January 30, 2013 / 4:51 PM / 5 years ago

TEXT - Fitch says occupation not a proxy for gender in UK motor insurance

Jan 30 - The AA British Insurance Premium Index released today suggests
insurers are putting more weight on factors other than gender, including
occupation, now that they are prohibited from using gender as one of the factors
to determine the price of premiums. An individual's occupation provides an
insurer with insight into the likely driving habits, lifestyle and hence
potential risk of a prospective policyholder. This makes it a valid and valuable
factor for motor underwriters, Fitch Ratings says. 

Insurers have historically used occupation as part of the underwriting process. 
A 2011 pre-EU Gender Ruling survey conducted by Confused.com suggests that 
occupation was not used as a proxy for gender in the past. The survey listed 
pilots of harbour ships being quoted lower premiums than state-enrolled nurses, 
even though traditionally ship piloting has been a male dominated industry while
nursing has been a female dominated industry. 

The same survey listed mobile disco owners as paying the highest insurance 
premiums. These individuals are most likely to be driving late at night or early
in the morning, the period that is statistically proven to have the highest 
proportion of fatal accidents. 

The recent AA survey showed the premiums for young (17-22 years old) male 
drivers were roughly static while premiums for young women increased by about 
12%, a result we would have expected from the gender ruling. In general, 
premiums for men of all age groups fell, while premiums for women under 30 
increased. The recent general fall in premiums for the market as a whole is more
related to long-run pricing trends within the UK personal motor market than the 
gender ruling.

Over a longer period, the AA survey indicates that premiums for the 17-22 age 
group have roughly doubled since January 2010, with substantial increases 
affecting all age categories over the same period. During this time, insurers 
have raised prices to restore underwriting profitability, in response to a steep
rise in claims costs from fraudulent and bodily injury claims, which the 
industry continues to seek to control more tightly. 

Occupation though has several shortfalls as a rating factor and therefore needs 
to be supplemented with other factors, such as postcode, age and driving 
experience. Postcode is a good indicator of the likelihood of vehicle crime and 
accident rates, given that a high proportion of accidents happen within five 
miles of the person's home. 

The best predictor of an individual's likelihood of claiming remains their 
personal driving history. The length of time since a claim or accident is likely
to remain the best way of judging a person's driving history, until black boxes 
for cars become cheaper and more ubiquitous. Black boxes can be wired in to a 
car to provide data on speed, braking and driving style to the insurer.

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