I am not sure the ECJ directive is a good parallel in this scenario. At the heart of the ECJ issue was the exemption insurers enjoyed on sex discrimination because it was based on statistical evidence. Also, the use of sex was/is a universally accepted risk factor in most markets. Even the ONS still reports life expectancy by sex. As it is the ECJ directive is more of an idiosyncratic position.
In reverse, price walking was an acceptable practice in our market but it isn't a universally accepted insurance practice across EU let alone in global markets for personal insurance. It was an idiosyncratic issue with our market. The other aspect of price walking is it isn't statistical but rather it is one of those soft issues that can easily end up involving profiling people with lower bargaining power or greater information asymmetry. It can then be easily dressed up (deceptively) as client inertia. If the matter ends up being decided on soft issues ethics should be one of the considerations.
Unfortunately, we as the actuarial profession got here because of historic issues in the gi market. These include but are not limited to the following
- actuaries came in force to the GI party later than in other practice areas so the actuarial price may not be as hard as say life insurance where the rate book is gospel;
- pricing may have previously fallen to other roles e.g. underwriters who priced and managed their portfolio profitability. The practice may have continued even when actuaries became more involved with final price not being an actuarial responsibility;
- this technical price in personal lines has been evolving. The use of glms is not that old;
- the personal lines market is very price competitive making price walking attractive; and
- historically regulators have been more involved with pensions and life insurance, among other reasons.
I wish this matter was handled in the context in which the practice developed without putting a disproportionate amount of the blame on IFoA and actuaries. Unfortunately, it is now a political bullhorn for some. In conclusion when the price walking discussion began if an actuary had advised their company to stop the practice how likely would they have prevailed?
Last edited: Apr 22, 2022