Insurance companies use customer data to estimate the risk of an accident and calculate a price for covering that risk. Any discernable attribute that correlates with differences in risk can help to make pricing more accurate. The age and gender of the driver, where they live and the vehicle they drive are the key factors for generalising about risk. A driver’s nationality is another data point that can make a big difference to the cost of vehicle insurance in Switzerland, according to a survey published this week by Comparis.
Some foreign nationals in Switzerland pay significantly more for their car insurance than Swiss people. While a few foreign nationals pay less. These observations are based on more than 85,000 online car insurance quotes.
The biggest premium difference is paid by 20-year-old Kosovars in the city of Basel who drive the Mercedes-Benz GLC. This group pays an average of 74% more than they would if they were Swiss. Nationals from North Macedonia (+74%) and Turkey (+73%) with the same age, location and car also pay significantly more.
Significant premium differences for 20-year old drivers exist also for Portuguese living in Basel driving the Mercedes-Benz GLC (+24%), Spanish living Basel driving the Skoda Octavia (+20%), Italians living in St. Gallen driving the VW Golf (+17%) and French living in Geneva driving the Mercedes-Benz GLC (+5%).
The news is not bad for all foreigners. Some pay less than their Swiss counterparts. More experienced drivers from Germany and the U.K. pay 1-2% less than Swiss.
Rules across the European Union prohibit many of the underwriting practices used in Switzerland. Before 2012, insurance companies across the EU could charge women less than men for vehicle insurance. Now the practice is banned there.
In Switzerland, some political parties have decried actuarial practices, describing them as discriminatory. 20 years ago a federal commission drew a similar conclusion. However, Switzerland’s federal government has so far decided to leave things as they are.
Generalisations are imperfect and high level generalisations are obviously unfair. All men are not high risk drivers, nor are all women safe ones. At the same time, rules that prevent the use of actuarial generalisations create another kind of unfairness. Women are less likely to have accidents than men. So it makes actuarial sense to charge them less. The EU rule change might have removed gender discrimination, but it means women in the EU on average now subsidise men.
In addition, price discrimination in insurance can potentially have a positive effect on behaviour. For example, Swiss insurance actuaries might be inadvertently improving road safety be pricing potentially reckless young drivers out of the market for high powered vehicles. If premiums for a 20-year old man driving a Mercedes-Benz GLC are unaffordable the same driver might opt for a lower powered vehicle that is less likely to get them into trouble.
The more granular generalisations become, the fairer they will be – if there was some way to accurately identify the accident prone drivers across all nationalities and use that to discriminate rather than nationality, few would cry foul. But given there is probably no perfect generalisation, deciding what is fair will remain political.
More on this:
Comparis article (in French) – Take a 5 minute French test now
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