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Power Report: Discrimination by divorce, says woman driver

13 March 2016 - 01:39 By MEGAN POWER

There are many good reasons to marry, and stay married. If various studies are to be believed, couples live longer, stay saner - and are happier.

I've recently found another, more practical, reason for tying the knot; it can save you money on your insurance cover.

When I was in my 20s, with just a few years' driving experience, I accepted I was a higher risk to my insurer. I also accepted that not having my wheels behind a lock-up garage at night meant I paid a stiffer premium.

What I didn't know at the time was that my unmarried status also counted against me. Turns out single people are a far greater risk for insurers, attracting higher payments.

According to claims history and years of actuarial analysis, single people drive more aggressively and are statistically more likely to be involved in accidents.

This is apparently because married people, in contrast, are more likely to stay at home, especially on week nights and at weekends, and are less likely to drive late at night. And couples may have two cars, using only one of those, especially at weekends, thus reducing risk.

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So the singles lifestyle comes at a price. So does divorce. Most insurers consider divorced policyholders as single, or at least very close to it.

It's not something my colleague Suthentira Kaissri had bargained on when she updated her banking and personal details with OUTsurance two weeks ago. The 40-year-old Durban journalist was stunned to be told that due to her fairly new divorced status, her monthly car insurance premium was being hiked by as much as R280.

"I was furious," said Kaissri, who had taken cover on her 2011 BMW 320i before her divorce was finalised in 2014. "The agent could not explain to me why divorced people were expected to pay more to be insured. All she could tell me was that people who fell into this bracket had no choice but to pay more."

After Kaissri objected, her premium was discounted by just R28.

Spokeswoman Natasha Kawulesar said OUTsurance didn't believe the marital status rating was discriminatory, and it was one of about 40 factors looked at when determining premiums.

"The simple fact is that our data clearly show that single people, on average, have more car claims than married people," she said. "This is exactly the same as the fact that young drivers also have, on average, more accidents than older drivers. There will, of course, always be exceptions."

Of the 12 insurance companies I dealt with, just one, non-traditional insurer Prime Meridian Direct, doesn't use marital status (or risk profiling in general) as a factor in determining its premiums.

Although most comprehensive insurers, including the likes of Auto & General, Mutual & Federal, Santam and MiWay, take marital status into account, there are some subtle differences.

Hollard, for instance, doesn't distinguish between married and divorced customers.

But this may be short-lived. Hollard said it had noticed "differences" emerging between these two categories and was "likely" to charge differentiated premiums in the future.

There are other differences, too. For starters, the "penalty" for being single or divorced varies. Some insurers charge nominally more whereas some increases are more substantial, as in Kaissri's case.

Then there are those, such as Dialdirect and Budget, that regard cohabiting couples as married, and others, such as King Price and Discovery Insure, that consider them single.

And although some use marital status as a factor only for car insurance, others, such as Momentum, link it to household insurance too.

The payout consequences of giving an inaccurate status also differ markedly. Some insurers will never reject a claim for such an oversight; others are likely to deduct the differences in premiums from the settlement amount due. Worse still, consumers suspected of deliberate deception could have their claim rejected and policy nullified.

As for married couples who forget to update their new status from single, whether they're in line for a refund depends. Some insurers follow international best practice on this and refund the difference; others don't.

But should insurers be feeding into stereotypes that suggest married people have less of a (social) life than freewheeling singles? Aren't these distinctions arbitrary at best, discriminatory at worst?

Insurers - supported by the South African Insurance Association - deny they're either, saying such ratings reflect nothing more than "differentiation".

Even 1st for Women's Robyn Farrell agrees: "Discrimination implies an arbitrary distinction that is not based on merit whilst differentiation is a distinction based on merit.

"The entire insurance industry differentiates in terms of age, gender, geography, years of insurance and licence period, for example, as each of these elements affects the risk that the insurer is underwriting."

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Would this pass muster under our constitution, though? In certain US states, such profiling is outlawed, and in 2012 a European Union gender directive effectively banned insurers from being able to charge different premiums to men and women because it contradicted laws on discrimination.

Opponents argue that far from levelling the playing field, the directive has resulted in lower-risk women (women are considered safer drivers) subsidising higher-risk young men in car insurance. In the same way, if the marital risk rating were dropped, lower-risk couples would end up unfairly subsidising higher-risk singles.

So what's the answer?

"Most interested people anxiously await a constitutional decision on this," said senior short-term insurance ombudsman Peter Nkhuna. "I think it is only a matter of time before this will be tested in our courts."

He said every time one thing was distinguished from another, there was discrimination of sorts.

"The question is whether that discrimination is prejudiced, fair or not, and whether it is justifiable and permissible in law. The answer, judging from the international jurisprudence, is not necessarily consistent as policy or moral judgments also play a role."

He said the industry argued that such ratings were based on statistical evidence and that it would be impossible to underwrite individually. Also, insurers say the alternative would be so costly it would turn the industry on its head.

"I think there are decent arguments either way," said Nkhuna.

So where does this leave consumers? Thankfully, able - and encouraged - to find and choose the best rates and terms available.

The ombud, the South African Insurance Association and the South African Actuarial Society agree. Consumers can, and must, vote with their feet.

sub_head_start Contact Megan Power sub_head_end

E-mail: consumer@sundaytimes.co.za

Follow Megan on Twitter: @Power_Report

Tune in to PowerFM 98.7's 'Power Breakfast' (DStv audio channel 889) at 8.50am on Monday to hear more from Megan

Please note: Other than in exceptional circumstances, readers sending me complaints must be willing to be identified and photographed.

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