Age Groups, Accidents and Insurance
Article published on 9th June 2008
An article in the Guardian recently ("It's not about ageism: our policies are based on risk") raised some interesting questions about the nature of 'ageism' in the insurance sector.
Is it really a form of unfair discrimination to either deny certain sorts of insurance to elderly people, or else grant them such a policy but with a much higher premium than for a younger person? Well this clearly depends upon a cocktail of factors including the type of insurance being sought, the age of the person seeking it and the risks that face that person.
If insurance companies are about weighing risks, then of course an elderly person will pay more through premiums for life insurance (as an example) than people in their twenties, because the elderly person has a shorter life expectancy. If they don't, then their families would have to expect a far smaller payout when the policy holder expires. If this wasn't the case then the family of the deceased person who purchased a life insurance policy in his eighties would be taking money from the families of deceased people who had been paying premiums for many decades longer. This clearly wouldn't be fair and the company that offered such a deal would be unlikely to attract anyone except very elderly customers, so the books would not balance out.
The Guardian article points out that much the same can be said for higher premiums for a young person's car insurance, because as far as any statistical research has shown, younger people are more likely to be involved in car accidents than older people.
Similarly, would it be fair to all customers if an insurance company gave the same type and priced critical illness insurance to someone who is at an obvious and demonstrably high risk of developing such an illness as to someone in perfect health who is taking out the insurance 'just in case'?
I would think probably not, although oversight and a chance to contest an insurance company's policies with an independent watchdog must always be a given.
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