573 2850.

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