Is the requirement reasonable in the circumstances? Even if the above elements needed to establish indirect discrimination were satisfied (for example, in the case of people with certain disabilities requiring expensive cars), the higher premiums charged to expensive car drivers may ultimately be considered reasonable in the circumstances. This is because the higher premiums are directly related to the increased costs of repairs. Where the risk to the insurer is greater, given the increased expected cost Summary The correlation of insurance rating factors with protected attributes alone (particularly if unknown) will not necessarily constitute unlawful discrimination: • There will only be direct discrimination if a customer is treated differently because of, or by reason of, a protected attribute. • Whether there is any unlawful indirect discrimination will depend on the nature of any requirement imposed, the customer’s failure or inability to comply with it (in relation to the RDA and DDA), whether the customer is disadvantaged by the requirement, and ultimately, whether the requirement is reasonable in the circumstances. • If there is a greater risk arising from a rating factor, it may be reasonable for the insurer to charge a higher premium in accordance with that risk. • An insurer may be more at risk of unlawfully discriminating if: of repairs for expensive cars, it may be reasonable for the insurer to charge a higher premium.73 Conclusion The proposed pricing appears unlikely to amount to either direct or indirect discrimination. These conclusions rely on some important assumptions: • The relevant rating factor (type of car) has a clear and intuitive relationship to risk. • The insurer setting prices in line with that difference in risk. • The protected attribute has no direct bearing itself on risk. • Customers with a protected attribute can change their risk behaviour as described by the rating factor (i.e. they are able to purchase cheaper cars). In other situations, some of these assumptions may not hold. An insurer should take steps to ensure that any indirect discrimination which might emerge from their prices is reasonable in the circumstances. – The insurer sets prices based on a rating factor with no clear and intuitive relationship to risk or in an arbitrary manner, such that the pricing may not be considered reasonable in the circumstances. However, in some situations, the protected attribute itself may still have a measurable relationship with risk, as discussed in Part B below. Guidance Resource: Artificial intelligence and discrimination in insurance pricing and underwriting • 2022 • 29