First published in ITIJ 103, August 2009
With the introduction of the Equality Bill poised to bring age into line with race and sexual discrimination, Michelle Mitchell explores whether life really does get better with age
Insurance is an absolutely vital service – all consumers need to be able to manage their personal risk effectively. Driving without appropriate motor insurance is unlawful and few people would choose to travel abroad without making suitable travel insurance arrangements. However, as the number of older people continues to rise, many of them are finding that the current insurance market does not come close to successfully meeting their needs.
This year the number of people aged over 65 in the UK will rise above 10 million for the first time. Over the next two decades, this figure is expected to increase to over 15 million, while the number of people aged over 85 is expected to double.  This welcome increase in people living longer is complimented by better health and fitness well into older age, challenging traditional stereotypes of the older traveller – our ageing society is moving towards celebrating longer life.
However, this is not universal. Many older people are struggling to enjoy the freedoms they crave as a result of barriers which prevent them from enjoying their later years as they would hope to.
The older perspective
Research, commissioned by Age Concern and Help the Aged, found that one in ten people over the age of 75 actually decided against taking a holiday or trip because of problems securing travel insurance. A separate survey by Saga found that 25 per cent of people over the age of 65 had been turned down for insurance purely on the grounds of their age. Of this group, seven per cent had been unable to find any travel insurance at all. While this may sound like a small percentage, in numerical terms, it equates to a significant portion of the population of potential insurance purchasers.
"An ageing society can no longer struggle on treating the bulk of older people as 'risks' or 'burdens' that require special pricing"
Age thresholds, such as those set at 65 or 75, often lead to unreasonable and disproportionate increases in premiums which do not appear to reflect a sudden increase in risk. Older people find these arbitrary lines – which seem completely divorced from their personal situation – extremely unfair.
This is an issue that older people, quite rightly, feel very strongly about. Age Concern and Help the Aged often receive comments from older people about their experiences trying to get insurance:
“They refused me a quotation because of my age and made me feel a freak.”
“We used to get family travel insurance cover for £50, then as soon as my husband turned 65, it went up to £130. From one day to the other. He’s no less fit!”
Other stories the charity uncovered include a 70-year-old man who wanted to hire a car and was told that, due to this age, he would have to agree to pay the first £500 of any claim – even including theft. In another case someone found that that their travel insurance premium went up from £175 to £831, simply because they were over 75 – even though there had been no change in any medical conditions from the previous year. Another gentleman told us that:
“The insurance ended up being more expensive than the holiday itself. For me, being without insurance would mean not seeing my son.”
Legislation against discrimination
Clearly there is an injustice here which needs to be tackled. An ageing society can no longer struggle on treating the bulk of older people as “risks” or “burdens” that require special pricing. Thankfully, the Government has recognised this fact - the Equality Bill, which is currently before Parliament, is an important and positive signal to society as a whole that we need to rethink our outdated attitudes to age. The proposed legislation introduces welcome legal protection against age discrimination in goods, facilities and services for the first time, bringing age into line with other protected areas, such as race and sexual orientation.
Uniquely, the Bill does allow for age discrimination to be justified if it is a proportionate means of achieving a legitimate aim; for the other protected areas this justification is only available in cases of indirect discrimination. In addition to this ‘objective justification’ defence, the Bill goes further, by giving the Government powers to provide a tailored exemption, allowing the insurance industry to continue to use age as a factor as part of a risk-based assessment.
Calls for action against age discrimination are not just coming from within the UK. Countries across Europe will need to consider how they can eradicate harmful age discrimination, as a new European law will extend the current protections in place against age discrimination. In 2008, the Commission of the European Union brought forward proposals for a new Directive that would outlaw age discrimination outside of the workplace, but includes a specific measure recognising the needs of financial services industries:
[I]n the provision of financial services Member States may permit proportionate differences in treatment where, for the product in question, the use of age or disability is a key factor in the assessment of risk based on relevant and accurate actuarial or statistical data.
Earlier this year, the European Parliament gave its support to the Draft Directive, although the precise wording will now be a matter for the Council of Ministers.
