BIBA response to the consultation on ending age discrimination in services and public functions
30th September 2009
The British Insurance Brokers’ Association (BIBA) is the UK’s leading general insurance intermediary organisation. We represent the interests of insurance brokers, intermediaries and their customers and have partner members from the leading insurance companies too.
This puts us in a unique position. As intermediaries, we are the agent of the policyholder but also the agent working for the insurer. That allows us to look at this from a fair perspective to all sides. Our brokers are also on the front line, selling travel insurance from a huge range of insurers, to clients of all ages and medical conditions.
BIBA membership includes 1,700 regulated firms. Insurance brokers and intermediaries distribute nearly two-thirds of all UK general insurance. In 2007, insurance brokers and intermediaries generated £1.5 billion of invisible earnings and they introduce £22 billion of premium income into London’s insurance market each year.
BIBA was part of HM Treasury Financial Service Experts’ Working Group on age discrimination. BIBA has a great deal of respect for the Help The Aged and Age Concern and the excellent work they do. Our own members suffer the same frustrations that they do when clients are turned away without advice or insurance protection and we are also disappointed when premiums more than double on someone’s birthday.
BIBA welcomes the GEO consultation on age discrimination in the provision of services and the exercise of public functions.
BIBA members are able to offer access and availability to fairly priced insurance to consumers of all ages. We do not believe there is a market failure for older or younger people seeking insurance, particularly travel or motor. We believe that a problem in obtaining insurance occurs because consumers do not know where they can obtain appropriate cover.
BIBA completely opposes unfair age discrimination. We believe that a fair system to help consumers, without forcing insurers to cover areas they have never dealt with, can be reached through proportionate risk-based pricing and signposting.
• BIBA opposes unfair age discrimination
• BIBA supports proportionate risk based pricing
• BIBA welcomes signposting
Our responses to the 25 questions set out in the consultation are as follows:
1. What timetable should be set for implementation of the provisions in health and adult social care?
2. What services and practices in health and social care that differentiate on the basis of age in a positive and fair way should be retained?
3. What actions need to be taken to tackle age discrimination within health and social care, and by whom?
4. Which of the following high levels options do you prefer, and why: Option 1 (strict implementation of the ban on age discrimination, with no specific exception), Option 2 (a tailored specific exception allowing age to be used provided that it is proportionate to risk and costs) or Option 3 (a wide specific exception, which would mean that all current practices could continue)? Please state your reasons.
BIBA strongly supports option two.
It is quite clear to BIBA that there is no market failure or systematic overcharging of certain age groups. What we see is the commoditisation of travel insurance. For example, a 71 year old could try three distribution channels when buying a policy: a supermarket brand, a comparison site or even their bank – and find that none of them would provide a quote. However, we do not believe there is market failure. What we see is a supermarket trying to use its brand to make money when insurance is not their core business. We believe that the services of an insurance professional – an insurance broker/ intermediary – for advice and access to a wide choice of markets is invaluable.
Banks usually sell their own brand product but with one product only they are unlikely to cover all comers and often are unable to help when it comes to the older traveller. Whereas insurance brokers often use a panel of insurers to choose from. Therefore the consumer has greater choice via the intermediary sector.
Travel insurance is a complex product and the traveller needs to obtain the right advice and suitable cover for their trip. Insurance is a broker’s core business and they help tens of thousands of people arrange cover every day, with a range of different requirements, including older travellers.
Our member insurance brokers are able to offer access and availability to fairly priced insurance to consumers of all ages. We do not believe there is a market failure for older or younger people seeking insurance.
BIBA is concerned that many people buy their insurance from the internet or over the telephone and it is often here where insurers refuse cover. The result is that the customer feels let down and left without insurance protection. However, as established by Oxera there is no market failure. Cover is readily available from insurance brokers for people of all ages, but consumers need guidance, through signposting, to direct them to the most appropriate cover available, and ensure they are not put at unnecessarily risk.
BIBA describes “signposting” as ‘A way of helping consumers who were turned down at the point-of-sale (telephone, internet, face to face,) by a financial services provider on the basis of their age. Consumers would be ‘signposted’ by the declining company to an independent source of information about providers that did offer the relevant product.’
