What is age banding?

• A. The price of insurance for the same level of insurance will vary based on age of the individual
• B. A method of grouping employees by job title
• C. A cap on the number of dependents
• D. A way to adjust premiums based on smoking status only

Answer: (A)

Age banding is a method used in insurance pricing where people are grouped into age ranges and premiums are set based on which range a person falls into. The idea behind it is that age influences risk: younger individuals generally have lower likelihood of needing costly claims, while older individuals face higher risk. By applying different rates to each age band, insurers price the same level of coverage more fairly and predictably, reflecting how risk grows with age. It isn’t about job titles or dependents, and it isn’t solely about smoking status; those are separate factors that can also influence premiums, but they don’t define age banding itself.