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These are the days of political correctness where, on issues of gender, race, religion and other divisive issues, we are expected to remain civil and avoid anything that might stir up trouble. This actually makes life quite difficult because, if real change is going to be made, there must be an honest debate about the issues. So, for example, should men and women receive the same pay for the same work? This should not be controversial. If the employer benefits equally from the work done by both sexes, there’s no reason to reward one more than the other. Except there’s no transparency. Only a tiny percentage of employers make pay grades public, so it’s almost impossible to discover whether any group of individuals is being paid less than the average for that type of work. Now let’s turn the question around. Would you expect a man to be asked to pay more just because he’s a man?

It’s a statistical fact that women live longer than men, so let’s say a man and a woman of the same age ask for quotes to buy a life insurance policy with the same guaranteed death benefits. If the insurance companies base the quotes on the math, the man pays more because he will live for fewer years. There are two reasons for this. First, the man may not work for as long before ill-health forces retirement, i.e. the payments will stop. Second, as women live longer, there are more years for the investment of the payments to build up in value. So women can expect to pay less than men for the same product. Except this would be a positive discrimination on the basis of sex. Presumably that’s illegal.

Moving on to insuring drivers, it’s a statistical fact that women are safer drivers than men. They are more likely to obey the law and generally drive less recklessly. So even if they are involved in accidents, they are traveling more slowly and so there’s less injury to passengers and less damage to the vehicles. Because premium rates are based on the risk an insured will claim, women should pay less than men. Except, unless the insurance company offers a women-only policy, men and women are grouped together so there’s no problem in giving to same rates to individuals with the same safety records. The averages will simply show that women pay less than men. (more…)

It’s always interesting to watch how the news media shape their coverage to tell us what they think we need to know. A few years back, the political discussion briefly focussed on our dependence on oil. This was a reaction to the price spike on the international market which was passed on to drivers in gas prices. It was a shock to see $4 gallons. Those driving guzzlers also hit the milestone of $100 for filling up the tank. Everyone hated being parted from their money and reacted rationally by driving less. As the spot price for crude oil fell, so did the prices at the pumps. Naturally, we all picked up where we’d left off and began using our vehicles whenever it was convenient. This ignored the underlying reality usually referred to as peak oil.

Scientists (the guys no one takes seriously) have been saying for years that we’re slowly running out of oil. Over the centuries, a finite amount of oil was created and, at the rate we’re pumping it out of the ground, we’ll use it up fairly quickly. Quite how quickly is a guess, but the scientists and geologists are saying we’ve passed the peak of easy extraction. From now on, it’s going to become harder to find new reserves and, because these reserves are likely to be in difficult places, the cost of extraction will rise. Put another way, the price of gas at the pumps is going to start rising and slowly keep on rising.

That’s one of the reasons why Washington has been producing regulations to improve the miles-per-gallon performance of our vehicles. Some politicians have also been talking about taxing gas to force up the price and encourage us to drive less. So here come the insurance companies with pay-as-you-drive policies. This offers you discounts if you drive less. Think of this as a mixture of self-interest and environmentally friendly PR. In reality, it’s simple risk management. The less you drive, the lower the risk you’ll be involved in an accident. If you only drive at off-peak times in areas where there’s less traffic, the chances of a claim are even lower. That justifies a reduction in the premium you pay. (more…)

We’re all used to the idea of black boxes from the airplane industry. If there’s a crash, investigators are quickly on the scene to recover the boxes. They give the first insights into the cause of the crash and, hopefully, when the investigation is complete, safety can be improved. Everyone wants planes to be as safe as possible. Well, the same is true of auto design. Thanks to big government, working through the National Highway Traffic Safety Administration (NHTSA), every new vehicle is leaving the assembly line with an event data recorder (EDR) inside (for those who like details, it’s usually under the driver’s seat). An EDR is designed to work in exactly the same was as an airplane black box except it doesn’t record the conversations inside the vehicle. It’s wired into all the major onboard systems and continuously records everything happening in the vehicle while it’s in motion. If there’s a crash, it holds the last minute of activity in a permanent recording.

At present, each manufacturer is allowed to produce their own design of recorder although the nature of the information to be collected is standardized. As from 2013, all the manufacturers must use the design produced by the NHTSA to collect a very wide range of data including all the changes in speed immediately before the crash, whether the driver was braking, and so on. The declared intention in collecting all this information is to allow the NHTSA to collect standardized data from all crash incidents. Should patterns emerge, it will be easier to identify design and manufacturing problems and, after consultation with the manufacturers, to modify the designs to produce safer vehicles. In this, the initial intention is to treat the information as mere statistical data, i.e. not identify the source vehicles or drivers.

But this is not the intention of the other interested parties. Although the NHTSA guidelines transfer ownership of the data to the owner of the vehicle, the majority of insurers have written a clause into their policies giving the owner’s consent to accessing the EDR data following an accident. So, if your explanation of the accident given in the claim does not match the recording, this can trigger either a refusal of the claim or, in the more obvious cases of fraud, a police investigation. For example, if people were to claim their cars keep accelerating and will not slow down, the EDR will supply clear evidence of whether the brakes were actually applied. This has nothing to do with the computer systems that collect data for the pay-as-you-drive policies. But both systems could save you money in the medium- to long-term. (more…)