Risk Equalisation - Maybe Car Insurance

dan nukem

Hi all,

I was wondering if somebody could explain something to me?
How is the risk equalisation scheme fair for us younger people?
Are we being punished for being healthy, and the first generation of non-alcoholic non-smokers?

I am covered by BUPA and i'm very dissapointed to see they will be leaving Ireland. The reason they are leaving of course is Risk Equalisation. BUPA would have to make 1million payments per week to VHI for their ineffiency. Obviously the only way to generate this money is to hand it over to the consumer.
BUPA have taken the moral high ground imo, and refused to be bullied by a greedy and incompetent government. Bertie is furious because somebody stood up to him, and nows he whinging in the media like a child throwing its toys about.

Risk Equalisation means , as I understand it, that in order for BUPA to remain profitable and remain in Ireland, their younger & healthier customers should be forced to pay higher premiums to cover the old folk who've spent the last 50 year smoking and drinking their way into higher premiums.

The older generation in this country have ALREADY made their money with the property boom while the new generation have taken it in the neck with the impossible house prices (yes, I STILL can't afford to buy!!)

Fair is fair, I am 24, if I have to pay for some old man's health charges, then he should be forced to hand over some money for my car insurance premium!

I have been waiting nearly 1.5 years at this stage to sit 1 driving exam in Cork City and I am still waiting! Only for the fact that Hibernian have the ignition for Provisional drivers, I would be paying E3000 per year.

I'm tired of our generation getting it in the neck 24/7, whens it gonna stop?

LostinBlanch

Well Dan if you don't like it, stick it to whoever you think is responsible at the next election, and get your frineds to do the same! You see as far as the govt is concerned older people vote in greater numbers than people your own age, so get the vote out and hurt them.

ziggy

This post has been deleted.

The_Minister

LostinBlanch wrote:

Well Dan if you don't like it, stick it to whoever you think is responsible at the next election, and get your frineds to do the same! You see as far as the govt is concerned older people vote in greater numbers than people your own age, so get the vote out and hurt them.

In fairness, no party opposes risk equalisation.
Labour love it, as do the Greens and Sinn Fein, Fine Gael would lose votes if it opposed it.
It's not an issue that you can vote on.

cyclopath2001

ziggy67 wrote:

If community rating is right/wrong in one insurance sector it should be right/wrong in the other.

That's debatable.

In health, people incur liability mostly through no fault of their own, from unavoidable disease or accidents. It is socially good for the young to subsidise the elderly. It is arguable, of course that smokers should not be subsidised.

In motoring, people incur liability through reckless behaviour. I can see no social justification for good drivers to subsidise bad ones.

Nuttzz

cyclopath2001 wrote:

In motoring, people incur liability through reckless behaviour. I can see no social justification for good drivers to subsidise bad ones.

I disagree with that, As a 21 year old i had to pay IRL£2000 for my first car insurance not because of my reckless behaviour but because I was 21, that fact that i have 10+ years NCB is reflected in my premium now but the reality is that people like me dont want to pay the same premium as the suped up MR2's with the "for sale" signs on them because we know that they are more likely to become a RSA statistic than the vast majority of safer drivers

mike65

Until insurers treat drivers as innocent until proven stupid the young will always pay through the nose regardless of thier own driving ability/common sense.

Mike.

cyclopath2001

Nuttzz wrote:

I disagree with that, As a 21 year old i had to pay IRL£2000 for my first car insurance not because of my reckless behaviour but because I was 21, that fact that i have 10+ years NCB is reflected in my premium now but the reality is that people like me dont want to pay the same premium as the suped up MR2's with the "for sale" signs on them because we know that they are more likely to become a RSA statistic than the vast majority of safer drivers

But isn't the problem that the insurance companies have not found a better way to distinguish between high-risk drivers and low risk ones?

Hotblack Desiato

cyclopath2001 wrote:

But isn't the problem that the insurance companies have not found a better way to distinguish between high-risk drivers and low risk ones?

The real problem is the completely broken driver training and testing system

IF passing your test actually meant something (our test is waay too easy tbh)
and IF it could be taken within a reasonable length of time from starting to drive
and IF no unaccompanied learner driving was allowed
and IF all instructors were qualified and regulated and had to certify you as competent before sitting the test
and IF a probationary period were introduced for new licence holders, with 2 offences = a ban and start again at the beginning thanks very much
and IF Garda enforcement was not a game to issue as many tickets as possible, regardless of the low risk caused by most of those offences

then the insurers could be pretty sure that the worst of the clueless would be weeded out by the system.

