Bereavement Leads to Higher Insurance Premiums Due to AI Pricing Algorithms
Bereaved policyholders are experiencing higher renewal quotes for car and home insurance, a rise partly attributed to AI-driven pricing algorithms. For example, Kay Lawley saw her car insurance increase from £301 to £348, and her home and contents insurance rise from £1,039 to £1,161 following her bereavement. Alison Roper also reported increased costs for her home and buildings insurance and car policy despite her late husband not being named on the policy.
Another widow encountered a rise in her Swinton Insurance renewal from just over £200 to about £641 after her husband's death. Swinton attributed these hikes to the system, later apologizing, reviewing the situation with their underwriting team, offering compensation, and the family ultimately secured a cheaper alternative.
The use of AI algorithms in pricing maps individuals to similar claims histories, considering factors such as age, occupation, and marital status. This approach results in a 'bereavement premium' reflecting statistical risk changes when a joint policyholder dies. For instance, Ageas states joint policyholders are considered less risky and receive a discount, which is forfeited upon the death of one policyholder. Though a process exists to prevent removing discounts unfairly, it failed in Lawley's case. Ageas refunded the extra premiums and sent flowers, noting that Lawley will lose the discount at the next renewal due to her status as sole policyholder.
The industry, represented by the Association of British Insurers, explained that pricing decisions are commercial and based on risk appetite, affected by personal circumstances. However, it did not clarify the prevalence of bereavement premiums or the consideration of solo drivers as higher risk. Campaign group Fairer Finance criticized insurance pricing as opaque and overly complex due to AI use, calling for greater transparency and regulatory measures to protect consumers.
