Friday, March 04, 2011

Are women safer drivers or do they drive less?

"Women are safer drivers." That's the mantra in the Irish press these past few days following the ruling by the European Court of Justice that insurance companies cannot use gender to determine insurance rates. That's the mantra, but is it true?

Both David Quinn and Kevin Myers make this assertion in today's Irish Independent, but they're not alone. This is stated as a fact, but I've never seen any real data that backs up this statement. Sure women file fewer claims, but is that because they're safer drivers or because they drive fewer miles?

For a short while in the 1980s I worked at an actuarial firm that provided the statistics on which many car insurers set their rates. I remember how my boss showed me stats accumulated in an academic study of drivers in one or two states (might have been North Carolina & Virginia). Among the statistics collected was miles driven, which turned out to be a better determining factor with regards to claims than was gender.

However as my boss explained, getting accurate information from drivers on the number of miles they drove annually was really impossible. Gender was easier to ascertain and, well, women drove fewer miles than men. On average.

I don't know if it's still that case that annual mileage is not used as a factor in determining car insurance rates in America, but I'd like to know. I also don't know much about how car insurance rates are determined in Ireland, but I'd like to know that too.

What I do know is that I've played with insurance brokers' web sites, changing various factors to see how the rates are affected. What I've noticed is that it doesn't matter if I indicate annual mileage (kilometer-age?) of under 10,000 km/yr or 25-40,000 km/yr. The rates on offer are the same.

However, if I swap genders, I get a lower Comprehensive rate (3rd Party Fire & Theft are the same for male/female of my age/married/etc). Now why would this be? I presume it's because women file fewer claims than men do, which makes them better risks for insurance companies (but not necessarily "safer drivers.")

I find it a more than dubious assertion that a woman who drives 35,000 km/yr is a better risk than a man who drives 7,000 km/yr, all other factors being the same. Yet, that's what the insurance rates tell us, but I'd absolutely love to see the stats that back that up.