All The Frugal Ladies Personal finance with a feminine touch
Insurance is so mainstream in today’s world – car insurance is compulsory, Obamacare has brought health care into the spotlight and with businesses, the recent spate of floods in America and across the world has brought the topic of insurance to the fore. While a lot of aspects of insurance are debatable, the age old question of how insurance premiums are decided upon by insurers, and whether these hugely discriminatory parameters are fair, have probably driven the most debate in this field.
Let’s recap then shall we, as to what constitutes your average insurance premium. To narrow down our focus and not deviate too much, we’ll stick with auto insurance for the purpose of this article, but many other insurance policies such as health insurance, life insurance and home insurance among others do have many, many parallels to auto insurance as well. The more straightforward ones such as the make and model of car, accident history, credit history and driving habits are easily explained. Your car, if more costly, will have a higher rate to compensate for its price. Similarly, if you’ve been involved in a few fender benders, have a few parking tickets to your name and have been booked for a DUI or two it will obviously cost more to insure you. In terms of driving history, if you travel a lot by car, or have indulged in street racing or the like then again, you stand at a higher risk of car damage meaning insurance rates are higher. When talking about credit history, again, it’s quite clear, if you’ve been known to skip payments on past debts then you’re a proverbial flight risk, so they will charge more to protect their bottom line.
The bizarre world of insurance premiums
It’s the other factors that leave you scratching your head though, as insurance is calculated based on age, address, type of job, and gender too. How is this relevant you ask? Well, insurers claim that their statistics show that all these factors are significant in one way or another. Age is explained, again I think fairly, through the high numbers of youngsters aged between 18 and 25 filing insurance claims every day. If youngsters in general have a bad rep, even the few who do drive well have to face the brunt though, and that isn’t fair. Instead of rewarding them for bucking a trend, they’re being punished for it.
Similarly, men and women have a disproportionate insurance premium charge attached to them. The numbers are significant in this too, as past statistics on accidents and insurance claims point towards men carrying more of a risk than women on the road. But is it really fair to make a statement like that? As a man, and a really good driver who’s record is clean as a whistle, I find it annoying that my wife, who’s been involved in one accident and has a few tickets to her name gets off easier in terms of auto insurance, even though our cars are pretty much of the same value, and we obviously live in the same place, and have similar jobs in terms of position and pay scale. I’m being overcharged in my eyes and a lot of other men and women feel this way about a variety of these factors and a combination thereof.
Each firm functions differently
The madness doesn’t stop there either, however, as each individual will get a different quote from all the insurance companies available, as the weightage given to each factor is proportioned in a different manner within each firm. Let me clarify with this example, say The Hartford adjudged my insurance premium to be $100 a year (an unrealistic figure, but easier to comprehend this way), and I decide to check what AllState thinks, they might charge me $150, same guy, same car, same everything, but the rate switches by a huge degree, and this actually happens!
Europe takes a stand
In Europe, this is no longer the case though. A ruling in 2012 by the European Court of Justice has decreed that insurance premiums cannot be charged differently based on sex, and have to be uniform in this regard. Viviane Reding, Vice President responsible for justice, fundamental rights and citizenship, EU commission explained the new law and its reasons, as seen on the EU commission’s website, she said “Gender equality is a fundamental right in the European Union and the Court of Justice made clear that this also applies to insurance pricing, The insurance sector has had over a year to prepare the switch over to unisex pricing and the European Commission has helped the industry to adapt during this period. The Commission will monitor how the industry will implements these new rules in practice. ”
Should the United States of America, a country that has been the flag bearer for equality in the 21st century also follow suit? Are insurance companies justified in making these discriminatory judgments? And if the answer is yes, then should that be where the line is drawn, or should other factors such as age and profession also come under review? These are fundamental questions that need addressing in the public domain, and you the American citizen need to get in on the act.
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