Insurance and Equality

1. Insurance and Equality Paul MacDonnell, Head of Regulatory & EU Affairs, Irish Insurance Federation

2. NOTE: The views expressed in this presentation are those of the speaker and do not reflect the views of the IIF or its members

3. The argument The Equal-Treatment agenda means: • Expropriation of wealth from the poor to the better off • Raising the overall cost of insurance thus making it less affordable for the poor

4. Contents • How we got here: • Gender • Where are we going? • Religion or belief, disability, age or sexual orientation • Why imposing equality on insurance is a mistake • knowing / pricing real risks is a common social enterprise – which the equality agenda, using politics and legislative activism, prevents.

5. How we got here: gender • EU Commission attacked gender in insurance on two grounds • It’s a proxy for (real?) factors? • Where private markets are replacing state systems it’s use is ‘unacceptable’

6. It’s a proxy for (real?) factors “Studies show that sex is not the main determining factor for life expectancy. Other factors have been shown to be more relevant, such as marital status, socio-economic factors, employment/unemployment, regional area, smoking and nutrition habits. Lifestyle can be seen as a multidimensional factor which has a significantly higher impact on individuals’ life expectancy than sex. Studies which have tried to remove lifestyle, social class and environmental factors from the equation have shown that the difference in average life expectancy between men and women lies between zero and two years with the conclusion that the growing gap in life expectancy witnessed in the general population in some Member States cannot be attributed to biological differences. Sex is at the very best a proxy for other indicators of life expectancy. The inference which can be drawn from such studies is that the practice of insurers to use sex as a determining factor in the evaluation of risk is based on ease of use rather than real value as a guide to life expectancy.”

7. Unacceptable where private replaces state • Gov’t is getting out of pension provision • Gov’t is getting out of health-care insurance • Gov’t never used gender • Private insurers mustn’t use it either. …..Ignores why Gov’t is getting out of pensions and health. These schemes are bankrupt.Why? Because of unfunded universal entitlement and community rating.

8. Impact • Reducing premiums for boy-racers will increase number of boy-racers on road • Higher frequency of crashes • Higher costs • Higher premiums • Young, poor women will subsidise them to drive and kill or will withdraw from market

9. Impact • Higher proportion of young men on road as total insured = higher costs • Pensions: women may save on purchase of annuities. • Young men will be less inclined to save. • Poor young men who do save will subsidise rich professional women’s pensions

10. Where are we going? Religion or belief, disability, age or sexual orientation Proposed directive in current draft would require insurers to justify ratings in case of age and disability based upon information – actuarial or medical.

11. Where are we going? Religion or belief, disability, age or sexual orientation Proposed Directive: (15) Actuarial and risk factors related to disability and to age are used in the provision of insurance, banking and other financial services. These should not be regarded as constituting discrimination where service providers are able to show by relevant actuarial principles, accurate statistical data or medical knowledge, that such factors are determining factors for the assessment of risk.

12. Frequency of use

13. Civic study • Draft Anti-Dis’ Directive allows actuarial / informational-based price differentiation • Civic study says all age, disability, gender are ‘proxies’ • Civic says ‘complaints’ are evidence of a problem. Are Insurers one ECJ ruling away from ‘Community rating’?

14. Why imposing equality on insurance is a mistake Proposed Directive: (15) Actuarial and risk factors related to disability and to age are used in the provision of insurance, banking and other financial services. These should not be regarded as constituting discrimination where service providers are able to show by relevant actuarial principles, accurate statistical data or medical knowledge, that such factors are determining factors for the assessment of risk.

15. Why imposing equality on insurance is a mistake New diseases Medical knowledge Medical knowledge Medical knowledge Medical knowledge Actuarial Knowledge

16. Why imposing equality on insurance is a mistake New diseases EQUALITY Actuarial Ignorance

17. Why imposing equality on insurance is a mistake • Poorly-paid young women drivers subsidize better-paid more risky young men • Poorly paid young male savers subsidize better paid female savers • Insurers can’t price risk for new diseases, conditions or life-styles thus forcing others to pay – leading to mis-pricing and ultimately solvency problems

18. Why imposing equality on insurance is a mistake • Medical advances may slow • Dialogue between medical science and insurance may cease • Disease and its treatment may become subject to political considerations

19. Thank you Paul MacDonnell, Head of Regulatory & EU Affairs, Irish Insurance Federation