Sunday, 13 March 2011

Gender discrimination and the european court of justice

On the first of March the european court of justice ruled that insurance comapnies will not be allowed to offer different prices based on gender. Insurers have until december 2012 before the ruling comes into force so, is this a victory for gender equality or, as the majority of media outlets are suggesting, an idiotic move which will be to the detriment of both men and women.

At present, insurance companies in europe, operating under directive 2004/113/EC can charge differentially with respect to gender as long as it is backed by robust data at a national level. In other words, they can charge men more for car insurance if it turns out that men tend to crash their cars more than women. But they will have to remove all such differential pricing by the end of 2012.

This issue has 2 strands to it, firstly that our law is being dictated by european courts, not even by the elected european parliament, which I will not be covering in this post because it is going to be the subject of a different one I'm currently researching, and secondly, whether it is fair to differentiate on the grounds of gender.

It has been proved beyond any doubt that men, on average, are more likely to be involved in crashes, and are more likely to be involved in more serious crashes. As a result men tend, on average, to make larger and more frequent claims than women. My own personal view is that differentiating between two people is perfectly acceptable as long as it is a fair differentiation. In other words, if men are actually more likely to be involved in crashes then it is only fair that they should pay higher insurance premiums. In the same way, if women do actually tend, on avergae, to live longer than men then it is only fair that their payments into an annuity should be paid out over a longer period. 

It is harder to illustrate the next point with car insurance so I'll switch to annuities. For anyone who doesn't know, an annuity is where you pay an insurance company a lump sum and they agree to pay you a fixed income (inflation-linked) every year until you die. If your average man will live to 78 years old (the current life expectancy) and he puts £50,000 into an annuity at the age of 65 then is it really unfair for the insurance comapany to offer to pay £50,000/13 a year until they die because they will, on average, pay £50,000 back (in practice the total they expect to pay back will be less than the amount put it because of running costs etc.) and since women live on average for 17 years beyond retirement, if a woman puts in £50,000, is it really unreasonable for insurance companies to pay a yearly income which will, on average, pay them back just as much as your average man will get? 

Surely, it is more unfair when, if annuities are equalised, a man will put in £50,000 and only get back, on average, £40,000 whereas a woman will put in £50,000 and get back, on average, £60,000. The system is designed so that if a man and a woman pay the same amount into an annuity, they will both, on average, get the same back so what exactly is wrong with that?

Some people will say that you shouldn't discriminate on the grounds of gender because people can't choose their gender, any more than they can choose their race. To these people I say, in that case, do you honestly believe that someone who is severely mentally handicapped shouldn't be stopped from driving "because it's not their fault that they are handicapped"? Or that we shouldn't stop under 18s drinking alcohol or smoking because "it's not their fault that they are under 18"? After all, most people who are against discrimination don't think age discrimination or discrimination against the disabled should be allowed. But in that case you wouldn't be allowed to have any age limits on anything, because it would be "discrimination". If you honestly believe a 12 year old shouldn't be stopped from drinking or smoking then that's your call, but if you do then hopefully you can see why "discrimination" on the grounds of fact, whether that fact be that 12 year olds, on average, aren't mature enough to be responsible to be allowed to drink alcohol or that women, on average, live longer than men or that the severely mentally handicapped, in general, aren't in a fit mental state to be in control of a vehicle or that men, on average, are involved in more accidents than women, should be allowed because it is simply common sense that if something is true then it should be taken into account, especially when analysing risk which is insurance companies' primary purpose.

In short, stop thinking about "discrimination" and recognise that actually, differentiation on the grounds of proven facts (and the links with regard to driving and lifespan have been shown to be true conclusively for years now) actually benefits society as a whole.

Treating men and women (or any other categories into which you decide to put people) equally does not mean treating them exactly the same, it means treating them both fairly. If it is a comprehensively proven fact that your gender is a significant indicator of your risk then it should be taken into account. Ultimately it should be common sense that the truth shouldn't be ignored just because some people find it unpalatable, because a society or nation that ignores the truth is never going to prosper in the future.

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