Insurance – a licence to discriminate

3rd March 2000

Ireland has signed up to all sorts of human rights treaties over the past 50 years or so. Most of these treaties oblige us to respect the rights of individual citizens. Our own constitution says that all citizens will be treated equally.

None of these treaties apply to insurance legislation, apparantly, for here is the last great bastion of prejudice and favouritism.

A young colleague working here at The People has been quoted some £2,500 for his first year’s insurance. I am currently paying around £400.

The point I want to make in this column is that this state of affairs is outright discrimination, which has little to do with risk assessment and everything to do with screwing young people for all that can be wrung out of them.

Let’s take three imaginary blokes called Larry, Harry and Barry.

Larry and Harry are 21 and Barry is 51. Larry is a tearaway who tries to get the ton out of the car on every straight and finds hand brake turns on corkscrew corners particularly invigorating.

Harry is a member of the local ornithologist’s club and hasn’t yet found a use for fifth gear.

Harry lives in Letterkenny, Larry lives in Tuam and Barry lives in Bantry.

One night Larry writes off his own car and two others in a mad overtaking manouver. Counting the broken arms and the neck-braces, the total cost of the accident is £100,000. Larry’s third-party covers the damage.

But who pays the bill? Harry and Barry were both at home in bed at the time of the accident in their respective ends of the country.

The bill is paid through insurance premiums, of course, and while Harry pays £2,000 – Barry pays just £300. The justification for this is that Harry is the same age as Larry.

How is this argument sustainable? How could Harry have prevented the accident? How can he influence the behaviour of someone 100 miles away simply because he happens to be the same age?

The justification for this is apparently the risk factor. Evidence shows that young people are more likely to have accidents. While this is undeniable it doesn’t explain why young people should pay for the accidents of other young people.

Young people are paying for other young drivers’ accidents after the event. Therefore there is little element of risk. Let me explain using our original trio.

Let’s suppose that Larry, Harry and Barry are the only three drivers in Ireland. Each year the total insurance payout for car accidents is £1,000. Evidence shows that, on the basis of age, Harry and Larry are twice as likely to have an accident as Barry.

Therefore on a risk basis the premiums should be Larry £400, Harry £400 and Barry £200. I have no problem with these differentials.

Now Larry has an accident so the whole £1,000 has to be paid out. He forfeits his £400 which has been based on risk. But so does Harry while Barry gets off with paying half as much.

The point is that higher risk payments are justified for younger people but they should be entitled to their money back if they don’t have an accident. The liability for accidents should be spread equally among all other motorists.

I would love to see this issue put before the Supreme Court to test its constitutionality. I would like to hear the Supreme Court explain why one citizen of this Republic should be more liable for an accident than another citizen based simply on age.

Young people should ponder why ‘community rating’ is applied to health insurance and not to car insurance. Perhaps it’s a risk thing.