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Should insurers take gender into account?

Cartoon of woman in car

A new ruling means that insurers can no longer take gender into account when calculating your premiums. But what will this mean in practice – will you be better or worse off – and is it a fair decision?

Today, the European Court of Justice has ruled that insurers won’t be able to base premiums on the gender of policyholders.

At the moment, insurers can take gender into account providing they can justify it on the basis of risk analysis and claims statistics.

But the new ruling means that from December 2012, insurance providers will no longer be exempt from a wider EU principle covering gender equality. Until then, insurers can continue to charge men and women different premiums providing they can ‘ensure that the underlying actuarial and statistical data on which the calculations are based are reliable, regularly updated and available to the public’.

The gender gap

So what does this all mean to you and me? Today’s ruling could see men or women paying more or less, depending on the product they’re seeking to buy.

Take an example: women tend to get a worse deal on pensions as they have a longer life expectancy. As a result of the ruling, their annuity income would rise, while it would fall for men.

But women could find themselves worse off when it comes to car insurance. Currently, young male drivers pay more for car insurance as they’re involved in more accidents and claims than young women.

A ‘disappointing’ ruling

Maggie Craig of The Association of British Insurers, which represents the majority of insurance providers, has called the ruling ‘disappointing’:

‘This gender ban is something the UK insurance industry has fought against for the last decade. The judgment ignores the fact that taking a person’s gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance. Insurers will now study this judgment carefully to manage negative effects for customers.’

The ruling doesn’t come into effect until the end of 2012 so you shouldn’t see any immediate change to your insurance premiums.

We’ll be keeping a close eye on insurers to make sure that they don’t use this as an excuse to raise prices across the board. But what do you think of these rulings – are they fair? Do you think you’ll be better or worse off as a result?

Should insurers take gender into account?

Yes (74%, 344 Votes)

No (26%, 121 Votes)

Total Voters: 465

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Comments
Guest
June says:
1 March 2011

What is the point of actuaries if they’re not allowed to do their stuff? Insurance is the business of quantifying risk – if everyone is to be charged a flat fee then why not call it another motoring tax and let the government collect it? It would make sense if insurance companies were to charge premiums based on a person’s actual individual driving record. That way if you’re a good driver you get the credit and the lower premiums, rather than subsidising those who happen to have the same age/gender/place of residence/vehicle or any other variable that may or may not apply.

Guest

Very true June and a great point.

Insurance premiums should be based on the ability and experience of the driver, thats all. But they don’t so, why not just make it a tax?

A woman is not safer than a man and vice versa. The fact that Sheilas wheels existed for so long proves that people only want equality when it suits them.

Guest

If it was found that people with red hair were less likely to make a claim or crash their cars would it then be fair for them to have lower premiums? Not in my view so I tend to support the judgmernt of the European court. It will hopefully lead to a more rigorous actuarial approach, so that as well as taking account of the kind of car people drive [because that affects the repair expense], the individual’s driving record should also count for a lot – how many miles a year they drive on how many days, rural versus city driving, night-driving, and even their occupation to some degree. And criminal record? – worth thinking about, perhaps. But we should bear in mind that there is likely to be a trade-off between the level of insurance premiums and honest disclosure: the industry is plagued by evasion and dishonesty already. Many young drivers, having just passed their test, can probably drive better [and certainly have more recent knowledge of the highway code and correct practice] than many older drivers who have adopted bad habits, so in my opinion it is wrong to penalise all young drivers just because of their age. The No-Claims Discount is a crude tool for discriminating between different drivers. The technology is available nowadays to make much better actuarial assessments of individual drivers. I cannot see how substituting taxation for insurance would improve things – insurance is about remedies and compensation which I wouldn’t trust to the government bureaucracy to administer if I was hit by a drug-crazed driver.

Guest
Sue says:
2 March 2011

If it was found that people with red hair were less likely to make a claim or crash their cars then OF COURSE it would be fair for them to have lower premiums – surely that’s the whole basis of actuarial calculations?! If young men had a better risk rating than young women then they should definitely pay lower premiums, but apparently statistics show that they pose a greater risk to the insurance company’s profits than young women and so it seems very reasonable that they should be charged more. It’s a no-brainer – and the same goes for the other end of the age spectrum when annuities are being assessed. I am baffled by the court ruling.

Guest
Brian Andrews says:
2 March 2011

Any genuine actuarial factor is appropriate – including red (or blue or purple) hair, if that were to be statistically true. Why on earth does John think a known factor should be ignored?

Guest

“so that as well as taking account of the kind of car people drive [because that affects the repair expense]”

This is actually quite trivial.

If a driver loses control, crashes through a supermarket window, causes a fire that destroys the shop, all the stock, and several lives, then the cost of the repairs to the car pales into insignificance. An extreme example, no doubt, but there are others, e.g. next time you see a car transporter truck on the motorway laden with, say new BMWs or Mercs, work out the possible cost of causing that to crash.

No, the kind of car people buy is an indicator of the risk they pose. People who buy high performance cars are statistically more likely to make a (big) claim than those who buy small, economical city cars.

Guest
tony Humphreys says:
1 March 2011

this is one of the reasons we are thinking about emegrating. Will my children be able to afford to drive when they are older? in this country I fear not, which is why we are considering new zealand, where third party insurance is part of tax. This amongst many other reasons anyway.

Guest
caroleinwales says:
3 March 2011

Tony Humphreys talks about moving to New Zealand so his children can afford to drive in the future – well he’s right, but for very wrong reasons in my view. I did the ‘once in a lifetime’ visit to NZ a couple of years ago, and was astonished to discover that insurance is not legally compulsory at all out there. So there are many drivers on the road with no cover….and consequently many ‘victims’ of bad driving who get no compensation at all and have no legal redress. An appalling state of affairs, and not something to be applauded and exploited so that some selfish wannabee drivers can save money.