The UK Equality Bill and rating by age group

At present insurance companies are free to set premium rates using a range of rating factors, including age. This practice, according to the Actuarial Profession (which is governed jointly by the Faculty of Actuaries in Edinburgh and the Institute of Actuaries in London) reflects the fact that age is a key factor in determining the cost of providing the insurance, since it can materially influence both the likelihood of policyholders making a claim and the size of such claims when they occur. In its written response to the parliamentary statement in June this year by Harriet Harman, Minister of State (Women and Equality), on the proposed UK Equality Bill, the Actuarial Profession argued that not using age as a rating factor would result in lower risk age groups (for example ages 40-70 in motor insurance) subsidising higher risk age groups. The following is an edited extract from the Actuarial Profession’s recent letter to Ms Harman signed by Caroline Instance , the chief executive of the Actuarial Profession.