Of course nothing like the sort exists, so pretty much all they've got to go on is NCB, gender, age. (Choice of car reflects your budget not your driving ability, some of the very worst driving is done in the very cheapest cars...)

cyclopath2001

ninja900 wrote:

then the insurers could be pretty sure that the worst of the clueless would be weeded out by the system.

One insurance company introduced discounts for young drivers who accepted to be monitored using GPS technology.

jhegarty

cyclopath2001 wrote:

One insurance company introduced discounts for young drivers who accepted to be monitored using GPS technology.

would you make weekly checkups mandatory for older people who want cheap health insurance ?

is_that_so

Although the cost for some young drivers are exhorbitant, companies do offer those drivers an opportunity to prove they are less of a risk by signing up to the various incentive schemes already mentioned. And that is risk equalisation. You pay less when they trust you to drive without creating a risk.

Otherwise how are they going to know? They'll just look at statistics. if you are in the high risk category then no amount of promising to be a good boy will do. You have to prove it.

If a health insurance company wants to assess your risk they can send you to a doctor. Health insurance also has a tendency to increase whereas car insurance should not under ideal circumstances.

cyclopath2001

jhegarty wrote:

would you make weekly checkups mandatory for older people who want cheap health insurance ?

That would go against the concept of community loading.

Driver's liability is caused by driver's behaviour.

Illness is different.

Alun

jhegarty wrote:

would you make weekly checkups mandatory for older people who want cheap health insurance ?

Actually that might be not quite such a stupid an idea as you suggest .. not weekly, of course, but certainly regular check-ups, say every 6 months. The theory being that if you catch certain conditions early enough they'd be easier, and therefore possibly cheaper, to treat.

Alun

cyclopath2001 wrote:

Driver's liability is caused by driver's behaviour.

Illness is different.

Not necessarily .. people's behaviour can affect their susceptibility to, and the success of treatment of some illnesses quite dramatically.

Gurgle

Alun wrote:

Not necessarily .. people's behaviour can affect their susceptibility to, and the success of treatment of some illnesses quite dramatically.

Safety of a driver is entirely down to their behaviour.
While lifestyle does have an effect, you can't say the same about health.

If community loading were taken away, then at 70 you would be looking at more than €8k per year for health insurance. As you get older it would only go up.

Most older people would be unable to pay it - after a lifetime of paying health insurance when you statistically probably didn't need it you would be kicked into the hell of the public health system.

Or theres the other option, as in the US - limited cover. You can pay for health insurance for 40 years, then you get cancer at 60.

Watch your treatment hit the limit in a matter of months, then you either take option a)pay the costs of treatment yourself, sell your house and let the costs eat away everything you own or option b) die.

Conar

Gurgle wrote:

Safety of a driver is entirely down to their behaviour.
While lifestyle does have an effect, you can't say the same about health.

If community loading were taken away, then at 70 you would be looking at more than €8k per year for health insurance. As you get older it would only go up.

Most older people would be unable to pay it - after a lifetime of paying health insurance when you statistically probably didn't need it you would be kicked into the hell of the public health system.

Or theres the other option, as in the US - limited cover. You can pay for health insurance for 40 years, then you get cancer at 60.

Watch your treatment hit the limit in a matter of months, then you either take option a)pay the costs of treatment yourself, sell your house and let the costs eat away everything you own or option b) die.

Surely that doesn't reflect anything that could happen in our health system.
Health insurance simply means better treatment, but you will still always be treated in the public wards.

Gurgle

Conar wrote:

Surely that doesn't reflect anything that could happen in our health system.
Health insurance simply means better treatment, but you will still always be treated in the public wards.

I have no idea of the statistics for how many people over 60 have health insurance, but the public health system is failing at present. If everyone over 60 were reliant on it, it would come tumbling down. Providing the neccessary treatment to everyone over 60 would require a massive increase in funding.

Bottom line - instead of paying for it through community loading, we'd be paying for it through PAYE. Meanwhile health insurance companies make a killing by pricing the high risk population out of the industry.

When all the numbers are added up, healthcare in the country would cost more - by an amount at least equal to the insurance companies' profit margin.

Conar

Gurgle wrote:

I have no idea of the statistics for how many people over 60 have health insurance, but the public health system is failing at present. If everyone over 60 were reliant on it, it would come tumbling down. Providing the neccessary treatment to everyone over 60 would require a massive increase in funding.

