Measuring Risk

The news sites –  and blogs –  are awash with the absurd ruling from the European court on the matter of insurers using sex as a factor in measuring risk. We have now reached a level in the “equalities” agenda where common sense hasn’t so much been abandoned in the swamp but has now been consumed by the crocodiles. The reason insurers discriminate is because the statistics tell them which groups of drivers pose the greater risk, therefore those higher risk groups pay higher premiums. In making this observation I am repeating what I have seen countless others saying elsewhere yet is a truism that escapes the court. The other truism is not that men’s motor insurance premiums will fall –  now, stop giggling at the back –  everyone’s premium will rise. Insurers, having a captive market will make the most of this to hike prices up. We will all pick up the tab for a stupid ruling made supposedly in the interests of the consumer. It won’t be the insurers who will suffer, rather it will be the people the ruling is designed to protect. With protection like that, I think we will probably better off without.

All that said, there is a point to be made about how insurers come to their decisions. Upon arriving back in the UK, we found that our premiums were now higher. They were higher because the vehicles were on French plates. This, apparently, makes them a higher risk. This is an absurdity as they are exactly the same vehicles we exported. Equally, some insurers would not accept the French no claims bonus –  even though the French happily accepted the UK one two yeas previously and the NCB certificate clearly stated how much of it had accrued in the UK. This was clear evidence that we had not claimed, yet, apparently, this made us a greater risk. So, too, did the simple fact that we had lived in France for two years –  this despite us driving the same vehicles and not making a claim in that time. This tends to lead me to the conclusion that the insurance industry is made up of rapacious sharks who will use any excuse to bump up the premiums based upon what they can get away with, and has nothing to do with the actual risk posed by the proposer in the real world.

One final point on all of this. I spent five years teaching people to drive. One thing I could tell you, a good driver’s ability has nothing to do with what is in their pants –  their exposure to risk and therefore their likelihood of making a claim will have more to do with the way they use the vehicle, miles driven, types of roads, time of day they drive and so on. It is very much an individual thing and the systems used by insurers lump us into homogenous groups and bases our risk factors on things that do not necessarily apply to us as individuals. My most recent pupils were my niece and nephew. Doubtless he pays more for insurance than she does. I can tell you now, knowing what I do about their driving skills that it should be the other way around. Statistics do not tell the whole story. They never have.

The insurers use a blunt instrument for measuring risk that could certainly use some honing to make it more applicable to real world risk. This court ruling is even blunter and helps no one –  except, perhaps, the insurance industry.