Big Brother

[Linas.P]

5 hours ago, Bluemarlin said:

Of course insurance is discriminative, that's the point. The higher your risk profile, the higher your premium. It works exactly like tax, as the more you earn, the more you pay. It's both unfair and inaccurate to compare the two by imagining tax as an age based charge though, as tax is income based, whilst insurance is risk based so, whilst both have incremental charging, the basis for it is different.

Aggregating it wouldn't be fair either, as the 50 year old driver, who's had no accidents or convictions, and drives a Focus one day a week, would be charged the same as a 17 year old, with speeding convictions, drink driving bans, and multiple crashes, driving a souped up hot hatch. Risk based insurance encourages and rewards good behaviour, whereas a flat rate rewards recklessness. How is that either fair, or sensible?

Besides, insurance is to some extent aggregated anyway, as you don't pay what you cost. Some pay more than they claim, and others pay less. It's just fine tuned by profiling risk, to put more of the burden on those more likely to present more of a risk. As such your calculation loses any value by not looking at the total amount claimed, and seeing what proportion of that is due to the higher risk drivers, who pay the highest premiums. If the numbers are weighted in that direction, then it would show the risk calculations to be accurate, and thus a more fair distribution of the cost.

A comparison to health insurance is unreasonable too, as public health is pretty much a basic human right in any civilised country, and driving a car, where you can reduce your risk profile by how and what you drive, is a choice. Where would you draw the line? Gas and electricity are expensive, and they're even more necessary than a car, so should we all just pay a flat rate for that? What about petrol, that's effectively compulsory too?

I do however agree that insurance in the UK is too high. Whether that's a reflection of costs, or blatant profiteering, I don't know, but agree that prices should be better investigated and regulated, especially given that it's compulsory. I also agree that there should be a greater differential between third party and fully comprehensive insurance.

Ultimately though, insurance is a gamble, with insurance companies betting that you won't crash, and you betting that you will. As  such, the odds, and therefore the price, are risk based. So, whilst I agree that there should be changes, I feel that preventing better data collection, and more accurate assessment of individual risk, would make things less, rather than more fair.

I have no idea who's right though Linas, we just have different opinions.

First thing - I don't know who is right either, we just discussing, have opinions, examples and arguments - as long as it is civilised discussion I think everyone benefits!

I think comparing insurance with tax is very correct - both are mandatory "deductions". Yes you pay more tax because you earn more, but you are not  paying more tax because somebody of your age, gender or colour makes £200k a year? Whereas for car insurance you pay more even if you personally have not done anything wrong, you are just considered more risky because some 18 years idiot crashed and killed 3 of his friends when drunk. If the taxes would work like insurance then it would be something like that - "a 25 years old male is EXPECTED to earn £35,000 and pay 20% tax, which is £7000 - therefore EVERY 25 years old male have to pay £7000 tax per year regardless how much they ACTUALLY earn".

I said it would be "fair" or maybe "fairer" if we just divide the costs across the society, I never said it would be "perfect". And yes - I do believe that charging 50 years old perfect driver £86 and at the same time charring 17 years old in "souped-up hot hatch" the same £86 would be "fairer", than charging one £500 and another £15000. I don't believe you have not described any risk factor here - age should not be risk factor, only experience, car modifications themselves aren't really a risk factor as long as it is road legal... so yes I cannot see any reason why 17 years old should be paying anymore than 50 years old provided they have same experience. Now obviously, no matter which way we look at it 17 year olds will be at disadvantage as they simply didn't even had an option to have any experience, but assuming edge case where both 50 years old and 17 years old got their license yesterday and drive same car, they should be charged same for insurance... unless other RELEVANT risk factors exist, like 17 years old's car costing double the price. Speeding convictions and driving bans are for goverment to worry about, I wouldn't even allow insurance companies to access the data. If we as society decided that speeding should carry 3 points and £100... and 12 points within 2 years = 6 months ban, then this is FAIR PUNISHMENT already, why should insurance company have any say in further punishing someone who was already punished?! Since when it is alright to punish people twice or 5 years in a row for same crime? 

We talking about "big brother" here and the information insurance companies have and complex and opaque calculations they make is definition of that. My main problem is that they are acting almost as extension of government, just even more evil, because frankly they are more competent. Goverment decided that legal driving age is 17, but insurance companies says "nope... we decided we make it impossible to insure unless you are 25+".  If there is anything worse than "big brother" in government, then it is private individuals/capital acting as if they have right to decide what is right and what is wrong and then as well having means to do it (in this case via excessive data hoarding). No they do not have a right and they should not be allowed to imply their own overarching policy above the law, they should only operate within the law i.e. they should not be insuring somebody who is 15 or who is 85 and had surrendered the license already, they should not insure somebody who is banned and thus don't have a license, but beyond that they should not know and should not care.

