EQUAL STATUS ACTS 2000-2015
Decision DEC – S2016 – 035
PARTIES
Mr Adam Herzyk (represented by Rory Kennedy, B.L., instructed by Keith Walsh Solicitors)
and
KennCo Underwriting Ltd t/a KENNCO Insurance (represented by Eamonn Marray B.L., instructed by Corrigan and Corrigan Solicitors)
Date of Issue: 30th May 2016
1. Claim.. 3
2. Summary of the Complainant’s Written Submission. 3
3. Summary of the Respondent’s Written Submission. 4
4. Conclusions of the Equality Officer 4
5. Decision. 8
Keywords: race – motor insurance – S. 5(1)(d) – statistical and actuarial evidence.
1. Claim
1.1. The case concerns a claim by Mr Adam Herzyk, that KennCo Underwriting Ltd t/a KENNCO Insurance discriminated against him on the ground of race contrary to Section 3(2)(g) of the Equal Status Acts 2000 to 2011, in terms of in terms of providing her with two different online motor insurance quotes, of which the quote for a driver with an Irish driving license was substantially cheaper..
1.2. The complainant referred a complaint under the Equal Status Acts 2000 to 2011 to the Director of the Equality Tribunal on 30 September 2015. A submission was received from the complainant on 18 December 2015. A submission was received from the respondent on 15 February 2016. On 23 February 2016, in accordance with his powers under S. 25 of the Acts, the Director General of the WRC delegated the case to me, Stephen Bonnlander, an Equality Officer/Adjudication Officer, for investigation, hearing and decision and for the exercise of other relevant functions of the Director under Part III of the Acts. On this date my investigation commenced. As required by Section 25(1) of the Acts and as part of my investigation, I proceeded to hold a joint hearing of the case on 23 May 2016.
2. Summary of the Complainant’s Written Submission
2.1. The complainant is a Polish national who has lived in Ireland since 2005. On 22 June 2015, he applied through the respondent’s online facility for a car insurance quote. He states that an Irish national would have had to pay €462.03, whereas he was quoted €594.87. He states that this mirrors the experiences of other drivers, whose quotes have been on average 40% more than for Irish drivers.
2.2. The complainant submits that the respondent states that the price differential depends on whether a driver holds an Irish driving licence or that of another country, and also on actuarial data. It is the complainant’s contention that it is for the respondent to prove that these differences in risk actually exist and that otherwise, his treatment is discriminatory on the ground of race or nationality.
3. Summary of the Respondent’s Written Submission
3.1. The respondent denies that it discriminated against the complainant as alleged or at all. It denies that any prospective customer, including the complainant, is asked to provide details of their nationality on the website, and that it only asks for which kind of driving licence the applicant holds.
3.2. It further states that negative loss trends from 2012, 2013 and 2014 show that claims from EU driving licence holders were 32% above full Irish driving licence holders and that claims cost for EU driving licence holders was 29% higher. Accordingly, the respondent states that the type of licence is a statistically significant predictor of claims experience and therefore a necessary tool in risk profiling.
3.3. Last, the respondent states that if a Polish or other EU-national applicant for motor insurance holds an Irish driving licence, they are quoted the same price as an Irish national. Therefore the respondent denies any discrimination on the ground of race.
4. Conclusions of the Equality Officer
4.1. The main issue for decision in this case is whether the complainant was discriminated against on the ground of race because the respondent quoted him more expensive motor insurance.
4.2. In evaluating the evidence before me, I must first consider whether the complainant has established a prima facie case pursuant to S. 38A of the Acts. It requires the complainant to establish, in the first instance, facts upon which she can rely in asserting that prohibited conduct has occurred in relation to him. It is only where such a prima facie case has been established that the onus shifts to the respondent to rebut the inference of discrimination raised.
4.3. In coming to my decision, I have considered all oral and written evidence presented to me by the parties.
4.4. I am following my own earlier decision in Prekun v. Liberty Insurance [DEC-S2016-015] on the question as to whether obtaining an online motor insurance quote is a service. In that decision, I wrote that
“Given that the definition of “service” provided in S. 2 of the Acts includes a “facility of any nature which is available to the public” and which expressly includes “facilities for banking, insurance, grants, loans, credit or financing” [emphasis added], I am willing to accept that the respondent’s online quotation facility is a service within the meaning of the Acts. Arguably, obtaining a detailed quotation based on one’s personal circumstance is an engagement with the facility, and therefore usage of a service.”
4.5. Like that earlier case, I am also satisfied in the case on hand that the complaint is one of indirect discrimination, as an Irish citizen with a Polish driving licence would have received the same insurance quote as the complainant, and the complainant would have received the same quote as an Irish driver, if he had an Irish driving licence.