The financial services and insurance industry is understandably concerned about practical implementation difficulties around the European Commission’s draft directive on equal treatment. However, the UK Equality Bill has been drafted with the potential EU directive in mind. Having effective legislation already in place will significantly strengthen the UK’s negotiating position in Europe and ensure that the UK can influence the final wording of this important Directive.
In terms of the debate which is now ongoing, Age Concern and Help the Aged fully accept that the insurance industry should be permitted to carry on age-based pricing, where this is objectively justified. However, anything further, such as permitting providers to refuse to quote for certain age groups, would undermine the Equality Bill, since this is precisely the form of financial discrimination older people care most about. The evidence does not suggest that it is even necessary.
While it is the case that certain small segments of the older population do present an unacceptably high risk to insurers, this will be because of their health or their claims history, not because of their age alone. Recent research by the independent agency CRA International, commissioned by the Association of British Insurers (ABI), showed that outlawing age limits and bringing in an ‘objective justification’ defence would not actually be expensive, costing only £2.4 million a year for the motor insurance industry, and £11.1 million for travel insurance providers. These costs are considerably less than the £482 million estimated by the industry in 2008, and would be outweighed by benefits to consumers of £6.4 million for motor insurance and £14.2 million for travel insurance. 
"The insurance industry ended up being more expensive than the holiday itself. For me, being without insurance would mean not seeing my son"
To pick out just one area of concern to the insurance industry – the so-called ‘teenage Ferrari driver’ – the CRA research found that only one provider in their survey did actually refuse to cover young drivers. Most used a pricing-based model to control underwriting risk. While the UK Bill would require pricing to be based on acceptable evidence, the industry’s concern that the Equality Bill would require unachievable levels of evidence is unfounded: we would accept that evidence should be defined relatively widely, as long as it is derived from hard data or a bona fide professional opinion. This would include predictive data, such as projected mortality trends.
Currently, the ABI and others have proposed a system of signposting or referring older customers to companies that are prepared to deal with them. This is superficially attractive and has been considered carefully, but it soon becomes clear this it is not the way forward. Effectively all older people’s business would end up with a few underwriters, while other companies would be free to carry on ‘cherry-picking’ business. This would damage competition and prices for older consumers could well rise as a result. For example, CRA’s research found that referral would be the highest-cost option for motor insurance if all insurers were obliged to offer it. CRA’s costings for signposting also did not include the cost of constructing the signposting system itself, and it was not clear how this would work.
Throughout all of this, it is important to remember that ageing is not a disease. So, while people living with cancer may well benefit from signposting systems set up through cancer charities, it simply would not be appropriate to treat older people in the same way. We all age, and companies who recognise this fact and start to look at older consumers as an opportunity rather than a threat may well be the ones to benefit. The business benefits of accepting the tide of change are compelling.
Instead of resisting change, insurers and the financial services industry should seize the moment and embrace the new opportunities that an ageing population presents. The number of older people who need their products and who wish to buy insurance is actually increasing rapidly. Too many of these potential customers are finding themselves priced out of the market or excluded completely, simply because of a number on their birth certificate. The impact this has on the consumers’ views of the companies concerned cannot be over-stated. Why would an older person return to an insurer who refused their requests for travel insurance simply because they have reached a different birthday? It is a PR disaster which aggrieves so many people and is so manifestly unfair.
"Throughout all of this, it is important to remember that ageing is not a disease"
As such, the time is now right for legislation and the momentum both in the UK and across Europe is pushing change forwards. Instead of characterising this new legislation as a burden, insurers should start to recognise it for the springboard for profitability that it really is. Those insurers who embrace the new legislation first will be those who most benefit from a largely unexploited but growing market.
 Government Actuary Department current estimates based on 2006-based population estimates for the UK, Office for National Statistics, 2008
 Insurance and Age: exploring behaviour, attitudes and discrimination, Age Concern and Help the Aged, March 2007
 Age discrimination in financial services: final report of the experts’ working group, HM Treasury, October 2008
 Insurance and age-based differentiation, ABI research paper no 12, 2009
 Age discrimination in financial services: final report of the Experts' Working Group, HM Treasury, October 2008