The accidents are different thing and they do have a database of the accidents which they have compiled themselves, I would argue that database should be subject to GDPR, meaning one insurance company should not be able to share the data with other insurance company without your explicit permission. This is how it works within any other industry - your hair dresser is not sharing you phone number with another hairdresser do they? For that reason they have NCB and that is only one thing which should matter. If they decided to have industry wide "discount and reference scheme" fair enough, they can say "this person overall have accumulated 3 years NCB", how and why does not matter, maybe they had insurance for 10 years and hand 2 accidents, or they only had insurance for 3 years and had no accidents... 3 year NCB = 3 years NCB. They do say they keep it for purposes of "preventing fraud", which not only isn't true, but again I would argue is not their business to care about. Insurance fraud is criminal offence, people can get real prison sentences for it, thus it is not for insurance to care about it. Insurance simply receives the claim, investigates the claim and if it seems fraudulent, then they report it to police... then police do investigation and if it is fraudulent take an action. It is government who decides how fraud should be punished, not insurance company... sure insurance company can suspect fraud, find evidence of fraud and like normal people go to court and say "we not paying this out as it is fraudulent". Why should they have any more information than any other business? When I go to restaurant they don't have database on all people they serve to identify those who were paying with fake money?! No - they check the money you gave them and if it is fake they confront you or call police or whatever... So here insurance clearly have unreasonable expectations to be protected from fraud above all other businesses. 

I do not consider driving a choice - I consider it a right, but even then you should agree we not giving any choices for many people, they just considered high risk right away regardless of how they personally drive. Likewise I do believe health care should be more restrictive - why am I a "healthy eating and exercising individual" paying same tax as somebody who is "overweight, drinks, smokes and abuses other substances"? Surely eating, drinking, smoking, not exercising and drug use is a choice?! That isn't right either... but this is different topic. 

I guess if I summarise what I am trying to say - consumer rights are ABOVE the rights of service providers and should always be protected at any cost. This is similar to "innocent until proven guilty" - 17 years driver should be considered as "perfect driver" and given a choice to to prove themselves, if within 3 months they are banned from driving then they will be banned from driving because of speeding, or because of drink driving, this is for laws and for government to decide, if they have 3 accidents which they make the claim for, then it is for for the insurer to say "sorry nest year either you pay us £5000 to insure or we not covering you anymore"... but as long as they drive without penalties and crashes they should have a "perfect record" and pay low insurance. Same as we don't put new-born babies in prison "just in case they going to commit murder at some point in their life". And it isn't a gamble, because insurance companies have basically rigged the game - if you don't crash they win, because you just paid "thousands for insurance" and they can keep it... and if you do crash then they still win, because now you will be paying more for your insurance for many years to come and they pretty much charge back everything they paid... just think of how often people have minor accident and "agree not to report it and just pay for it out of their pocket", because they know they ultimately are better off not to involve insurance. So not only they paying for the cover, but they as well are better of not using it!

Finally, I don't believe insurance companies or people working for them are inherently evil... they have legal cash cow and they are abusing it, most people/industries would do the same, look at what is going on in US with health insurance for example. Give people an unfair advantage and they will use it, it is that simple. I guess the question here is whenever we agree that they have unfair advantage or disagree?!

[Bluemarlin]

I will certainly agree with you that they have an unfair advantage, and believe that insurance companies take advantage of that. I guess the bit we don't agree on is risk profile based pricing. You think it's unfair on younger drivers and those who have a history of high risk behaviour, whereas I believe a flat rate is unfair on more experienced drivers with a low risk record. I think I'd agree if the risk profiling was arbitary, and didn't reflect reality but, if younger, less experienced drivers, or those with convictions or who drove specific kinds of car, were responsible for the most claims, then I favour it.

I am curious though as to why you're in favour of flat rate car insurance, and yet think a flat rate is unfair for health, and would prefer risk based profiling for that. That would just result in older people, or those with genetic conditions, being profiled into higher premiums. It seems contradictory to favour it for one and not the other. Not all illnesses are choice based. But, as you say, that's a different argument.

Additionally, I still maintain that the tax argmument is false, as they're entirely different for a number of reasons. Firstly, one can't accurately predict earning based on age, gender or colour. Secondly, and more importantly, there's no need to predict anything, as tax is retrospective. We can see to the last penny how much an individual has earned and tax then with 100% accuracy. That said HMRC is trying to get away with it to a lesser degree, by trying to get people to pay a proportion of tax in advance, based on the previous year's earnings. Insurance however has to predict risk, and base it's charges on that, hence the need to profile for that risk. If you wanted to treat them the same, then you'd have to charge everyone at the end of the year, based on their actual record for that year, which is of course unworkable. The only perfectly fair way is to have no insurance at all, and people simply pay as they go for any damage they cause, but that too is unrealistic and so we're left with imperfection in whatever system we have.

The reality is that, as technology advances, more and more data will be collected, and more sophisticated systems will be developed to analyse it. This will inevitably result in more profiling, and a greater ability to predict things. Some of this will be good, and some bad.