Bottom line - instead of paying for it through community loading, we'd be paying for it through PAYE. Meanwhile health insurance companies make a killing by pricing the high risk population out of the industry.

When all the numbers are added up, healthcare in the country would cost more - by an amount at least equal to the insurance companies' profit margin.

Valid points.
Whatever the way forward though I think we need to start looking after the elderly.
I was in the out-patients department in James Connolly a few months back and I felt really sorry for the large percentage of old people that were either left in what can only be described as industrial looking wheelchairs, or using the regular seating when they obviously were not the least bit comfortable.

I think that risk equalisation could work, but I also think that VHI should be privatised and adhere to the same rules as others. This might create some kind of level playing field and would incentivise other health insurance providers to join the market and take on older clients.

The situation at the moment seems like a step backwards to me.


***EDIT***
Sorry for drifting off topic OP.

cyclopath2001

Alun wrote:

Not necessarily .. people's behaviour can affect their susceptibility to, and the success of treatment of some illnesses quite dramatically.

Agreed, but we're 'comparing apples and oranges'.

For the most part, motorist liability derives from their own risk-taking behaviour, whereas, in health, a substantial amount of the liability stems from factors outside of a person's control. There is some sense in health insurance including preventative measures but, weekly checks would be excessive.

SeanW

Not necessarily - ypu pay for car insurance based on the liability of your demographic group as a whole, very little to do with the person themselves as a driver - the proverbial boy scout pays similar insurance to the boy racer. It's similar with health insurance - ones health and therefore health liability has much to do with their age group etc. Only with health insurance there's now "risk equalisation" which basically means younger people subsidise the older (I have no problem with that in theory, but I don't like the mechanism) but are still being screwed over with car insurance.

Community rating/Risk equlisation is nothing more than a stealth tax on young people.

cyclopath2001

SeanW wrote:

Not necessarily - ypu pay for car insurance based on the liability of your demographic group as a whole, very little to do with the person themselves as a driver - the proverbial boy scout pays similar insurance to the boy racer.

But what about the 'no claims bonus' and loadings for people with endorsements and penalty points?

If motor insurance is based on demographics it's because it's convenient to it this way. Drivers have been offered reductions based on GPS tracking which would help them prove they were responsible in their behaviour, but the scheme has not proven popular.

Taken to an extreme, if insurance companies had control over driver testing and GPS tracking data, they'd be able to calculate risk more precisely. That they do not do so is because the public would resist it. It's not because of any commitment to community rating for motor insurance.

It's one thing, in health insurance, accepting community rating where the young and healthy subsidise the elderly and unfortunate, especially when we could all pass from one state to another. Health insurance is optional, if you don't want to participate, you can carry the risk yourself.

It's quite different to insist that careful drivers should subsidise dangerous drivers.

SeanW

It's very much similar. I do not expect that older drivers or otherwise "good" drivers should subsidise younger drivers - if younger drivers as a group incur more risk then that's how it goes - I have no doubt some older, better driver on a limited income could be forced off the road if they had to cross subsidise others in a community risk scheme.

But the reverse applies as well - I am sure there are some young people on low incomes who will not be able to afford health cover because their premiums will be loaded with cross subsidisation of higher risk customers.

I don't disagree with the idea of younger people partly paying for the needs of the older generation, I consider this to be a fundamental part of civilised society, but I think it should be done on an ability-to-pay basis instead of what is effectively a regressive stealth tax.

The government could have used tax revenues to fund this scheme (instead of reducing the top tax rate AGAIN) instead of screwing over young people who are already getting soaked in other parts of the insurance market.

cyclopath2001

SeanW wrote:

But the reverse applies as well - I am sure there are some young people on low incomes who will not be able to afford health cover because their premiums will be loaded with cross subsidisation of higher risk customers.

All insurance is about spreading risk.

