Insurance and age-based differentiation

April 8, 2009

CRA International (CRA) was asked by the Association of British Insurers (ABI) to conduct research into the impact of potential age discrimination legislation on insurance markets. The report found that more than 99% of customers aged 65 and over are able to obtain motor insurance and more than 98% of customers aged 65 and over are able to obtain travel insurance. The evidence for any form of age-related intervention on the grounds of market failure is weak. In the motor insurance market, upper age limits have been increasing over time, but concerns about adverse selection means that some insurance companies are unwilling to unilaterally remove them. In the travel insurance market, informational problems mean that some older consumers are required to take time searching for a provider who will offer them a quote. A range of policy options have been considered (removal of age limits, narrowing of age bands, signposting and referrals). The net benefits of these policies vary but are small in all cases.

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