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The Actuary The magazine of the Institute & Faculty of Actuaries

Age restriction signals more cost and less choice

Customers are likely to face higher insurance premiums and less choice if the Equalities Bill restricts the use by insurers of age to help them assess risk, the Association of British Insurers (ABI) warns in a report published last month. The cost of travel insurance alone could double if age could not be used as a risk factor.

The report, entitled Age and Insurance: Helping older customers find the cover they need, puts forward a number of counter-arguments:
>> 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.
>> 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 50. Restricting the use of age would mean that insurers are not able to take account of differences in risk among older customers, unless a more intrusive and costly approach, such as individual medical assessments, was used. The additional costs would lead to higher premiums.
>> 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.

The report and related articles can be found at www.abi.org.uk