Equality Bill is starting to look tricky for insurers

The Equality Bill is starting to look rather less straightforward than the insurance industry initially hoped.

The Committee stage is now underway. Last week and this week they have been taking evidence from a wide range of organisations, including the Association of British Insurers, and next week will get onto the serious business of a clause-by-clause examination of the bill. The evidence sessions will have done little to soothe the nerves of the insurance industry. The insurance industry knows it is vulnerable to criticism on the way age limits are applied in certain classes of business such as travel insurance but it will not have expected to end the week attacked for disability discrimination against victims of pleural plaques and facing a possible ban on using genetics and family history in underwriting decisions.

Not surprisingly, Help the Aged and Age Concern took the opportunity of appearing before the committee to stress their opposition to the insurance industry being given any blanket exemption from the age discrimination provisions in the bill. The thrust of their complaint, which seemed to be listened to sympathetically by the committee, was that the insurance industry uses age as a proxy for other factors such as health and does so relatively crudely with broad age bands, such as over 65 or 65-75.

Where these organisations seemed to be in agreement with the insurance industry was over the need for all exemptions to be dealt with in the bill and not left to ministerial order. It seems that they are as worried as the insurance industry that exemptions could be granted or taken away almost on a ministerial whim.

Poor Nick Startling from the ABI went in well briefed to deal with the age discrimination issues but had hardly got into his stride when Labour MP Jim Sheridan launched into an attack about the insurance industry's stance on compensation for people with pleural plaques and those who go on to develop mesothelioma. Mr Sheridan seemed to want to hold Mr Startling personally responsible for the lack of compensation paid to people with pleural plaques and steer him into admitting that this constituted disability discrimination.

Next up was the Liberal Democrat MP Dr Evan Harris who wanted to get genetic testing on the agenda and pressed for a guarantee that the current moratorium on using genetic tests in underwriting would be extended beyond 2014. Of course, Mr Starling couldn't give this and it looks as if Dr Harris will press for an amendment to the bill to make the moratorium permanent and may even include some aspects of family medical history in this proposed ban too.

The week's evidence was rounded off by Vera Baird, the Solicitor General and the minister on the committee. She was supportive of the complaints from older people's charities that the insurance industry's use of age in underwriting was "gratuitously discriminatory" and was not always actuarially justifiable. She said the Government Equalities Office was working on a policy document specifically on this area and was consulting with both the industry and the age lobbies. Apparently, a draft version is doing the rounds at the moment. I think its publication will be awaited by the insurance industry with a little more anxiety after the last week.

11 Jun 2009

Topics: genetic testing, Equality Bill, asbestosis

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This letter from Nathan Williams, UK personal lines underwriting director, RSA in last week's Post provides some useful comment. RSA fully supports steps by the government to eliminate unfair discrimination. However, the Equality Bill as currently proposed is unworkable for insurers and may have unintended negative consequences for the broad range of consumers, including older people. As Age Concern and Help The Aged note, earlier this year the Association of British Insurers commissioned CRA International to carry out research looking at the problems associated with older peoples' access to insurance products. This research showed that more than 99% of older customers are able to obtain motor insurance, and more than 98% are able to obtain travel insurance. This shows that availability of insurance is not a problem, and that the market is working and is providing products for customers of all ages. Age Concern and Help The Aged propose that providers should be banned from refusing to quote for certain age groups. Insurers being able to target specific markets is one of the basic principles of insurance, and if insurers were no longer able to specialise in certain demographic groups, customers of all ages would see higher premiums as a result of less competitive pricing and fewer insurers in the market. I was pleased to see that Age Concern and Help The Aged accept that insurers should be permitted to price according to age, as this is one of the basic principles of insurance and underwriting risk. However, I am concerned about what an objective justification for age-based pricing could mean in practice. Like all insurers, RSA has limited actuarial data for certain uncommon risks; for example, there is very little information available as to the risks of a 17-year-old seeking insurance for a Ferrari or an 85-year-old seeking cover for a skiing holiday. Actuarial data is, therefore, not available for every risk, and it will be impossible for us to actuarially justify our premium-setting for certain customers. We recognise that while the vast majority of older people are able to obtain insurance, there is a problem with access to these products, and insurers need to do more to guide older customers to where they may be able to obtain insurance. RSA's More Than Select is one example of this sort of system. If a customer is unable to receive a quote from More Than, they are referred to More Than Select, and matched with a partner broker or company that is more suited to meet their need. While Age Concern and Help The Aged may believe that these are of limited use, we feel that the widespread use of such a system in the market helps to ensure that all consumers have access to insurance. As the article notes, the older market will continue to grow over the coming decades, and insurers do need to be ready to provide insurance to this ever increasing demographic. By directing these potential customers to specialist providers, RSA believes this should provide a workable solution for both consumers and the industry.

Posted by: David Worsfold, 16 Jun 2009 | 15:42

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