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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.

Profile photo of dean
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.

Profile photo of John Ward
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?

Profile photo of gradivus
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.

Guest
Tony Humphreys says:
3 March 2011

No Compensation = no compensation culture – great.

When I drive, I accept the risk – and if I have an accident, then thats a risk I take. I dont drive with the smug knowledge that if I am involved in a accident its Win Win all the way to the bank. That is wrong and a typical ‘me me’ attitide that has decimated Britain over the las 10-15 years.

Anyway, New Zealanders are not so snobby to keep up with the neighbours, they just get cars that run, so it they do just prang them, its not the greatest loss in the world.

If you want to get away from the low life compensation culture of the british, then New Zealand is the place for you too.

Guest
Mark Campbell says:
1 March 2011

The ruling is simple implementing rationality into the insurance models; which the insurers are not capable of doing. The reason why women make less claims is because there are less women drives than me; and women drives have typically been driving for less than men. Why; because historically Ones husband or boyfriend was expected to drive a lady. Times are changing and no doubt, so will the statistics. The EU courts have just sped up the rational decision making process.

Guest
Brian Andrews says:
2 March 2011

No, the ruling is actually removing rationality from the insurance models. It is quite irrelevant WHY women make less claims (drive less, more careful, chaeper cars, etc), only that they do.

Guest
David Reaves says:
2 March 2011

Insurance whether life, annuity, car, household etc is a risk business. It is right that that insurers should be able to charge premiums based on risk. It cannot be right for a commercial company to charge one section of the community more than their risk entails any more than right to charge another section less despite the risk. The only issue is how that risk is calculated because the company can only make predictions if the likelihood of an individual claiming is low. I have never had a serious accident but how does my insurer determine how likely I am to have one in future?

Amongst many other aspects of risk analysis, it is widely accepted that women drivers have fewer accidents than men under otherwise similar circumstances. So why should women be penalised due to male traits. It makes a man’s insurance cheaper than it should be and could even skew policy takeup such that the woman is put as a second driver on a man’s policy rather than taking her own.

Authorities should constrain themselves to looking at the fairness of the risk rating system, not impose social engineering into a straightforward commercial situation. It is not fair to average out premiums between two groups of people, one of which involves a higher risk than the other. Next we will find young inexperienced drivers being subsidised by those of greater age and experience.

Guest
Jeff H says:
2 March 2011

The EU members and staff do not have to earn money so have no responsibilty for what they do. Insurance is by definition an evaluation of risk. It has nothing to do with being PC. The only answer to the stupidity of the EU is to leave it. Perhaps Which could do research on that as a subject. However, if travel and health insurance is to be made cheaper for us ‘Oldies’, then perhaps the EU is a marvellous idea.

Guest
Peter Ford says:
7 March 2011

Yes, we should withdraw from the jurisdiction of this court – despite the down-sides of doing so. It’s an outrageous decision.

Guest
Oliver says:
2 March 2011

Before I make any comment let me start by saying that I am a young male driver, so naturally shed a tear every time I have to look at how much I pay for car insurance. Also as a student, a tin of beans can deplete half my weeks budget.

Therefore, despite the couple of hundred extra pounds this will apparently reduce my premium by, I am strongly against this ruling.

Insurance is about charging enough money to cover payouts + overheads + profit margin. In an ideal world premiums would be charged on an individual basis, but everyone knows this would increase overheads, increase paperwork, reduce efficiency all of which would be passed on to the customer resulting in increased premiums. Creating profiles and groups is needed to maintain a good balance of efficiency and accurate premiums.

Its part of a trend that scares me where we can no longer give different groups seperate treatment even when there is factual evidence in support of doing so. When will this stop?

As a young, white, (reasonably) intelligent, hetrosexual, British, working and studying, athiest male, it makes a change actually benefitting from these “non descrimination” laws. Sometimes it feels like people with my charascteristics are the only ones it is ok to descriminate against. And where are the feminist groups coming out in great support of this fantastic victory for womens equality?

Profile photo of MartinScherer
Guest

As a white male I am tired of the presumption there is no discrimination against men.

However, this ruling simply shoots us in the foot and brings all anti-discrimination into disrepute.

Guest
Brian Andrews says:
2 March 2011

Presumably on the basis of ‘anti-discriminatory’ principles, then ageism should be next for the chop? After all, why should I be charged less than a newly qualified seventeen year old driver, just because I’ve got thirty or so years of accident frree driving? Disgustingly disciminatory I call it!

Guest
Sandra says:
2 March 2011

This issue is not about gender it’s about risk and it is well known that women are safer drivers than men, particularly young men.

