Comment: The truth behind the numbers

Do insurers’ scare tactics stand up to scrutiny?

It’s another month – and another collection of scare statistics from protection insurers. Certainly no period ever goes past without some frightening figures from the very firms whose products are intended to produce comfort and reassurance.

LV=, the insurer formerly known as Liverpool Victoria, hit the publicity jackpot with a whole page in The Guardian for its “cost of a raising a child tops £200,000” survey. It might have been a slow news day but The Guardian also thought this so newsworthy that it gave this figure an above the masthead trail on page one as well. That’s big – it’s what the casual buyer sees.

The insurance company’s publicity machine must have been delighted. The long romp through its statistics was uncritical. But it must have held its breath to see if it received the same “Ben Goldacre” treatment as the LV= release a year back in February 2009 which proclaimed a 29% increase in cycling accidents over the past six months.

Goldacre, who writes the paper’s Bad Science feature, was so incensed by this that he devoted a whole column to showing it up for the nonsense it was.

Leaving aside that the LV= figures were compiled online from a self-selecting sample and that the severity of the accidents is uncertain, the insurer compared the summer months with the previous winter period. Cycling is unlike motoring. Drivers crash more in winter due to darkness and ice whereas cyclists tend to use bikes far less in winter so reducing the accident count. Those who carry on cycling in the bad weather are the most experienced and hence the least likely to fall off.

Now scratch this year’s LV= figures a little and see if they stand up to scrutiny. The £200,000 works out at around £10,000 a year so a family with three children would need £30,000 after tax before any other costs such as housing or the expenses of the parents. If we assume – very conservatively – that each parent costs as much as a child, then a two parent, three child family needs £50,000 a year. To get that sort of income before tax, the family would need around £80,000 a year. This would put them up into the top 5% or so of incomes. Therefore the figures may be fine for top earners but not for the vast majority. The results show London parents pay out even more.

More than half the UK average £200,000 – £107,000 – is accounted by just two items, childcare and education. Now, how many families outside the wealthy minority spend £10,700 per child per year on these items? My children are grown up now but while there were a few years of pre-school childcare, the £50,000 lifetime figure is simply not recognisable. Nor is the similar lifetime figure for education – my children like most youngsters went to state schools.

Mike Rogers, the group’s chief executive is quoted saying: “I suspect many new and prospective mums and dads will be a little shocked to see the potential financial burden ahead of them.”

I suspect they will be shocked as well – by the sheer distance between LV=’s figures and reality. If it really was that expensive, we would put our children up for adoption or use better contraception.

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