Insurers will be grilled over a mysterious practice that’s costing you much more for cover

INSURERS will be grilled over the little-known practice of setting premiums, not just on risk but on what their computers calculate you’re willing to pay.

EXCLUSIVE

INSURERS will be grilled over “price optimisation” — the little-known practice of setting premiums not just on risk but on what the cover provider’s computers calculate a customer might simply be willing to pay.

It comes as analysis by News Corp Australia reveals insuring a black car can be 10 per cent more expensive than a white car, a driver’s gender potentially changes cost by three per cent and education level has as big an impact as colour and gender put together.

But it is the emergence of price optimisation that is arguably the most concerning development for consumers.

It inflicts a price hit simply because an insurer’s mining of “big data” has led it to believe it can simply get away with it. This might be because the customer has previously accepted big premium increases after a genuine increase in risk.

RELATED: Startling ways car insurers determine your premium, from vehicle colour to marital status

News Corp Australia has learned that a looming inquiry to be led by the nation’s one-time top consumer cop Allan Fels will delve into insurers’ use of price optimisation.

While the inquiry is part of Professor Fels’ role of NSW’s insurance monitor, the providers to be grilled sell cover nationally.

Seventeen US states have banned price optimisation due to concerns about its effect on consumers.

It’s been discovered that gender plays a big role in the premium charged for car insurance. Picture: Thinkstock image

The Insurance Council of Australia and insurers themselves did not rule out optimisation was being used in Australia.

“Every general insurance company in Australia underwrites premiums differently based on a wide range of factors,” ICA communications head Campbell Fuller said yesterday. “These are commercial decisions for individual insurers. The Insurance Council encourages consumers to

shop around for policies that provide the best value based on both price and features.”

News Corp Australia’s secret-shopping using several insurers’ online quoting engines reveals a red car is more expensive to protect than a white one but cheaper than black. And an insurance buyer who left school before the end of year 10 may be charged as much as 13 per cent

more than a university-educated buyer — even where both had exactly the same driving history and other details.

On gender, some insurers charged women more than men in certain circumstances but less in others.

The analysis was done after a Senate inquiry into general insurance revealed car colour affected premiums and that the time of day a policy was purchased soon could too.

Sergei the meerkat will face a probe. Picture: Supplied

Meanwhile, Sergei the meerkat is about to get a taste of his own medicine. Or serum, to be correct.

A political move is afoot against the aggregator Compare the Market to force it to declare upfront that many of the products it sizes up are underwritten by its parent company.

As News Corp Australia has previously revealed, seven of the 10 car insurance brands on Compare the Market come from Auto & General Services Pty Ltd. Both Compare the Market and Auto & General are ultimately owned by Budget Holdings Limited. Two of the four home

insurance brands on Compare the Market are also arranged by Auto & General. This information is buried deep within the Compare the Market website.

Nick Xenophon yesterday said he would seek to force Compare the Market’s meerkat “Sergei” to drink the same truth serum the critter sneaks into a man’s coffee in a current TV ad.

At a Senate inquiry into general insurance he made a formal complaint about Compare the Market to the Australian Competition and Consumer Commission, which was giving evidence.

The ACCC responded that the lack of disclosure “potentially … would concern” both it and the Australian Securities and Investments Commission.

Nick Xenophon is also unhappy with the name Compare the Market. Picture: Supplied

Senator Xenophon also expressed dissatisfaction with the name Compare the Market, given that the aggregator did not compare the whole market.

He will now prepare legislation to force aggregators into prominent disclosure of ownership and relationships.

A Compare the Market spokeswoman last night said it hadn’t heard Senator Xenophon’s comments, it did disclose its relationships and was always trying to get all insurers to participate in its comparison service.