Are insurers discriminatory? Well, in short, you could say yes they are.
An insurer’s job is to assess risk. They base their rates on statistical data, often both from their own claims data and information shared between other insurers. They will look at their loss ratios to determine which groups of people are costing them the most in claims pay-outs.
So, with this in mind, they do have a bias against specific groups of people who they perceive to be high risk and costly for them. Occupation, age, sex and location can all affect the level of risk you pose to an insurer and you may find you’re faced with higher premiums because of factors beyond your control.
Age can be both a positive and negative factor when buying insurance. For example, some car insurance providers offer discounted rates to drivers over the age of 50 – as they believe their age and experience will result in fewer claims. However, younger drivers under the age of 25 are often seen as less experienced, so usually get offered pricier policies. Young, male drivers can find they have very high premiums due to the fact that young, testosterone-fuelled motorists have a tendency to speed and make bigger, more expensive claims.
Female drivers can often benefit from discounts offered by women-only car insurance policies. Statistically, women are less likely to make a claim and the claims they do make tend to be less substantial – so they’re rewarded with lower premiums.
Having said this, senior court legal advisor – Juliane Kokott, recently concluded that it was legally inappropriate to link insurance risks to an individual’s sex. She claimed it was against EU ideals and unfair to base the price of insurance on a characteristic that’s unable to be changed.
Life insurance is hugely backed by statistical data (even more so than other types of insurance) and employs highly specific actuarial tables for each group of people. In general, life insurance providers see advancing age as a higher risk as it denotes a shorter lifespan and can bring with it medical problems. A pre-existing medical condition can also be of concern for your life insurer, again for obvious reasons – it may result in a claim if you die from your condition.
Traditionally, people who have been diagnosed as HIV positive are often turned down for life insurance due to the serious health complications that can arise from their weakened immune system. The HIV virus could of course lead to AIDS.
However, it seems that the insurance industry is slowly but surely responding to the fact that tens of thousands of HIV positive Britons are currently living longer and enjoying a healthy, active life. This is thanks to advancements in antiretroviral treatments.
Pulse Insurance is a company that specialises in high risk cases, helping to provide cover to those who have been turned down by other providers. This summer, they began offering specialist life cover to those living with HIV (not AIDS). Their ‘Harbour’ policy provides a modest amount of Life cover for Death from Natural Causes Only – up to £25,000. The policy also includes Personal Accident cover up to £200,000. Pulse Insurance do not request a doctor’s note or medical report from the applicant, so the policy can be put in place very quickly.
Pruprotect also became the first mainstream provider to extend their life cover to those living with HIV. They offer up to £250,000 of cover over a maximum of 10 years.
With both of these policies, an individual’s eligibility for a policy is dependent on very strict criteria – in fact when Puprotect first launched this policy, its estimates suggested that only 7% of HIV positive applicants would meet these conditions. High premium prices will also apply.
Insurance is not an exact science; it’s based on claims statistics as well as the experience of insurers. Your personal circumstances can affect your premiums and this could seem discriminatory and unfair to some people. However, assessing and balancing risk in this way allows insurers to contiune providing cover to a wide spectrum of people.