Age law will double premiums

Customers will face price hikes and less choice if the Equalities Bill stops insurers pricing on age, the Association of British Insurers (ABI) has warned in its report Age and Insurance: Helping older customers find the cover they need.

The cost of travel insurance alone could double if age could not be used as a risk factor, the ABI said.

The AA said motor premiums for the majority would also double.

The report shows that restricting the use of age by insurers would be:

• Unnecessary. Insurance is widely available for all customers, regardless of age. Independent research undertaken for the ABI shows that 99% of older customers are already able to find motor insurance, with 98% able to obtain travel insurance.
• Unfair. Taking age into account, where it is relevant, ensures that prices are fair to all, including older customers. In motor insurance, the average cost of a claim made by someone aged over 80 is nearly 50% higher than one made by someone aged 60. In travel insurance, the average cost of a claim made by someone aged over 65 is nearly three and a half times more than one made by someone under age 50. Restricting the use of age would mean that insurers would not be able to take account of differences in risk among older customers, unless a more intrusive and costly approach, such as individual medical assessments, were used. The additional costs would lead to higher premiums.
• Restrictive. Without sufficient age-related information, insurers would be unable to offer competitively priced cover to accurately reflect the risk. This could lead to some insurers ceasing to offer cover, and discourage those insurers who currently specialise in providing cover for older customers.

Nick Starling, the ABI’s Director of General Insurance and Health, said: “The insurance industry is committed to treating people fairly, and is opposed to unfair discrimination. The Government, organisations that represent older people and the insurance industry agree that premiums should reflect individual risk.

“Insurers only use age where it is relevant, and restricting their ability to do so would rebound on all customers, through higher premiums and less choice. Any legislation should tackle genuine discrimination, not insurance where the use of age helps to ensure a wide range of products at competitive prices.

“Our research shows that travel and motor insurance is widely available to older customers. However, we recognise that some people may need more help to find the right policies for them. That is why we are working with our members, the Government and age charities to improve access to information about suitable insurance products.”

If an insurer does not want to take on the risk a particular age group then they ought to be compelled to refer people to an independently accredited list of providers who will be able to quote.

The AA

Simon Douglas, director of AA Insurance, said: "An unintended consequence of applying age equality to car insurance will be a be reduction in premiums for a few at each end of the age range but an increase for the majority.

"There is a significantly greater likelihood of a claim being made especially by young and inexperienced people. Similarly, as age advances, the likelihood of being involved in a collision increases."

The lowest risk is presented by drivers between 45 and 65, for both sexes. "For example, young men aged under 21 are 10 times more likely to make a claim than someone aged 35 or over. Similarly, the size of claim for a young male driver over is £4,200, compared with £1,400 for a male aged 35 or over. That's why premiums are high for young people. Removing age discrimination could well double premiums for the majority of middle-aged drivers, of both sexes."

Saga response

Saga appeared to endorse the ABI’s view claiming the issue is about people knowing where to go for cover so they can continue to enjoy life to the full.

A Saga poll of over 10,500 people aged over 50 found that 25% of the over 65s had been turned down for travel insurance because of their age. But 93% of these had gone on to find insurance from another company.