The recent inauguration of the current President Obama has caused the citizens to hope that the economic turmoil will soon recede. The speech held so much promise and President Obama actively creates solutions to confront and address the problems at bay. Insurance companies are suffering the most with the current financial maelstrom and people are beginning to lose faith in these well established institutions. With everything that is happening, can insurance companies surpass the existing dilemma?

The economic meltdown has greatly impacted each industry known to mankind. It has created havoc and certainly will continue to do so in the next two years. Government agencies are doing their best to cope with the situations and help each industrial firm get back on its track. Insurance companies, mainly, have become more and more unstable and in need for government aid.

Recently, though, there has been a proposal to eliminate age as a factor in gauging car insurance premiums. Consequently, all payments will most likely be set higher for all individuals availing a security plan. Insurers fear that with this, as a starting point, legislation might also influence them in its prerogative to charge riskier customers with a higher premium as a means to manage risk. This can result in imbalance and can further create a slack in control for insurance firms. To address this concern, insurers will then have to set higher prices for all ages disregarding their inherent characteristic of engaging in risky or adventurous activities.

ABI declared that 60-64 year old drivers have average claims of £1,170, while those aged over 80 have £1,716. With the proposed law, this factor (age) is disregarded unless a medical assessment approach is done (which is costly). Either the insurer will go ahead with the assessment plan and charge a higher premium to the policyholder as a consequence, or the insurer will directly give equal premiums to every individual disregarding age that is much higher, still, because the risks are generally assumed for all ages. Either way, the proposed bill is still disadvantageous for the policyholders and insurers alike.

Every demographic differentiation has an impact in measuring a policyholder’s premium. A woman, for example, would yield a lesser premium than a man, because of its nature to be more cautious (majority) and to drive lesser miles than a man does. A young adult would also yield a higher premium than those people in their 40s that have families since the latter are deemed to be risk-averse. All these legislations can break the insurance agencies because of the control issues within each company that arise with the given bill.