Discrimination under attack
Whether you read that headline as a good thing or a bad thing may have something to do with how old you are.
Wednesday, December 22nd 2010, 3:33PM
by Russell Hutchinson
My experience is that above a certain age the idea of being ‘discriminating' is usually seen as a positive thing, like being selective about your clothes. But a greater proportion of younger people tend to read it with a negative connotation - their next thought might be that the discrimination being talked about is racism or sexism.
So when you hear that health insurers in California are being pursued by politicians who want to ban discrimination on the basis of gender you have a look a little closer at the issue. Those politicians want to garner votes from what might appear to be a popular measure. I am delighted that today most people don't question the idea of equality between men and women in the workforce, for example. But this industry relies on experience rating, and you don't need to be a doctor to know that men and women are different. Insurers know something more - that claims experience differs too.
Public relations conscious insurers ensure that for the politically correct, for every mention of cervical cancer there is a mention of prostate cancer - but there isn't in fact equivalency in claims. Simply put, women get sick more often. I am sure all our readers know that their health cover should be more expensive and their income protection, but their life cover is cheaper.
What is valid is the right of regulators to ensure that pricing complexity for the variety of experience rating categories is not used to exploit groups, especially in complex, low involvement products, where consumers find it hard to understand pricing anyway. But I would be astonished if, in a market as diverse as California's, or New Zealand's for that matter, a few phone calls would not quickly give you enough comparative prices to know whether or not you are being taken for a ride.
The downside of banning this kind of discrimination isn't, surprisingly, obvious to everyone else: that the product is made more expensive most people can figure out. But they don't see how that tends to mean that more lower risk lives will make the choice to self-insure. That in turn makes the remaining pool sicker. That in turn means you have to charge everyone more. More of the healthy lives leave... and so on.
You have a role to play in stopping this. By explaining the value of experience rating to your clients, you can help keep this kind of folly out of the market. For the good of everyone who values insurance, I hope your message gets through.
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