TELEMATICS | GenDer DirecTive

BLACk BOx OF TRICkS

daily rating changes based on that. paul stacy, director at wunelli, says: the pricing directors ive spoken to dont want to fill up their quota for young people in January because no one wants to get them wrong. pricing directors are a bit worried about writing a lot of young business too quickly and getting too close to their reinsurance limits. so i think they will go in conservatively, which will mean female rates will go up.

Fairer premiums?

As the EU gender directive looms into view, Kin Ly examines whether telematics could be the answer to fairer premiums for all
iLLusTrATion: CAMERON LAW

the industry, particularly the Abi, has fought against the possibility of a gender rating ban for nearly a decade. however, for some telematics providers, the ban will mean a step closer to what they believe are fairer car insurance premiums. for them, eliminating gender as a metric will mean women with bad driving behaviours no longer being able to hide behind a low premium. Under the current pricing system, women of the same profile (age, location, vehicle type, etc) may be given the same rate by an insurer

but one of the insured may be a better driver than the other. for this reason, gender metrics have been deemed inaccurate by businesses such as tomtom business solutions, which says that by using this measure, consumers are simply getting an average premium. All youre paying is an average and thats an average of the best and the worst its unfair if youre the best because youre paying for the worst, says giles margerison, director at tomtom business solutions, UK and ireland. its not fair for anyone to pay higher insurance premiums than their driving style reflects. what has happened is that bad female drivers are benefiting from women who are good drivers, he adds.

Other metrics

gender is not the only metric that has come

or some time, telematics has been touted as the solution to lower premiums, particularly for women, who will see their car insurance rise significantly next month when the gender directive comes into force. with just weeks until implementation on 21 december, industry efforts previously used to oppose the gender rating ban now turn to recommending telematics technology as a gateway to fairer premiums. however, tom cooper, founding director of insurance intermediary firm igo4, believes telematics could introduce to the market a pseudo gender rating. the concept is that the device produces data that reflects the true driving style of an individual by using road-specific metrics. it will give an indication of the drivers acceleration, braking and cornering, as well as detail of the time of day and type of road they are driving on. the information is then used to assess the drivers risk and inform their premium. some insurers argue this provides evidence to support the view gender ratings should remain where car insurance is concerned. Although there is little possibility of the decision being revoked, telematics is believed

to be an alternative to gender ratings. mr cooper says: i dont think the ban will be legally removed the eU equality Act is there and in writing. but what would be removed is a situation where women are paying the same rate as men. what will happen is that we will get pseudo underwriting and rating by gender. if youve got a black box, it will prove that women are safer drivers than men and so gender rating will return naturally. it wont be as black and white as to say if youre a woman your rate is going to be 20% cheaper than a man. but it will mean we can see that a womans driving style is better than a man of an equivalent age so that 20% differential rate will return automatically, without being overt.

Young women hit hardest

there is no doubt all women will be faced with higher premiums when unisex rates are introduced on 21 december but it is women under the age of 25 that will be hit the hardest, according to research by the Association of british insurers (Abi). last year, it conducted an investigation into the use of gender in insurance pricing and found that female drivers under the age of 25 will experience an average increase of 25% to

their car insurance. the industry argues that gender-neutral rates will create unfair pricing policies that will no longer take into account the risk differences between men and women. for instance, figures from the AA indicate the average claim for an 18-year-old man is about 4,400 but for the female equivalent, the average is 2,700. for an insurance underwriter thats a critical difference so it is going to change the way the insurance industry works and ultimately it means a young womens premium will go up, says graeme trudgill, head of corporate affairs at british insurance brokers Association. potentially, prices could go up by about 30%, the younger you are. however, the market appears to be reacting cautiously about drawing up unisex rates. there is a real worry among some insurers about getting this wrong, says telematics provider wunelli. the firm, which extracts telematics data for underwriters to use, warns there will be some instability in rates for young drivers, predicting that in the first few months of the gender directive, insurers are likely to assess what their competitors are offering and make

under scrutiny. in recent months, age has come into the public eye, with research by Which? magazine bringing to question the efficacy of using it to devise car insurance rates. the magazine found that older drivers disproportionately pay higher premiums than those who are 40 years younger than them. drivers aged 81 to 85 paid 50% to 70% more than those aged between 41 and 45, despite posing less risk than this age group. the prospect of a fixed car insurance premium for all looms over the insurance industry as gender is removed and other metrics such as age are scrutinised. As with the gender rating ban, will the insurance industry face another legal fight against calls to end ratings by age? mr cooper says this could certainly be the case and warns the gender directive is pushing the industry closer to a one-size-fitsall car insurance for drivers: i think its only a matter a time before someone puts in a legal challenge to stop underwriters rating on age. i can foresee a time where everybody will have the same insurance premium regardless of where they live and what they drive. this is when telematics is the only answer.

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