4.6. The case is therefore one of indirect discrimination, which is defined in S. 3(1)(c) of the Acts as
where an apparently neutral provision puts a person referred to in S. 3(2) at a particular disadvantage compared with other persons, unless the provision is objectively justified by a legitimate aim and the means of achieving that aim are appropriate and necessary. [Emphasis added]
4.7. Accordingly, the complainants need to show that the fact that holding Irish driving licences instead of EU ones attracted a significant discount in motor insurance, put them at a particular disadvantage. I am willing to accept that the price difference in the quotes can be viewed as that disadvantage. The price differential was close to 33%. I am further willing to accept that an Irish motor insurance customer is more likely to hold an Irish driving licence than an EU national. I would like to note, though, that in light of the fact that the complainant produced no figures at all as to how many Irish and EU-nationals hold Irish and EU driving licences, respectively, and in light of the fact that it is very easy to exchange one’s EU driving license for an Irish driving license, that this is a generous interpretation of evidential requirements in favour of the complainant.
4.8. Counsel for the complainant made the argument, which was accepted by the respondent’s Underwriting Manager, that obtaining an Irish driving licence would not change the complainant’s individual risk profile one bit. And indeed it is puzzling that motor insurance claims by holders of EU driving licences, but not UK licenses, should cost the respondent so much more. However, Mr A., Underwriting Manager for the respondent, produced figures, which, in conjunction with his cogent oral evidence, I accept. It can be summarised as follows:
4.9. The respondent, which is an underwriting agency for large insurers who do not wish to set up dedicated Irish operations, but wish to offer a variety of insurance products in the Irish market, receives capital from these insurers to underwrite policies. It is obviously important for the respondent and its business relationships with these insurers that it prices policies in such a way that the insurers make a profit, and that the respondent itself earns its fees for the service it provides and thus remains a viable business. Accordingly, the “loss ratio”, that is, the amount of claims paid out from premiums taken in, must be less than the total amount of premiums. Premiums for policies are reviewed nearly daily for risk factors to ensure this is the case. Among identified risk factors for motor insurance, apart from EU driving licences v. Irish/UK driving licences, are factors like the insurance holders place of residence and/or work, age, driving experience (the “no-claims bonus”), profession, and age and make of the insurance holder’s car. These factors, in fact, do not seem peculiar to the respondent’s way of doing business, as they are asked by virtually all motor insurance providers when one requests an insurance quote. This also goes for whether a driver has a licence from Ireland or the UK or another EU country.
4.10. Counsel for the complainant questioned whether the figures for the driving licence factor were properly disaggregated, i.e. whether the greater losses the respondent incurred could not possibly be ascribed to some other factor, such as migrants into Ireland living in specific neighbourhoods or driving older cars. However, Mr A. explained, and I accept, that these factors are priced separately, i.e. whatever the origin of one’s driving licence, the insurance holder is already paying extra for his old car or her unsafe neighbourhood.
4.11. Turning to the figures themselves, I undertook not to give exact numbers in this decision due to these being sensitive business data for the respondent. The two main points about the figures provided are that the respondent pays out more in claims than it earns in gross premiums from the policies of the holders of EU licences, which in terms of its overall business model, is clearly an untenable situation. The other point is that over a period of eight years, the respondent had about 5000 EU licence customers, about 200,000 Irish licence customers and about 10,000 UK licence customers. The Irish and UK loss ratios are virtually identical, despite the fact that the number of UK-licence holders is so much smaller, and in fact amount to about 5% of the total Irish licence holders. It might otherwise be argued that the large pool of Irish-licence holders absorbs, as it were, the more risky and costly insurance holders among them. The risk profile of the UK-licence holders shows clearly that this argument does not hold, in that this much smaller pool of licence holders has nevertheless an identical risk profile. I should also note that in both cases the loss ratios are at a level acceptable for the respondent’s business model.
4.12. While I note that the UK pool is twice as big in numbers as the EU pool, both are significantly smaller than the Irish pool, amounting to 2.5% and 5% of the Irish pool, respectively. I am therefore satisfied that pursuant to the provisions of S. 5(1)(d) of the Acts, which allow that
differences in the treatment of persons in relation to annuities, pensions, insurance policies or any other matters related to the assessment of risk where the treatment
(i) is effected by reference to
(I) actuarial or statistical data obtained from a source on which it is reasonable to rely, or
(II) other relevant underwriting or commercial factors
and
(ii) is reasonable having regard to the data or other relevant factors
differences in service provision shall not constitute discrimination. The respondent has demonstrated by the oral and written evidence adduced that its actions are covered by these statutory provisions and that the statutory exception therefore applies.
4.13. I did not invite any of the witnesses to speculate as to why there is such a marked difference in the risk profiles, although it remains a fascinating question that perhaps another public body, such as the Road Safety Authority, might want to study one day. With regard to the case on hand, I am satisfied that the evidence provided shows that the provisions of S. 5(1)(d) of the Equal Status Acts fully avail the respondent, and that it has therefore successfully rebutted the prima facie case raised by the complainant.
5. Decision
5.1 This decision is issued by me following the establishment of the Workplace Relations Commission on 1st October 2015, as an Adjudication Officer who was an Equality Officer prior to 1st October 2015, in accordance with section 83(3) of the Workplace Relations Act 2015.
5.2 Based on all of the foregoing, I find, pursuant to Section 25(4) of the Equal Status Acts, that KennCo Underwriting Ltd t/a KENNCO Insurance, did not discriminate against Mr Adam Herzyk pursuant to Sections 3(1), 4 and 5(1) of the Acts.
______________________
Stephen Bonnlander
Equality Officer
30 May 2016