House/Contents Insurance Quote - Gender Differentiation?

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/82061240#Comment_82061240

My pricing background was motor, same principles apply to all mass market consumer insurance. So we had circa 10m policies and circa 0.75m claims every year and had decades of data; from that we can segment the portfolio of customers by age, driving experience, how many miles they drive each year and see the average rate of claim, the average claim value and the standard deviation.

Through that type of analysis you see that young drivers have more claims and higher value claims. You see old people start having more claims again but their value is lower. You therefore price accordingly as the premium charged needs to reflect the risk they pose else you get a lot of negative selection… good drivers will go because premiums are too high and lots of bad drivers will join because you are the cheapest for them.

Its not just about the risk though, our HR bill isnt going to materially change if we made a push to only insure lower risk drivers so there is an element of OpEx, IPT is a flat percentage and obviously we are a for profit company so there is both a risk and profit margin in there.

Contrary to popular belief we dont get a load of egg heads in an ivory tower to debate if someone has made one non-fault claim what the impact on the odds of them having another one is, instead we can check our own data. Where the model does get complex is if you introduce a rating factor not previously gathered (eg credit score, a former project of mine) then there is some theory rather than stats used but in that case when it launched it intentionally made little difference, after 6 months we had some data we could start doing analysis on and so the ratings became stronger and after 2 years it was considered data was now statistically relevant and it went to full force.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82061218#Comment_82061218

I don't need the reasons for the laws against discrimination to be explained to me (for more reason than most), that wasn't my intention. I've agreed that my original title for this thread was mistaken, what I am seeing in a very specific quotation situation is a difference when two people of different genders ask for the same quote.

Contributors to this thread have made good suggestions as to factors I was not aware of and made it clear that gender discrimination (or even differentiation) is not a factor.

Your comment

The law as it stands means some people have to unfairly pay more for others because an actuary is constrained.

suggests to me that you are not happy that anti-discrimination law makes it illegal to (er) discriminate when pricing insurance products?

In what way is it unfair? How would you change it to make it more fair?

MyRealNameToo

https://forums.moneysavingexpert.com/discussion/comment/82061308#Comment_82061308

So take the easy example, teenage boys have more claims and more expensive claims than teenage girls. Historically insurers could see that so charged teenage boys more than girls. When the law changed they could only assess teenagers as a whole and so girls ended up paying a fair amount more and boys paid a little bit less.

When you get older then the differential tended not to be anywhere near as big and at some points the two could reverse, men started having the lower premiums (especially if factoring in mileage) than women but of cause they now also both pay the same.

It was understandable that in 2011 when the laws came in there were a lot of teenage girls who didnt like that their premiums had increased by £1,000 simply because the EU had said gender can no longer be used to rate insurance.

Obviously gender was a EU thing and somewhat out of our hands but there are other examples, the when the FCA was publishing consultation papers on the new rules on consumer Home and Motor renewal pricing they acknowledged that people who shop around will be worse off, they also acknowledged that some of those customers will be vulnerable and that could be because they are already in financial distress. Ultimately however it felt the harm being done to those blindly renewing each year, who did have a strong correlation with older people, was the worse evil and so put in the regs that pushed up new business prices

Brie

fyi - I assume that even in the EU it would be the sex of the individual rather than the gender that is the basis of discrimination. That certainly is the case in the UK as gender is not a protected characteristic while ones sex is.

flaneurs_lobster

https://forums.moneysavingexpert.com/discussion/comment/82061329#Comment_82061329

Not going there, I'll use the two terms interchangeably until there is a specific situation where one is required to be specific. Since discrimination is outlawed (in the specific instance of general insurance pricing) I can't see why the term used is relevant here.

Brie

https://forums.moneysavingexpert.com/discussion/comment/82061346#Comment_82061346

sorry - should have prefaced that with "pedantic alert"!! 😉

j2009

https://forums.moneysavingexpert.com/discussion/comment/82061329#Comment_82061329

It was unofficially called 'the gender directive' and at the time the distinction between 'sex' and 'gender' wasn't as prominent. Even the regulator would refer to it as this.

I guess it was a bit too risqué for the insurance industry to call it 'the sex directive' and whilst it might have done wonders for recruitment into the industry I feel sure it would have only ended in disappointment.

Brie

@j2009 😆 I'm sure you are right!!!