Profile photo of omegafrankie
Guest

I agree wholeheartedly with June’s comments.
Insurers and pension providers employ actuaries for the very
good reason that it enables them to identify the risk more clearly and
to tailor their offers accordingly.
It is doubtful that the European Court has any expertise in this area, and I suggest
that the court is stumbling into the same realms of surreality that the
Human Rights Court ( also a court with little or no expertise or qualifications ) has stumbled into with prisoners voting rights.

Profile photo of omegafrankie
Guest

Just read Jeff H comment and agree with every word of that one!

Guest
Anonymous says:
2 March 2011

Was the ruling just about gender? I think different age groups have different accident statistics too and are thus charged different prices and I wonder if there has been a ruling against age discrimination?

Guest
graham says:
2 March 2011

This was bound to happen one day. Ever since equality was requested there have been winners and losers. First the retirement age had to change for ladies from 60 to 65 and now they will have to pay more for their car insurance. Men have also lost out with the annuities so really nobody gains.

Guest
bernard says:
2 March 2011

mad mad mad. Why should the pathetic EU medlers know more than our British Insurance companies?

Guest
Mike Warr says:
2 March 2011

Another example to support our exit from the EU . They are meddlers and we cannot find any good things for staying . It is a very expensive way of kicking us in the teeth , so many millions of pounds squandered for more expensive restrictions . It was never meant to work in this way . It is carrying on where Hitler left off , subjugating the Proud British people helped on by Charles De Gaulle . We should drop out on expense grounds as the EU is all take take take . The millions who died in the Second World War must be spinning in their graves , they did not die for this state of affares

Guest
Chilternphil says:
2 March 2011

Don’t you just love the law of unintended consequences. Equality was always important and it appeared we had made some great improvements. Yes there must be equality but in an intelligent rational and logical society, it should take account of the reality, which the unaccountable EU seems to ignore. (NB has never had its accounts passed by auditors so surely the ultimate unaccountability.)

So I am just waiting for my EU grant so I can become taller, richer and better looking; mind you they may strike back and demand I change gender and work for another 10 years.

Profile photo of John Ward
Guest

This is proving to be a fascinating conversation and there were some strong reactions to my previous comments [at 5.51 pm on 1 March]. Perhaps it is just as well that we have a European court to deliberate and pronounce on these tricky, and quite emotive, questions of fairness and balance. Up to now I had been thinking it was not fair, and therefore not British, to discriminate against somebody on the basis of a congenital factor such as their sex [or hair colour in my example] rather than on the characteristics of their driving behaviour. As Sandra says [at 2.02 today] “it is well known that women are safer drivers than men, particularly young men” so women need have no concerns over this judgment because every good driver [irrespective of their sex] will enjoy lower premiums than a risky man of any age.

Guest
Ted says:
2 March 2011

As many have already said insurance is about the identification and costing of risk. Applying social agenda priorities is irrelevant, misleading and unfair – to those taking out insurance, pension annuities and other financial products that will be affected by this ruling.
To whom are those making such judgements accountable?
Is this not an issue that Which should be taking up within Europe?
Also in all the comment that has been made in the run up to this long anticipated decision I have not yet seen any reference to what happens elsewhere in Europe. The ruling cannot surely be directed at the UK alone, and also surely other Eurpoean countries will run their insurance and where relevant pension offerings on a similar gender risk assessment basis as the UK. Does anyone know what happens/will happen elsewhere in Europe?

Guest
Peter Ruck says:
2 March 2011

What next – people aged 85 years of age be ingentitled to travel insurance to America for the same price as a 25 year old, although there is more likelihood of an older person claiming for serious illnesses, otherwise it could be percieved as ageist! Insurance premiums should be assessed on their level of risk.

Guest
Laurie says:
2 March 2011

I agree with Junes comment “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?” If the EU says men and women should pay the same then young men and old men should pay the same !! PS I am over 50 and my insurance is now 5 times less than last year because I took my son, who is 19, of my policy this year.

Guest
Vivian says:
3 March 2011

It may be cheaper for women drivers, but neither is it fair that a woman should receive a much lower annuity/pension in spite of having paid as much/for as long as a man.

Profile photo of richard
Guest

Depends on the pension. Teachers have had equal pay for many years – and equal pensions. But the reason for other pension differentials is because women statistically live longer than men – so it is perfectly fair for them to be paid less..

But back to topic – the EU ruling is wrong – because charges are or were based on perceived risk. – anything else is ridiculous..