BIBA welcomes any signposting solution and can help support it by way of our standard national rate consumer helpline 0870 950 1790 (free as part of a BT free call package). This is available for any consumer with a query on how to access relevant insurance cover. This service is already in place and currently receives around 50,000 calls per year. Our website receives 200,000 hits per year in the find a broker section. www.biba.org.uk
BIBA outlined to the Treasury and also to Oxera, on behalf of the Government Equalities Office, and to the standing committee of the Equality Bill, that its members are able to offer access and availability to fairly priced insurance to consumers of all ages and that insurers should signpost such consumers to BIBA’s consumer helpline which can find a suitable broker to provide cover.
BIBA is also aware with age comes medical problems and all BIBA members have a medical screening that facility at their disposal to aid placement of cover to those who are deemed fit to travel.
Option 1 goes too far and there would be significant unintended consequences with insurers potentially withdrawing from the market as they have little or no understanding of these new risks. Option 3 would be insufficient as customers need guidance in finding cover through signposting systems and as Michael Foster MP said on 4th September 2009 at the London GEO Roadshow on Equality, “it is not reasonable for consumers to have to shop around extensively.”
We are also very pleased to see that the Government Equalities Office has stated that option two is their preferred choice.
Option two means no significant extra cost to the consumer, use of an existing successful low cost signposting system and most importantly of all, an easy, fairer, helpful solution for travellers. So common sense should prevail.
BIBA’s own vision of legislation is one that ensures fairness and signposting to help people, but does not force insurers to cover areas they have never dealt in and do not understand and do not have the data to risk base pricing – particularly when there is no market failure. It is worth remembering that BIBA members can arrange cover for the vast majority of risks irrespective of age, gender and disability.
5. Do you believe that the following is an adequate description of what might be acceptable evidence: “acceptable evidence should be about a risk identified by actuarial, statistical, medical or other information relating to the person’s age. It should include public or private empirical, actuarial, statistical, qualitative research or other material or data, and evidence of costs, including but not limited to administrative or operating costs. It could be from UK or international sources, based on industry-wide data, firm specific data or the experience of another firm, provided that it was relevant, accurate and from a source upon which it was reasonable to rely”. Please state your reasons and if there are other factors that should be included or whether some elements should be removed.
6. Do you think that age based pricing should not require strict mathematical proportionality?
We agree. Flexibility should remain as this helps with cross–subsidisation, which affects all age groups.
7. To what extent do you think that commercial considerations should be allowed to be taken into account in financial services provision and which factors should be permitted?
BIBA believes it is extremely important to allow commercial considerations to be taken into account. Targeted insurance products help people of differing ages. All considerations mentioned here should be allowed to continue, particularly advertising and age bands.
8. Do you think restrictions should be placed on the use of age bands within financial services provision? If so, please state your reasons, with examples where relevant.
Age bands should not be restricted by legislation. Age bands keep underwriting costs low which means savings for the customer. Older people with travel insurance age bands also benefit from cross subsidy. Premiums charged should be proportional throughout so insurers must be mindful of this when using bands.
9. What are your views on the advantages and disadvantages of narrowing age bands? What size should the age bands be (e.g. 1 year, 2 years, 3 years, 4 years, 5 years)? Where risks are broadly similar, is a wider age band reasonable? How could firms justify a particular banding structure?
We are supportive of age bands but not the large increments between some bands. We would like to see a smoother graded approach between bands. This should prevent doubling of premiums between some bands. Ultimately insurers should be allowed to set their own bands according to their own data.
10. Do you think that firms should be able to continue to set minimum and maximum age limits for products – quoting only to people within those age limits?
Please state your reasons why with examples where relevant.
Insurers should be free to accept or reject the risks they want and have knowledge and expertise to deliver but consumers must not be rejected without any idea as to where to find important insurance cover. Therefore the proposed signposting system is an ideal solution.
11. Should age-related special offers, such as age-related saver accounts and marketing still be permitted? Please state the reasons for your answer.
Yes as these have helpful benefits for the target audience.
12. Do you think signposting and/or referrals would be helpful for customers looking for various financial services? Which do you prefer? How do you think such a system could best be set up?
Signposting is by far the best solution. It would be extremely helpful for customers looking for financial services. Part of our response to Q4 is relevant here. BIBA is concerned that many people buy their insurance from the internet over the telephone, and it is often here where insurers refuse cover. The result is that the customer feels let down and left without insurance protection. However, there is no market failure. Cover is readily available from insurance brokers for people of all ages, but consumers need guidance, through signposting, to direct them to the most appropriate cover and ensure they are not put at risk.