dan nukem

Pat McCarthy is 24, he graduated from a computer science degree 2 years ago, he has 2 jobs and he works on average 60hours per week.
He doesn't drink or smoke and he exercises 4days per week. He earn less than E30,000 per year.
Of his second job in the evening, for every 2 shifts he does, 2 are essentially done for free because of tax (paying for the costs of some person who is too lazy to get a job, or paying to hold prisoner in Clover Hill etc.)
He has a GF, would like to get married but has to save his money. He would like to get a mortgage but has to struggle to save the Stamp Duty(which the government have admitted they don't need). Luckily, he doesn't live in Dublin as he would not be able to afford to rent and would have to live at home like his friend Tom does.
He pays higher car insurance than a lot of people because the government are unable to provide him with a driving exam so he will be waiting and paying higher premiums for a while yet, despite the fact that he had to pay a few hundred euro to sit 10 driving lessons/theory tests.
He also has to pay council charges, refuse charges, tv license charges(even though he has not time to watch the bloody thing) and a whole host of other charges. He also loses even more of his salary because he has a private pension to operate.
He knows there is an economic boom in the country because he sees a lot of 50 year olds who have high salaries driving big Mercedes.
He has an ECO friendly car because he wants to do his bit for the enviornment but the government don't seem to care, he still pays the same road tax as anyone else.
On the bright side, he only sits in traffic for 1hour per day, unlike his friend Tom in dublin who spends about 3hours per day.
He is not in debt yet, but he is essentially trapped and praying for crash in the property market.
He is dissapointed with the government even though he voted for them in the last election. He has yet to see any affordable houses being built anywhere.
He has his health cover with BUPA and has been very pleased with them but is saddened to hear that the government have tried to extort money from them and they will be forced to leave Ireland because they're unwilling to fine young people for looking after themselves.
It reminds him of the situation with SMART telecom and Eircom.

Paddy O Malley is 60 odd, left school after his intercert, never went to college, worked 1 job for most of his life doing about 35 hours per week, smoked 20fags a day, drank every weekend and rarely exercised if at all, having full irish breakfasts instead of a healthy diet to top it off.
He made a serious profit during the economic boom, as the value of his house increased substantially, he also lets his aunt's house which he inherited years ago for a tidy profit. With some of the equity, he bought up a couple of other properties around which he lets, and plans to give one to his daughter in a few years because she doesn't like having a 9-5, once the polish couple renting the house having finished paying the mortgage.
He had a driving test about 6 weeks after the first time he sat into a car and he passed the test because the tester was a brother of his second cousin once removed. He got his daughter a test in 3weeks because he slipped a few hundred to the local TD who sorted it out. He pays her insurance for her which is minimal because she is 26 and female, even though shes actually never driven on a motorway yet.
He gets a pension from the government and has lot of subsidies, sometimes he takes the luas to go around and visit his properties.
He has a very nice 2Litre BMW which he imported from Germany and he doesn't pay much for the insurance because of his age group, even though hes been known to drink drive the odd time, especially at the weekend after hes played a few rounds of golf.
Hes glad to hear that the government are finally sorting out the mess of a health insurance system by strangling that evil BUPA company because obviously they are not 'playing fair' by having younger customers and providing an excellent alternative to the VHI. Its good for society to pay for their elders - after all there would be no economic boom if it hadnt' been for his generation.
He is annoyed that some people thinks he is being greedy, he worked all his life!

dan nukem

Pat McCarthy is 24, he graduated from a computer science degree 2 years ago, he has 2 jobs and he works on average 60hours per week.
He doesn't drink or smoke and he exercises 4days per week. He earn less than E30,000 per year.
Of his second job in the evening, for every 2 shifts he does, 2 are essentially done for free because of tax (paying for the costs of some person who is too lazy to get a job, or paying to hold prisoner in Clover Hill etc.)
He has a GF, would like to get married but has to save his money. He would like to get a mortgage but has to struggle to save the Stamp Duty(which the government have admitted they don't need). Luckily, he doesn't live in Dublin as he would not be able to afford to rent and would have to live at home like his friend Tom does.
He pays higher car insurance than a lot of people because the government are unable to provide him with a driving exam so he will be waiting and paying higher premiums for a while yet, despite the fact that he had to pay a few hundred euro to sit 10 driving lessons/theory tests.
He also has to pay council charges, refuse charges, tv license charges(even though he has not time to watch the bloody thing) and a whole host of other charges. He also loses even more of his salary because he has a private pension to operate.
He knows there is an economic boom in the country because he sees a lot of 50 year olds who have high salaries driving big Mercedes.
He has an ECO friendly car because he wants to do his bit for the enviornment but the government don't seem to care, he still pays the same road tax as anyone else.
On the bright side, he only sits in traffic for 1hour per day, unlike his friend Tom in dublin who spends about 3hours per day.
He is not in debt yet, but he is essentially trapped and praying for crash in the property market.
He is dissapointed with the government even though he voted for them in the last election. He has yet to see any affordable houses being built anywhere.
He has his health cover with BUPA and has been very pleased with them but is saddened to hear that the government have tried to extort money from them and they will be forced to leave Ireland because they're unwilling to fine young people for looking after themselves.
It reminds him of the situation with SMART telecom and Eircom.

