Life Insurance PC. Where Gender Equality Is Just Wrong.

Should this young lady pay more for insurance just because males her age do stupid things?

Should this young lady pay more for insurance just because males her age do stupid things?

One of the great challenges facing insurance companies in the future is sustainability.

An insurance policy, in it’s purest form, is a risk transfer contract and an insurance company has a fairly simple role. Collect premiums from policy holders, and pay benefits to those policy holders when they have an incident that fits within the definitions of their policy.

In the incidence of a house insurance policy, you get to transfer the cost of rebuilding your home after a fire to an insurance company in return for the payment of a regular premium.

The cost of your insurance premium is directly related to two things. The insured amount which is the cost to replace the item and the risk factors involved in protecting the asset. This could include whether the house is made of weatherboards or brick, whether your home is in a flood prone area or even whether you happen to live in a  suburb that houses a lot of teenagers who get trigger happy with cigarette lighters on school holidays.

All of these factors help determine just how much your annual premium is going to cost you. If you live in a quiet, safe suburb on a hill, your premium will be relatively low. If you choose to live in a suburb that has house fires on a regular basis, then you will pay more. It’s one of the ways that insurance companies can make payments to their policy holders while ensuring their own long term viability.

And so it goes with Life Insurance. No matter the political or social intentions of the day, it is a fact that we all carry different levels of risk of dieing or becoming permanently disabled . If you’re overweight to the point of being clinically obese, then you are statistically more likely to die prematurely than someone who is fit and healthy. If you spend your non working hours consuming large amounts of recreational drugs or engaged in high risk, adrenalin fueled activities such as motor racing then you are statistically more likely to die than someone who spends their weekends playing at the beach.

If you carry a higher risk, then accordingly, you should pay a higher premium for your insurance. Or, if the risk of that activity is too high, then other policy holders shouldn’t have to pay the price of your personal choices and you should be excluded from obtaining cover for that activity.

Unfortunately, we did not choose whether we were going to be born as a male or a female but insurance companies have decades of statistical data that shows the risk differential between the two sexes at various ages and have priced their life insurance policies to show it. It’s a statistical fact that a 19 year old male is more likely to die as a result of a high speed car accident than a female of the same age and so insurance premiums reflect that risk for both parties.

A recent decision by the EU (European Union) to ban gender based premiums is a wrong move despite it’s grand intentions. We’re stepping onto a very slippery slope here with potential to provide an equal insurance footing for everyone, irrespective of relative risk. Already, one company has increased life insurance premiums for females by 23% to reflect this new ruling. Expect higher premiums for everyone if this way of thinking continues. No-one likes insurance companies, but if we lose them because political correctness sends them broke, there’ll be a lot more families living on the street.

Have you recently reviewed your life insurance?  Is it time you did?

2 thoughts on “Life Insurance PC. Where Gender Equality Is Just Wrong.

  1. paulineferguson

    Honestly, I think this is a prime example of PC gone wrong. There are some things in which males and females should be regarded as equal. There are some things in which we’re just not. For example, studies have shown that women have greater (on average) muscle strength in their legs, rather than their upper body. Men have greater upper body strength. This means that when performing physical activities such as lifting, women may need to involve their legs more, rather than just rely on their arm strength.

    Is this a bad thing? I don’t think so. It’s just a different thing, and if we understand it, we can adjust our lives accordingly.

    Another example is that young men (again, an average) have faster reflexes and spatial recognition speeds. This, coupled with the “ten foot tall and bulletproof” attitude of quite a lot of young men (late teens, early twenties) apparently makes them better pilots in fighter planes, given the appropriate training. It also translates to riskier behaviours when driving, as skill levels required to get a drivers licence are not similar to those required to fly a fighter jet. 🙂

    Women, on the other hand, tend to be more considering, reserved and conservative when driving, which is why mining companies like to have women driving their FBTs. (Technical term lol). These aren’t bad things, and neither of these precludes successful women fighter pilots or male truck drivers in mines.

    Statistics also show that people over the age of 40 tend to have fewer accidents (this may be experience, lots of previous crashes, cash required to pay bills instead of speeding tickets, a closer look at personal mortality or a combination of all of these). Again, that’s not to say that a younger driver definitely will drive like a pork chop, and an older one won’t, but the figures give results.

    It’s just a statistic, and that’s what insurance companies have to use to develop their premium costs.

    It’s not personal, and it certainly shouldn’t be used in this way… I noticed in your post you’ve said that one insurer has put up the premiums for girls by 23%. There doesn’t seem to be a corresponding lowering for males… and that’s not fair at all.


  2. rodneybukuya Post author

    Sorry Pauline, I missed that. The corresponding premium drop for blokes in this instance was 3%. Anyone who has ever spoken to an actuary or auditor knows that organisations don’t just pull numbers out of their hat. They’re based on something.

    Did you know that if your surname is Nguyen in Australia and you apply for a home loan, it will automatically be rejected at the first application and will require substantial documentation before it is approved. Or, at least that’s what used to happen.

    It’s not because Australian banks don’t like Vietnamese people, it’s because people who happen to have the name Nguyen are the biggest submitters of fraudulent home loan applications in the Australian market.

    Our financial institutions have access to decades of information and statistics and they provide products with pricing to the market at a rate that is both market and risk sensitive. If they were made to remove these price sensitivities then we would face the collapse of many institutions and the cost of buying their products would increase to show the increased risk.

    I’m a big believer in equality, but it should be equality of opportunity not result.



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