Sat | May 27, 2017

Are single-mothers more accident-prone than married drivers?

Published:Sunday | June 7, 2015 | 6:00 AM
Portrait of a businesswoman showing a car key Photosindia.com

QUESTION:

I am insured with ... for the longest while now. When I went to renew my car insurance in 2014, I was asked to pay more even though its value had gone below $1.5 million. The explanations that I was given for the increase did not make sense. I expected that the premium would be lower as the car got older and the value declined. One reason they gave stood out. I would have to pay more premium because I am a single mother. I am more likely to cause an accident because I take less care on the road than a married man. He would take more care while driving for the sake of his family than I would. When I queried the argument, I was told that it was decreed by the "insurance gods". Is this not a case of blatant discrimination against single mothers? Can you please enlighten me? I am sure that men married and single are the leading cause of motor vehicle accidents and fatalities around the world. I have now received a new renewal notice which shows an increase of $6,000.

- P.S., Kingston

INSURANCE HELPLINE:

Few persons are bold enough to challenge the decisions of insurance providers and go elsewhere for coverage. Fewer still have the courage to question the judgements of insurance deities! I like your style.

Since you sent me the name of your insurers I sought their comments on the issues that you wrote about in the interest of fairness. I asked them to answer the following questions: "Would you, as a woman, and a senior executive of ... please confirm:

(a) Whether the assertion that was made by this customer is correct?

(b) What statistical evidence does the company have to support the claim that single mothers who drive in Jamaica are involved in more accidents than married men and married women and who are more likely to act in compliance with the traffic regulations 'for the sake of their families' than single mothers?

(c) If the assertion is true, that is, your company discriminates against single mothers, when was this policy measure implemented? and

(d) If the assertion is true and the company actively discriminates against single mothers, isn't that action inconsistent with Section (3)(i) of The Charter of Fundamental Rights and Freedoms (Constitutional Amendment) Act, 2011?"

The reply was quick and professional. Much to my surprise, the response did not address the issues that I raised point-by-point. It said: "Thank you for bringing this matter to our attention. Our response will be of a general nature since we have not been provided with the particulars of the specific customer. (The reader asked Insurance Helpline to conceal her identity).

"In 2013, the company rolled out a new methodology for calculating motor insurance premiums. It is a statistically based, objective methodology that looks at the claims experience over many years of the company's historical data and uses this data to predict the likely cost of a claim for each customer and motor vehicle profile that is presented to us.

"Various attributes (e.g. age, marital status, colour of motor vehicle, parish, claims experience, among others) are captured by this mechanism to derive a technical price for a group of risks of a similar profile.

"This is the same way in which first-world countries derive insurance premiums and we are the first general insurance company in Jamaica to do this."

[Helpline's comment: The technique described is called predictive analytics. According to www.predictiveanalyticsworld.com - 'predictive analytics is business intelligence technology that produces a predictive score for each customer or other organisational element. Assigning these predictive scores is the job of a predictive model which has, in turn, been trained over ... data, learning from the experience of the organisation'.]

"While we cannot comment on the conversation that our insured may have had with our representative, we can state categorically that we (do) not engage in discriminatory practices. It is possible that the way in which our 'new' premium model works was misunderstood by our insured who seems to have left with the impression that she was being discriminated against because of her personal profile. We are sorry if the wrong impression was given to her and we will be more than happy to speak with her on the matter. Please feel free to call me or pass my number on to her."

Marital status and gender - the latter was not listed among the points the company cited - are among the 'attributes' captured to derive the premium. However, the company provided no information about whether the weighting factors that were applied to each attribute were the same or varied by attribute.

You, P.S., have rejected the company's explanation. The company discriminates against single mothers. You say this is "because the ratio of married women in Jamaica is low as compared to first-world countries".

Insurance rate making is very complicated. The information below provides additional ways to look at the problem that you are facing:

1. The World Health Organisation says that "from a young age, males are more likely to be involved in road traffic crashes than females. More than three-quarters (77%) of all road traffic deaths worldwide occur among men. Among young drivers, young males under the age of 25 years are almost three times as likely to be killed in a car crash as young females."

2. Peter Levy, vice-president of the Insurance Association of Jamaica, reported in April this year that even though local motor insurers had reported four consecutive years of underwriting profit, "it was not nearly enough to make up for the earlier losses - over 10 years the net loss is an inflation-adjusted $7.5 billion".

3. Insurance rates are generally subject to some form of state regulation in the United States. In Jamaica, the rate-making process is shrouded in great secrecy. Companies are free to charge what they deem is appropriate.

You are not tied to your existing insurers. Migrate to another company if it makes sense.

n Cedric E. Stephens provides independent information and advice about the management of risks and insurance. For free information or counsel, write to: aegis@flowja.com.