Paddy O Malley is 60 odd, left school after his intercert, never went to college, worked 1 job for most of his life doing about 35 hours per week, smoked 20fags a day, drank every weekend and rarely exercised if at all, having full irish breakfasts instead of a healthy diet to top it off.
He made a serious profit during the economic boom, as the value of his house increased substantially, he also lets his aunt's house which he inherited years ago for a tidy profit. With some of the equity, he bought up a couple of other properties around which he lets, and plans to give one to his daughter in a few years because she doesn't like having a 9-5, once the polish couple renting the house having finished paying the mortgage.
He had a driving test about 6 weeks after the first time he sat into a car and he passed the test because the tester was a brother of his second cousin once removed. He got his daughter a test in 3weeks because he slipped a few hundred to the local TD who sorted it out. He pays her insurance for her which is minimal because she is 26 and female, even though shes actually never driven on a motorway yet.
He gets a pension from the government and has lot of subsidies, sometimes he takes the luas to go around and visit his properties.
He has a very nice 2Litre BMW which he imported from Germany and he doesn't pay much for the insurance because of his age group, even though hes been known to drink drive the odd time, especially at the weekend after hes played a few rounds of golf.
Hes glad to hear that the government are finally sorting out the mess of a health insurance system by strangling that evil BUPA company because obviously they are not 'playing fair' by having younger customers and providing an excellent alternative to the VHI. Its good for society to pay for their elders - after all there would be no economic boom if it hadnt' been for his generation.
He is annoyed that some people thinks he is being greedy, he worked all his life!

piraka

Hey what about Joe Bloggs in his forties, who lived through the eighties but didn't emigrant and now is stuck in a middle managenent job working 16 hrs days with a working wife and 4 kids and watching his buddies die of heart attacks all around him due to stress. Has a house that worth something if he sells but he can't.

Rebeller

For all those who object (which I do not) to risk equalisation and community rating do you also have a problem with a PAYE taxation system

Any taxation system is essentially about one group subsidising another.

Theoretically, those on higher incomes pay a higher share of tax so that those on low incomes can access universal services such as health, public transport. Risk equalisation (in theory) is based on the same idea (i.e. making a service affordable to all by asking those who can afford it to pay a contribution)

While risk equalisation is a good idea in principle I fear that the government has an ulterior motive. Anytime I hear Bertie the bollix expressing a definite opinion and referring to private companies as "screwing" people (as he recently did when talking about BUPA) I get nervous and begin to look for the real reasoning behind the decision.

The PDs and Fianna Fail are no friend of the ordinary low to middle income PAYE worker. For them to introduce a scheme that seems to actually promote equality suggests that they all is not as it seems.

It's seems certain that VHI will be privatised within the coming years. That fact, tied into this government's stated policy of subsidising the development of private hospitals on public hospital sites suggests that the real winner in risk equalisation will be those in the private healthcare business (including a number of our leading Mahon Tribunal cowboy builder friends) who just so happen to be major "contributors" the the FF slush fund/

dan nukem

Rebeller wrote:

Theoretically, those on higher incomes pay a higher share of tax so that those on low incomes can access universal services such as health, public transport. Risk equalisation (in theory) is based on the same idea (i.e. making a service affordable to all by asking those who can afford it to pay a contribution)

I admit that I do not have an in-depth understanding of Risk Equalisation, I only know what I've heard from my HR and what I've read in the papers, however, while the above point is true regarding taxation i.e. the person earning more pays more tax - it seems to be that there is a reversal of roles with Risk Equalisation.
That being that the younger person pays more consequently paying a higher percentage of their wage than the older person is paying.

Read that last sentence again - how is that equalisation!?

That is of course based on the assumption that people in the workforce 30 years earn more than a college graduate which I'm sure most people would agree is a reasonable assumption.

seamus

There are no votes in doing things that directly affect young people. It's really that simple. Demographically, they have the smallest turnout. Do things which affect people's children and older people themselves, and you get the highest number of votes.

Gurgle

dan nukem wrote:

He made a serious profit during the economic boom, as the value of his house increased substantially, he also lets his aunt's house which he inherited years ago for a tidy profit. With some of the equity, he bought up a couple of other properties around which he lets

Thats your impression of the average 60-odd year old's financial situation?

Have you ever actually met anyone over 40?