Gender binary no longer a good fit for car insurance, Vero says

Thursday, 28 October 2021

Many countries have laws requiring drivers to be insured. New Zealand does not, despite policymakers having looked closely at doing so several times.

Offering car insurance premiums driven by a customer’s gender is no longer a good fit for a changing New Zealand society, Vero Insurance says.

The insurer is working to remove gender-based factors from its pricing and underwriting for consumer car insurance.

Sacha Cowlrick, executive manager of consumer insurance at Vero, said there had traditionally been strong evidence that gender could determine the likelihood of a customer making a claim and was a legitimate part of building up a person’s risk profile.

It has been reported that younger women in particular are less likely to crash than young men, but older women’s risk may be higher.

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But she said the company was always looking at whether products were relevant, and the male versus female binary distinction of gender was not a reflection of modern New Zealand these days, nor a true reflection of the gender spectrum of Vero’s customers.

“Historically insurers have compared data for ‘male’ and ‘female’ customers, but New Zealanders identify with a much broader range of gender identities,” she said.

“As a business we had the option to try and rate or price a more diverse gender spectrum, but we have made the decision that it is simpler and more inclusive to begin the process of removing gender from our underwriting.”

Cowlrick said the process was complex and would take at least 12 to 18 months.

“There is strong evidence that gender and age together are factors that can help to determine the likelihood that customers will make a claim, and gender can have a significant impact on price for some age ranges,” she said.

“If we were to remove the gender rating on premiums suddenly, it would mean big changes to some customers’ premiums at renewal. We need to do some work in the background to essentially ‘smooth’ the pricing differences to ensure that when we remove gender as a factor altogether it won’t create any sudden premium changes that customers aren’t prepared for.”

It would not be as simple as women facing higher costs in future, she said. “There’s pooling of risks and cross-subsidisation.”

She said customers would see a change in premiums over time but it would not be a “big bang”.

“It’s the start of a journey rather than going full noise, we’re aware of how we manage change.,”

The company had increasing ability to use real data on how people drove and that would have an impact on pricing in future, she said. “As cars become more and more computers on wheels that will grow.”