COMMENT by RUTH SUNDERLAND: Prejudice at a premium

By RUTH SUNDERLAND
Updated: 19:35 EST, 1 March 2011

The business world is turning into a battleground of the sexes. First we had the report from Lord Davies of Abersoch urging companies to bring balance to boardrooms by appointing more female directors.

Now comes the ruling by the European Court of Justice that insurance companies can no longer charge men more for car cover or life assurance, because it violates the principle of equality.

Lord Davies is quite rightly trying to tackle prejudice based on sex. Presumably, the ECJ thinks it is doing the same thing - but it has confused unfair discrimination with the perfectly reasonable act of making well-founded distinctions between groups of people.

Ruling: The European Court of Justice says insurance firms can not charge men more for car cover or life assurance, because it violates the principle of equality

Discrimination in the latter sense is the whole point of modern insurance, where premiums are set according to the risks posed by different types of policyholder.

Women drivers don't get cheaper premiums because insurance bosses are prejudiced against men, but because there is a body of statistical evidence that on average, they are safer at the wheel.

Gender is just one of the criteria used by insurance companies to discriminate, along with age, occupation, family medical history, lifestyle and postcode - a good guide to how long you will live, how likely you are to be burgled, and your risk of being flooded.

If they did not make assessments in this way, a 20-year-old would be charged the same premium for life insurance as a 60-year-old, and a boy racer in a hot hatch would be treated the same as a careful lady driver with a spotless record tootling around in her Nissan Micra.

Insurers have until the end of next year to comply with the directive, which will affect life assurance and pensions as well as car cover.

The industry says the UK market is highly competitive but for consumers the obvious suspicion is that companies will seize the opportunity to set the new unisex charges at a level that allows them to cream off more profit.

In itself, the gender ruling will not demolish the UK's insurance edifice as companies will still be able to use other criteria to make pricing judgements.

The big worry is that this may only be the start. Lawyers say Europe may turn its sights on other areas such as age, where there is already an EU directive against discriminatory pricing that currently gives an exemption for insurers.

Usage of postcodes could also come under attack as veiled discrimination against the less welloff. Then the insurance industry really would be thrown into disarray.

The insurance industry has behaved prejudicially in the past: at the height of the AIDS scare in the late 1980s firms were criticised for stigmatising gay men for their sexuality per se, rather than looking at high-risk behaviour.

In recent years, however, it has moved towards sophisticated pricing models that aim to tailor premiums to individual risks.

If it is not allowed to discriminate on the basis of hard evidence, then it will have to revert to a system that is much cruder, and arguably even less fair.

Insurance inequality is not a political issue - it is a statistical one.

Swannell's away

HMV's plight is looking grimmer by the day.

The entertainment retailer has not only issued another profit warning and admitted it is in breach of its banking covenants, it is also losing its well-regarded chairman, Robert Swannell, who last year accepted the chair at Marks & Spencer, though he will stay on for the time being as a non-executive director.

No-one would quarrel with the fact that chairing HMV and M&S is too much for one man, even Swannell  -  but that has been obvious to all concerned since he accepted the job at Marks last year.

What a shame a better moment could not have been found to announce he is stepping down. To say the least, this timing is tactless.

Ken and Terry

When Sir Terry Leahy's colleagues at Tesco bid farewell today to the boss who transformed the supermarket chain into one of this country's most respected businesses, they will no doubt feel a twinge of sadness.

But Philip Clarke, his successor, can console himself that the lowprofile Leahy is unlikely to be a bothersome f igure after hi s retirement.

The same cannot be said for the idiosyncratic sir Ken Morrison, who has embarrassed the Wm Morrison supermarket chain by selling shares without heeding City disclosure rules. since he has not learned how to stay out of trouble as he approaches his 80th birthday, there seems little hope of reform.