It’s common practice in the United States for men to be charged more for automobile insurance than women. Apparently, that’s about to change in Europe:
The decision means that women can no longer be charged lower car insurance premiums than men, and the cost of buying a pensions annuity will change.
The change will come into effect in December 2012, although customers could see premiums alter in the interim.
Representatives of the insurance industry said they were disappointed.
The court was ruling on a challenge by a Belgian consumer group Test-Achats.
It had argued that a current exemption for insurers contradicted the wider European principle of gender equality.
It’s not all gravy for men, though. Men had previously received greater pension annuities on the basis that they are less likely to live as long to collect them. So the end result is that men get less pension for their work, in the aggregate.
I have mixed feelings about this. My natural inclination is to see the first part as being relatively fair but to be outraged about the second. My mental wiggle room on this is that driving is something that each individual has a good deal of control over and so you can take a look at my driving record and compare it to a woman’s driving record of the same age and determine who is a better driver*. On longevity, though, behavior certainly plays a role but biology seems to favor women and so not only do men die younger, but now we leave money on the table when we go!
But really, this is splitting hairs. Either you accept aggregate probabilities as a legitimate factor or you do not. And so I am mixed. In the case of gender, I actually lean towards discrimination being okay within certain contexts. I am iffier on other topics. I’ve complained in the past about some of the criteria that auto insurance companies use (precipitated by a huge increase in my auto insurance rates due to some mythical problem with our credit) such as housing (if you live in a poor neighborhood, you may dinged whether you are a safe driver or not even though the correlation is without causation).
* – Along these lines, I have no problem with discrimination among the young, where driving records are less firmly established. And really, this may undercut my thoughts on the matter because I’m not sure how prevalent the discrimination is as you get older and have established your own driving record.
About the Author
9 Responses to Points For Consistency
Leave a Reply
please enter your email address on this page.
Men also pay more for life insurance than for women of the same age. Generally, at least with my company, a man of X years of age pays about the same rate as a woman of X + 5 years. Our disability policies have the same rates for men and women, though as a practical matter men tend to pay more because they’re more likely to be in high-risk occupations.
I wonder if this means that car insurance companies will begin running advertisements offensive to men and otherwise discourage men from patronizing them.
The EU directive is stupid; as Peter says, it all evens out in the end because men pay higher premiums for other categories of insurance.
What next? Fat people and smokers don’t get charged higher premiums for health insurance? It’s a very slippery slope.
Brandon, since men get more tickets and into more accidents, I’d imagine that they can rig up their formula to penalize men on that basis rather than on gender alone.
The issue is for young people that don’t have a traffic record. But their insurance is more likely than not to be with their parents, and you don’t want to alienate them.
What next? Fat people and smokers don’t get charged higher premiums for health insurance? It’s a very slippery slope.
Most of the time, they don’t. Group plans, government-run health care programs, and so on. The only real exception is in the US individual markets, and that’s already soon to end.
Regression to the mean. Take two 25-year-old drivers, one man and one woman, with more-or-less identical driving records, about midway between the average for men and for women of that age.
If I had to bet on who would have the most accidents over the next 20 years, I’d bet on the man. In a Bayesian sense, it’s more likely than not that the man is getting away with slightly riskier driving than his record would suggest, and it’s more likely than not that the woman is a bit unlucky and has more incidents than you would predict from her driving habits.
Now, it could well be the other way around. Or their records could be perfectly reflective of their driving habits. But, aggregated over thousands of customers, you’ll make more money by betting on the man having more accidents in the future.
Regression to the mean. Take two 25-year-old drivers, one man and one woman, with more-or-less identical driving records, about midway between the average for men and for women of that age.
If I had to bet on who would have the most accidents over the next 20 years, I’d bet on the man.
Perhaps not. I don’t work directly in car insurance and therefore am not 100% sure, but it’s my understanding that there isn’t much difference between the average male driver and the average female driver. The reason why men are worse overall is that the small percentage of truly dangerous drivers are disproportionately male.
Peter:
If it’s not normally distributed, and if you can tell with a great degree of certainty which group a man is in from, say, the first 5-10 years of his driving record, then my reasoning doesn’t hold.
But if this is the case, then why do insurers charge more for men? Or do they only charge more for young men without established driving records?
AIUI, once drivers have enough experience for driving records to be known with some degree of confidence, the rates for men and women get much closer to one another. If men continue to pay somewhat more it’s because men also drive more.