Exclusive: Ageism law will be 'disastrous' for consumers

Plans to ban age as a factor in premiums will hit millions of people, warn insurers. By Julian Knight
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The Independent Online

Millions of motorists and holidaymakers face a sharp rise in their insurance premiums, the UK's leading insurance body has warned. If the new Equality Bill bans insurers from taking age into account when deciding on premium levels, it will have potentially disastrous consequences for most customers, warns the Association of British Insurers (ABI) in a report to be published this week.

"The danger is if we can't use age as a rating factor, insurers will have to raise premiums across the board for all age ranges," said ABI spokesman Malcolm Tarling. "The simple truth is that age is an important factor. Take travel insurance for instance, the cost of a claim made by someone over 65 is three and half times more than one made by a younger person. As for motor insurance, claims made by 80-year-olds are nearly 50 per cent more expensive than those made by someone aged 60. It is only fair that premiums reflect this extra risk.

"We are not against equality legislation, but the Government has to think carefully about how it plays this. This is well intentioned legislation which could have unintentional consequences," he said.

In its Insurance and Age report, the ABI brands the plan to bar them from using age as a factor as "unnecessary, unfair and restrictive".

The Equality Bill to be brought before Parliament in the spring is designed to ensure that age discrimination does not take place in the supply of goods and services. Ageism is already outlawed in the workplace. Campaign groups representing older people are adamant that legislation is needed to ensure fairness and that there should be no exceptions made for the insurance industry.

"The ABI think the sky will fall in if this legislation happens, which is nonsense," said Nony Ardill, a policy adviser for Age concern. "Age can still be a factor in determining premiums and we recognise that there is an increase with, say, travel insurance risk as a policyholder get older.

"However, what needs to end is the arbitrary way insurers raise premiums when a certain age is passed – someone hits 70 and suddenly their motor or travel premium doubles – and we absolutely oppose the practice of some providers which refuse to quote on grounds of age," she said.

In addition, Ms Ardill called for the insurance industry to disclose how it currently calculates premiums.

"The insurance firms hold on to these tables as a commercial secret but they should be made to show exactly how they factor age into premiums. It must be transparent and fair. At present, we suspect that a lot of their data is out of date, taking no account of the fact that we are enjoying longer and healthier lives," Ms Ardill said.

Likewise, Jack Neil-Hall from Help the Aged would like to see premiums calculated with the individual circumstance of the policyholder in mind rather than based on date of birth.

"For example, a person in his '80s who likes to drive and go abroad on holiday can be suddenly hit with a huge premium increase to renew his policy, or find himself unable to get insurance at all, only because he has breached some age barrier imposed by the insurer," Mr Neil-Hall said.

"Age is used as a broad paint brush by insurers but it's much more sensible and fairer to look at individual circumstances," he said. "That same person may never have smoked, be in good shape and have a recent medical to prove it. Why doesn't the insurer ask to see it?"

But Mr Tarling says it's not cost effective or practical for insurers to do an in-depth analysis of individuals as suggested by Help the Aged.

"If we have to start asking for medicals, it will cost far more to formulate quotes, which will raise all premiums and the whole process will be delayed. Remember, a lot of insurance is now bought online and that could become impossible if we have to do what the campaigners want," Mr Tarling said.

He also denies that insurers in effect abandon older customers. "We don't refuse to quote purely on age. There are insurers who specialise in offering cover to older people. The market is working. Our report shows that 99 per cent of people who want travel insurance get it," he added.

As for motor insurance, the ABI says anti-ageism campaigners are not seeing the full picture: "The link between age and accidents is undeniable. For example, the under 25s are much more likely to have crashes as they are less experienced and that is why their premiums are much higher. If we weren't allowed to take this into account, it would inevitably raise premiums for older drivers," Mr Tarling said. But campaigners maintain there is a problem and only legislation will help. "People generally have an image of an older person as unable to think clearly or do things.The ways we look at older people are out of date," Mr Neil-Hall said.

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