Will age discrimination bill raise insurance prices?
Government plans for an equality bill have been met with mixed reactions from insurers. Some have claimed this as a victory for the consumer, while others have cautioned it may backfire and actually raise prices for everyone. Sarah Routledge looks at the implications of equality legislation for insurance.
The government aims to tackle age and gender discrimination in the workforce, replacing 116 different pieces of equality legislation in force with a single bill.
But it will also broaden the scope of age discrimination legislation, which has sparked a debate in the insurance industry.
The bill proposes pensioners should be protected from age discrimination by health and financial services.
Charity Age Concern is in support of the proposals. "Lots of people have come to us, and several organisations who have researched the market have also said, that older people have difficulty getting insurance," says spokesperson Zena Ambrose.
"The insurance companies have made this decision to base insurance on an arbitrary age rather than considerations of health or lifestyle.
"It is a lazy way of measuring risk."
Age Concern argues that refusing older people travel insurance because they are deemed a higher risk is an unfair generalisation, as a person who has turned 65 could be at a lower risk than a person who had a serious illness a few years ago.
In car insurance too, Age Concern says an older person may be at more risk of dying in a car accident, but they are at less risk of causing one, so basing a decision on age is unfair.
Online insurer Karma claims age discrimination is rife in the insurance industry, and hopes the proposed bill will put a stop to it.
Managing director Brian Wright said: "I'm delighted the government recognises that the majority of insurers do not meet the needs of elderly travellers - our research reveals just how wide age discrimination is.
"Over a third will not cover those aged 65 plus and around 70 per cent refuse to cover the over 75s. Those who do provide cover are quoting extortionate premiums - how can the difference between our premium of £25.03 and the most expensive at £208.70 be justified? And this price gap gets wider with age."
However, the Association of British Insurers (ABI) claims age is an important factor in assessing risk.
The organisation responded to the proposals with the warning: "Legislation, no matter how well-intentioned, could have the unintended negative consequence of forcing some insurers to withdraw certain products altogether, reducing competition and availability and pushing up prices for all age groups."
Spokesperson Malcolm Tarling says: "A person over 65 is eight times more likely to claim on their travel policy than a person under 50 and the claim will be three and a half times more expensive.
"We think the real issue is not availability, because there are specialist insurers out there, the issue is how we can get people to know of these insurers."
Mr Tarling adds that some insurance products may even be cheaper for older people - home contents insurance, for example, as retired people are more likely to be at home in the daytime. Car insurance also tends to go down for the over 50's.
There also seems to be a feeling that removing discrimination could also remove benefits for older people.
In a survey of Saga customers, 86 per cent "feel it acceptable to sell products such as holidays and car insurance that are confined to specific age groups".
Saga spokesperson Paul Green said: "There are insurance companies like Saga that want to serve the needs of the older traveller or motorist, the problem for the customer is one of knowing where to go to get proper cover if your general insurers can't help.
"We think it is wrong for insurance companies simply to refuse because of someone's age, but we can understand why they might want to do so as it is a very specialist area.
"Compulsion to provide cover from non-specialists will simply lead to high prices. Instead, insurers ought to be required to direct them to an independent source of information so the customer can easily find a provider that better understands their needs and will provide cover, because of their specialism."
As things stand, insurance companies do make judgements based on general risk factors, so age will play a part. Young people may also feel discriminated against when they take out car insurance as premiums tend to be higher.
But shopping around can make a huge difference, and there are insurers who specialise in certain groups.
As research from Karma shows, the difference between the lowest and highest internet-based quote (Karma £25.03 and Lloyds TSB £208.70) was £183.67, so clearly some research in this area does pay off.
Sarah Routledge
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