Consumers could end up paying more for insurance if Australia goes down the European path and limits insurers’ abilities to rate risk on factors such as gender.
Curbs on insurers’ ability to discriminate on the basis of risk, as had occurred recently in Europe, could mean safe drivers, or those living in non-flood prone areas, end up paying more for insurance.
IAG chief executive of direct insurance Andy Cornish said insurers set premiums after taking into account as many different factors as possible.
“It is clear that we are getting more individual in the way in which we price to our consumers,” Mr Cornish told delegates at an Insurance Council of Australia conference in Sydney on Tuesday.
“The ability for an insurer to discriminate based on an individual specific circumstances and characteristics is integral to the assessment of risk and our ability to accurately price it.”
Mr Cornish noted a European Court of Justice decision in March 2011 that made it illegal for insurers to consider gender when setting premiums.
As a result, comprehensive car insurance for a first time female driver rocketed up 104 per cent, while they fell 27 per cent for men, he said.
“What we are seeing, and perhaps what could occur in Australia, is that the less risky gender is now subsidising the riskier gender,” Mr Cornish said.
“We should all carefully consider the situation unfolding in Europe and its implications for fair discrimination in insurance.”
Mr Cornish said that although the federal government’s draft legislation for bringing together all anti-discrimination laws retained an existing exemption for insurers, it was not an unconditional exemption.
He said consumers were demanding more transparency in how their insurance premiums were priced and objected to cross-subsidisation, citing the Black Saturday bushfires in Victoria as an example.
“We know from the dreadful tragedy of Black Saturday that there was a lot of uninsured people living in the bush in Victoria,” Mr Cornish said.
“There was a huge amount of outcry at those that were uninsured and had enormous sums paid to them.”