BIBA welcomes any signposting solution and can help support it by way of our local rate consumer helpline 0870 950 1790 (free as part of a BT free call package). This is available for any consumer with a query on how to access relevant insurance cover and has no restrictions. This service is already in place and currently receives around 50,000 calls per year. Our website receives 200,000 hits per year in the find a broker section). www.biba.org.uk
BIBA set up from scratch a professional signposting service at very competitive commercial rates and strongly believe this should form part of this solution. We already help 250,000 people a year find cover via this service.
We see the signposting system as more beneficial to customers than a referral service.
We signpost to a range of companies who give good, clear and unbiased advice whereas a referral service could be more restrictive as well as more dependent upon financial reward for the referrer which would ultimately affect the cost for the consumers.
13. Do you think a requirement to publish data at industry level would serve a useful purpose for consumers and/or the financial services industry? Please state your reasons. If yes, what sort of data would you like to see published?
There could be benefits for the publishing of general data. This may encourage new players to enter the market, this giving even greater choice to the consumer. But it is also possible the figures could be misleading in many cases.
There would also be a significant cost to compile and manage this data so we believe the negatives outweigh the positives.
14. Do you think that there is a better or alternative method of achieving greater transparency, to increase confidence that age is being used appropriately within financial services?
Natural competition will see that the most competitive rates are made available. Insurance brokers deal with a choice of insurers and will be able to select the best deal for the client. Internet sales and comparison site sales must be made to comply with FSA rules on clarity of cover and we support the new OFT study into advertising and pricing. This should resolve many of the current issues.
15. Do you agree that age-based concessions and benefits should be allowed to continue; are there any particular concessions or benefits which you believe should or should not be allowed to continue? Please state your reasons, with examples where relevant.
Yes, these benefits should be allowed to continue.
16. Do you agree with the proposed exception to allow age targeted group holidays to continue? Please state your reasons, with examples where relevant.
17. Do you agree with the proposal not to provide a specific exception allowing age limits on holiday accommodation? Please state your reasons, with examples where relevant.
18. Do you agree that there should not be a specific exception allowing upper and lower age limits on the rental of vehicles? Please state your reasons, with examples where relevant.
Rental firms should be encouraged to contact a broker and arrange a wider policy.
19. Do you agree that vehicle hire companies should be able to vary their prices by age to reflect age-based insurance premiums? If so, do you consider that there should be a specific exception to this effect?
Insurers should use proportionate risk-based pricing for these risks.
20. Are you aware of any further age-based differences in treatment which would be prohibited under the legislation prohibiting age discrimination which you consider should be allowed to continue? Should these be protected by a specific exception and if so why?
21. Do you believe that there is a good case for a specific exception for an area which is not covered in this consultation document? Please state your reasons, with examples where relevant.
22. Do you have data on costs and benefits which has not already been included in the provisional impact assessment? Where possible please give details of the sector concerned; monetary costs/benefits; non-monetary costs/benefits (eg restriction/widening of consumer choice); useful research/databases etc.
23. What are your views on the proposed timetable for implementation of the ban on age discrimination in services and public functions?
The GEO should be mindful of the progress of the Equal Treatment Directive in Europe.
24. Do you have any other points or issues you wish to raise relating to age discrimination in the provision of goods, facilities, services and public functions?
25. Do you have any suggestions (for example regarding size, format, content, dissemination) to help ensure that guidance is sensible, proportionate and effective in helping public bodies and service providers deliver fair outcomes to consumers and the public?
GEO should work with bodies like BIBA who offer guidance to consumers and are a not for profit organisation. We can assist in designing this guidance to ensure the best outcome for consumers and the public.
BIBA believes our approach takes account of the GEO principles and ensures:
• It is proportionate
• It is clear and transparent
• Our response is practical and realistic
BIBA would like to meet with Michael Foster MP Parliamentary Secretary to the Government Equalities Office to discuss the issues raised in our response.
Thank you for taking the time to consider our response. If you have any further queries please contact Graeme Trudgill, BIBA’s Technical and Corporate Affairs Executive for further information on 02073970218 or on [email protected] or Peter Staddon, Head of Technical Services on 0207 397 0204 or [email protected]
Direct Tel: 020 7397 0201
Direct Fax: 020 7626 9676
Email: [email protected]