Do insurers discriminate unfairly? | Insurance - Independent Online

For people buying life insurance, discrimination based on their level of risk can be ethically justified, says Martin Hesse, Content Editor: Personal Finance at Independent Media.

Photo: File Image - IOL

However, on one of the underwriting criteria, socio-economic class, South African insurers may be open to the accusation of unfair discrimination on the way they allocate applicants to the different premium levels.

This is the conclusion of retired actuary Francois Marais, in his thesis for the degree of Master of Philosophy in Applied Ethics, “A critical evaluation of discrimination in risk underwriting in the life insurance industry in South Africa”, which he presented at the recent Colloquium 2019 of the International Actuarial Association in Cape Town.

Marais bases his argument on the ethical theory of “moral contractualism”, advanced by the American philosopher, Thomas M Scanlon. In his influential work What We Owe to Each Other (1998), Scanlon states that an act may be regarded as wrong “if it is disallowed by any principle for the general regulation of behaviour that no one could reasonably reject.”...

Marais says that the differences in premiums depending on where you fall within each of the four general groups can be considerable. A young non-smoking professional woman will get about R1 million life cover for a premium of R100 a month. An old, uneducated, poorly-paid male smoker will get only R22 000 cover for the same premium. In other words, people at the extreme low-risk end of the underwriting spectrum will receive almost 50 times more cover than people at the extreme high-risk end.
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Source: Independent Online