Equality and Fairness are not the same thing

If you listen to a lot of media chattering in Ireland you would think that Equality and Fairness mean the same thing. The two words are used interchangeably by occupants of that very crowded space they call the High Moral Ground.

But in fact the words have very different meanings. This is about to be demonstrated forcibly to Irish motorists, especially women, when the rules for insurance change in December of this year.

Last March the European Court of Justice ruled that Insurance companies will no longer be allowed to use gender when assessing risk for motor insurance because it is a form of discrimination. Even though everybody knows that it makes perfect sense to do so, insurers will effectively have one eye poked out and will not be able to price accurately.

In other words, forget about fairness and make sure that you charge equally. This is a really bad day for Mna na h-Eireann. It will mean much higher prices for insurance, especially for younger women.

Up until now Insurance companies have been allowed to discriminate on the basis of gender in setting prices for motor insurance provided that they can back up their choices with proof that they make a material difference.

The rules are not like this in every sector. For example, for health insurance Ireland has made a collective social decision that insurers cannot discriminate on the basis of age. If they were to do so, young people could have health insurance for next to nothing while the elderly would not get it all. To prevent this we have ‘community rating’, and the young subsidise the old.

To me that is reasonable because the alternative is no health insurance at all for large parts of the population. Motor insurance is different, not least because it is compulsory.

When the new rules come into force in December the first thing that we would expect is that prices will rise for everyone, right across the board. This is because underwriters will need time to develop different risk assessment criteria and in the interim they will have to protect themselves against losses, which they will inevitably do by charging higher premiums.

In the longer term, applying this rule would mean winners and losers. The biggest losers would be those who are currently the safest drivers, ie women.

For young women especially, forcing insurers to ignore gender would mean they would all end up paying more for their insurance than could be justified by their real rate of risk. This hardly seems a positive step.

It is often said that women are better drivers than men. This is not quite as true as it appears. They are certainly less risky overall but in fact when both genders reach middle years the gap between them all but disappears. Women tend to be a little cheaper than men to insure but this is more to do with the fact that men tend to do higher mileages.

The real distinction is between young men, aged under 25, and everybody else on the road. Young males are by far the riskiest category because they are far more likely to have a serious accident than any other sector. Allowing insurers to use these undisputed facts in has never been considered unfair discrimination in Ireland.

The ‘winners’ would be the drivers who are currently highest risk. In effect young women would be compelled to subsidise young men. This is an important road safety point as well; safe driving is rewarded with lower premiums and that clearly incentivises young men especially to drive more carefully.

In summary, if this measure comes to pass we would expect an initial price rise for all motorists, followed by an ongoing situation where young women are substantially overcharged in order to subsidise the under-charging of young men.

You can call that either equality or fairness, but you cannot call it both.

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