Euro-nonsense will cost insurance customers dear

Latest article by John Blundell in The Scotsman: MY BID for immortality, apart from my two sons, consists of Blundell's Law.

This can be expressed in several ways. "Stupidity has its own entropy" is the posh version. The plain man’s rendering is "All bureaucratic interventions achieve the opposite of what is intended". It can also be distilled to "All politicians destroy their own projects".

I have just stumbled upon a proposal so ludicrous that I can only take pleasure in putting in the boot. The innovation comes from the European Commission. You may think it a wee bit technical and tedious but there is comedy if you are patient.

"The Impact Directive implementing the principle of equal treatment between women and men in the access and supply of goods and services" sounds mildly virtuous, even blameless. Yet it is a heavy-handed imposition of falsehoods. It requires that insurance companies do not differentiate between men and women, whether it be for motor insurance or pensions.

Equal treatment of the sexes sounds benign. Yet the sexes are different. Suppressing these facts helps nobody.

Women drivers crash their cars far less than men. This is not just true in Scotland. It is true in Portugal and Finland and Greece.

My guess is it’ll be true in the ten new nations joining the EU too. I’m not sure what the explanation is. It may simply be testosterone. So, women deserve lower insurance premiums as they are a far smaller risk - yet this is what the EU Commission wants to censor.

The whole purpose of insurance markets is to share or pool risks. It is no secret that smokers expire long before those who do not block their lungs. The Commission is confused about whether this raw fact ought to be banned too. There is a strong anti-smoking lobby within the Commission which favours punishing or alarming the cigarette addicts.

Had these daft bureaucrats been around in the 17th century London coffee house Lloyd’s (which later evolved into the global insurance market) they would no doubt have insisted that all merchant ships paid the same premiums, regardless of the risks.

The nature of the risk is utterly different. Markets do their job by differentiating. They digest and process past experiences to price future risks.

Penalising safe younger women drivers to cross subsidise crash-prone males is distilled foolishness yet it masquerades as enlightened policy as it does away with sexual discrimination.

If muddling motor insurance is about a vivid but essentially modest amount of money, this is only a foretaste of the vast fatuities proposed by the Commission.

Across the EU, state pension schemes are failing. They are not funded, one generation simply taxes the next to pay for their needs. As the demographic patterns confirm, ever fewer workers of the future will be levied ever greater sums to pay for retirement benefits. Britain is something of an exception. Most of our pension provisions are in the market and fuelled by actuarial risk. The bulk of pension obligations on the Continent are claims on the national treasuries.

Yes, I know this sounds academic, but there is a potential catastrophe in insisting insurers and pension funds must disregard questions of sex, or smoking, or health, or of other lifestyle factors.

The European Commission thinks it is promoting "fairness". If women live longer, this fact of nature must be ignored so men are equal. It seems plain that these rules will only impose the flaws of the state social security or pension systems into the private markets.

We were told we were joining the Common Market. What we have is the Common Bureaucracy.

Edinburgh’s insurance giants seem to be mute about this problem. Perhaps they are only being discreet. Privately, they may be telling the Commission to behave coherently.

Yet this leads to far greater misgiving. The Commission could come up with preposterous ideas that have not been thought through. What we lack is a corrective mechanism. If our government pursues an unpopular policy, it has to explain itself to the electorate.

The noble philosopher Sir Karl Popper said most of the talk about democracy is waffle. The only substantive power in democracy was to dismiss a government. Fear of their rendezvous with the electorate is what keeps politicians alert. These powerful processes are absent from the European Commission.

Do not be fooled by the subterfuge of the European Parliament. The Commission does not draw its legitimacy from all those MEPs. The UK government has to secure a majority in the House of Commons, and try to resecure it at every election.

The European Commission is a very different beast. Nobody can be voted in or out. Nobody can be voted on or off. Here is raw power uninhibited by the democratic processes we all think we still live under. I believe we should be appalled that the auditors of the European Commission, reporting that half the organisation’s billions are corruptly or criminally processed, were dismissed for their diligence and courage.

So, a goofy plan to obliterate actuarial fact - that women drive more safely than men and live longer than men - is far more than an intellectual error.

It is emblematic that we are now subject to powers that lack proper corrective measures. The European Union is an autocratic monolith. It does not bother to crush its critics. It ignores them.

We are free to write to our MSPs, MPs or MEPs to criticise any directive from Brussels. In turn, they are powerless to do anything. They can burble. They can waffle. They can write articles. Why should Commission officials bother to yield any of their exhilarating powers?

If the EC can ignore the accumulated knowledge of the insurance industries with utter impunity, what levers can we mere motals pull?

When Friedrich Hayek penned his astonishing book The Road to Serfdom, he expressed the fear that nationalisation would not only crush all wealth but also destroy liberty. Perceptive though he was, he never envisaged or understood the prospect of this strange international bureaucracy that is incorrectable by elective mechanism and barely subject to laws.

It often seems to me that each industry is damaged or obliterated in isolation. Scotland’s fishing fleet has been decimated and the rest of us were as powerless as the Scottish Minister for Fishing. One by one every corner of our business life gets caught is these subtle cobwebs. We were told we were joining the "Common Market". What we have is the "Common Bureaucracy".

Scotland’s insurance markets work well. For generations they have been at the heart of Edinburgh’s vitality. Direct Line jolted us all and delivered cheaper cover far beyond the Lothians. Soon, perhaps, complying with the drizzle of Euro-directives, no Scottish insurer will have data on the sex, age, health, wealth, or accident history of its customers.

Paul MacDonnell of the Irish Insurance Federation expresses his exasperation: "In motor insurance, where objective sex-specific claims data justifies differences between men and women drivers, particularly amongst younger, less experienced drivers, equalising the premiums to the benefit of young males without improving their risk profile will bring more high risk drivers on to the road, thus making our roads less safe for all road users."

I have no doubt he is correct. My fear is that by fighting Euro-nonsense one by one, businesses will be defeated by the colossal weight of the Commission.

John Blundell is director general of the Institute of Economic Affairs.