Stephen Dunn, Chief Underwriting Officer. Fairness in car insurance pricing remains a contentious issue, particularly using proxies like sex or credit scores. In the UK, sex is banned as a pricing factor due to legal protections, but its effectiveness as a risk predictor sparks debate. Proxies such as age, claims history and credit scores are commonly used because they correlate with risk, but they often create injustices by assigning individuals to generalised categories. IoT technology and machine learning offer a promising solution by allowing insurers to measure actual driving behaviours directly, reducing reliance on these blunt proxies.
Beyond technology, fairness also hinges on societal values and regulations. The Financial Conduct Authority (FCA) emphasises pricing aligned to risk and transparency, while broader social fairness requires legislative and regulatory intervention. Insurers have a critical role to play by prioritising direct risk assessments, avoiding over-reliance on ethically troubling factors like credit scores, and fostering a culture of accountability. By leveraging advanced technologies and adhering to ethical standards, insurers can align profitability with responsibility, promoting trust and equity across the industry.
