Tuesday, 1 March 2011

BBC News - Insurance and pension costs hit by ECJ gender ruling

Insurance companies don’t discriminate on the basis of gender but on that of risk. This latest development is absolute madness. Who are these people that they can’t understand the basic principles of insurance?

An insurance policy is fundamentally a gamble, a bet. You bet the insurance company so much a month that you will have an accident and claim on the policy and they bet you a lump sum that you won’t. No matter how sophisticated it becomes that is what it is.

Taking the betting analogy to its natural home, if you bet on a horse the odds you get depend on the likelihood of that horse winning.  The greater the chance of a win the shorter the odds based on the degree of risk to the bookmaker. The bookie doesn’t “discriminate” on the basis that the favourite is a mare but on the basis that it is a horse with a better chance of winning on current form.

Going back to insurance, actuaries working for insurance companies are basically bookies who calculate the odds on who will be more likely to win the bet and have the accident. Women are less likely to have accidents than men and more mature women much less likely to have accidents than young men under 25 years. IT ISN’T ROCKET SCIENCE!

Who will gain from this latest wacky European dictat? Not men drivers whose risk to insurers is already established and won’t change and whose premiums will therefore not go down. Not women drivers who are reckoned to constitute less of a gamble to the insurance companies but whose premiums are bound to go up to achieve this unnatural parity with men. Who always gains when insurance premiums go up?

‘Nuff said!

BBC News - Insurance and pension costs hit by ECJ gender ruling

No comments: