I’ve always liked the story of the sharp young insurance salesman. Fresh out of training, he was out on his first solo day touting for business, and he sold a large life-insurance policy, on very favourable terms, to a man of ninety-one.
His boss was horrified. “Why on earth would you offer those terms to a man of ninety-one?”, he asked. “Well”, replied the salesman, “I checked the actuarial and mortality tables, and I found that very few men die over the age of ninety-one”.
The EU has embarked on a course of action that is equally stupid, equally at odds with reality, and potentially as damaging to the industry. Obsessed by its “anti-discrimination” mono-mania, it’s decided that it’s wrong for insurers and other financial institutions to offer different terms to men and women based on their sex. The result is likely to be dramatically lower (some estimates suggest 30% lower) annuity rates for men, and much higher car insurance premiums for women. In some cases one or the other sex may be a bit better off, but industry estimates suggest that in the aggregate, consumers will get a worse deal. And there is likely to be considerable damage to the industry. Yet again, EU rules compromise the success of the UK’s vital financial services sector.
Let’s be clear about this. Differential insurance rates offered to men and women are nothing whatever to do with prejudice, or discrimination, or gender-stereotyping. They are based simply on hard, factual, statistical records of actual claim rates, and accident rates, and mortality rates.
It’s possible to rate the risk of (say) a driver’s insurance policy based on a huge range of factors: age, sex, post-code, claims record, health factors, and of course the vehicle covered, and it is right and sensible that premiums should reflect risk, insofar as it can be objectively assessed. To remove a key risk factor from the mix is to drive a coach and horses through the industry — and to penalise unfairly (for example) women drivers, who by-and-large are safer than men. Sheila’s Wheels will find that the wheels have come off their business model.
If the EU is outlawing discrimination on grounds of sex, how long before it outlaws ageism, and makes my opening anecdote a reality? Or outlaws discrimination on health grounds, so that the sick and the healthy pay the same health insurance rates?
We still await a ruling of the European Court on this issue. But the betting is that the ruling will come in, and if it does, the consequences will be perverse. Within the UK, insurance will clearly become more attractive to bad risks, who will get cheaper premiums, and less attractive to good risks, who will pay more. Inevitably this will bias the customer base of the industry more towards bad risks — driving up premiums for all.
I don’t know the rules on cross-border insurance, but under the new EU proposals it would make sense for a British woman to buy car-insurance on-line from (say) a US provider, who will still have a rational premium structure, and it would make sense for a British man to buy an annuity abroad in the same way. Be ready to cover your ears, because here comes my most consistent theme: yet again, EU rules threaten to drive business, and investment, and jobs, out of the EU altogether. If this scenario comes about, then yet again the good business goes overseas, the bad business remains, and costs and premiums in the remaining UK industry go even higher.
EU regulations are becoming increasingly perverse and damaging — and disproportionately damaging to Britain. We should be Better Off Out.