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Flawed principles


We have seen a number of judgements recently from European courts which show how ignorant and out of touch they are with the workings of an Anglo-spheric democratic parliamentary democracy. Votes for prisoners a few weeks ago and now a complete veto on actuarial principles and risk assessment.

The two main fields are motor insurance and life insurance. Motor insurance will simply rise for young women. It is not possible to run a book at a loss for young males balanced by a profit on young females. So a matter of flawed principle will disadvantage the consumer.

More serious is the overriding of actuarial principles.

In the matter of annuity purchase, the higher costs reflecting the longevity of females is to be compulsorily abandoned. It remains to be seen if a life insurance company can run a system to subsidise female underwriting but I would think it unlikely. Certainly at a profit.

Also, European pensions are rather less dependent on annuity purchase than the UK. Unfunded pay as you go pensions make up a significantly bigger part of the retirement market. As always with European law, there is the danger of the unintended consequence. The Human Rights Act has given us no shortage of examples in recent years.

If it is illegal to discriminate against an actuarial assessment on life expectancy by gender by logical extension of the principle must be wrong on the assessment on age or health. Or indeed any other factors which affect underwriting of life insurance risk such as, obesity, smoking, lifestyle and medical history.

Should there simply be a rate for a human being purchasing an annuity where assessment of any sort is abandoned? In other words, a sort of Community Reinvestment Act for life insurance?

The Community Reinvestment Act abandoned due diligence banking for the political social goal of increased home ownership in the United States. It was the source of sub-prime debt.

The danger is the annuity market will be abandoned, male annuities will be prohibitively expensive or the market will moveto an offshore web purchase for insurance companies not domiciled in the EU.

The EU’s institutions distrust of market forces will eventually force all our industries abroad. It is somehow difficult not to believe there is some sort of conspiracy to destroy the European economy by some external force yet to be identified.

Godfrey Bloom is a member of the economic and monetary affairs committee and women’s rights and gender equality committee in the European Union


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