Shall we see the day when car insurance is completely identical for the driver rrespective of age, experience, competence.- or type of car?

Guest
Graham says:
3 March 2011

So if gender is discrimination then what about age. Should young drivers be discriminated against because they are young ? Therefore their premiums should fall, and the older should pay more.
This is how ridiculous all of these stupid rulings are from Brussels.
They are taking to the extreme letter of the law, no common sense at all.
Are all of the EU states following all the rules from Brussels, I doubt it.

Guest
JER says:
3 March 2011

I have said no because I believe it should be based on risk. However that means that if there is a clearly established difference in risk between men and women, it is reasonable to charge differently. But it still should be closely monitored as that risk becomes less obvious with age and experience.

Guest
K J Phillips says:
3 March 2011

I have been in favour of the principle of the EU since its’ inception but, if this ruling is typical of its’ (our) Court of Justices’ logic then Someone Please Save Us From Such Rulings, or maybe it”s time for a referendum on getting out of the EU.
The current system is not perfect for all cases BUT, it is based on sound principles (though perhaps not always applied with impartiality), and evolves over time and experience.
If this ruling is applied, the UK system will plainly be less fair from that point on.
We are what we are, gender, temperament, aptitude and all those things that affect risk.
Perhaps the EUCoJ will just ban gender next and have done will it, AND we’ll pay then to do it!

Guest
Tony Humphreys says:
3 March 2011

I fear that the only way out of such dictact is by removing power from not only an unelected EU, but politicians too.

If the equality legislation that has forced this, and other recent rulings, had been put out to referendum, then whatever way the vote went, at least we would have a decision that would be what the country had decided on. These issues would have come out in the campaigns, and we would be clear.

Politicians are no longer capable of passing such legislation because of pressure groups and vested interests, and power needs to be returned to the people, not the governments.

After all, if other countries can do it – USA and Switzerland for example, then why cant we.

Guest
Dave says:
3 March 2011

Maybe the phrase “innocent until proven guilty” should be taken into account for insurance. For years I have been paying ridiculous premiums for insurance and I have yet to make any kind of claim. All I can see insurance doing is bumping up the prices for women rather than leveling out the prices for men. Insurance has been ripping people off for years and i’m completely disgusted by the way it gets dealt with by our government. I think there is a bigger issue with insurance than gender discrimination. No claims bonus is a joke! why can someone pay to protect it? so they can make more money when actually there should be no protection whether you can afford it or not. Why should my premiums be bumped up if I do make a claim? they already assume i’m going to crash my car in the first year anyway hence the outrageous price and excess. This gender ruling seems like its just a way to make it that little bit more “fair” to the young males when actually its just going to ruin it for the rest of them.

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Guest

Insurance quotations vary a lot, and one factor is difference in the cover offered. Perhaps the only people who can work out the best deal are those who work in the industry.

I am in support of premiums related to risk but I would love to know how they are calculated. I can’t change my gender but I might be able to change other things in return for a more affordable premium.

Guest
Ms Ketenci says:
3 March 2011

Complete madness! Insurance of any type should be based solely on risk

Guest
Terry says:
3 March 2011

“At the moment, insurers can take gender into account providing they can justify it on the basis of risk analysis and claims statistics.”
That being the case, it doesn’t take a genius to figure out that insurers have a vested interest in getting their statistics right. If they don’t, they go out of business.
So how can anyone disagree with the current fundamental premise?
What am I missing?

Guest
Tia Junior says:
3 March 2011

So what next – accusations of agism because younger drivers pay more than older drivers? Perfectly reasonable to base a premium on risk profile or we’ll all just pay a flat rate. It’s a shame that profiling can’t be applied elsewhere – airport searches for example.

Guest
Brian Andrews says:
3 March 2011

It’s slightly off topic, but to answer your last point, profiling IS very much applied to airport searches.

Profile photo of Dan Moore
Guest

Given this legislation is going to come in next year, regardless of how controversial it is, it does certainly make it more important to shop around for cover, and give yourself more time to find affordable, quality insurance. That’s just about the only thing anyone who’s likely to be affected can do.

Guest
graham says:
4 March 2011

Vivian,
The reason ladies receive a lower annuity is because they live longer and therefore are paid the payments for a longer period.Insurance companies took this into account when working out the figures. With this new ruling payments will be the same but ladies will then draw more overall because of them living longer.

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Guest

My first reaction was that the ECJ ruling was ridiculous – counter to the laws of maths and logic.

Then it occured to me that this ruling may be a way to force insurers to change the way premiums are calculated, by taking into account the risk each individual poses. This would require a more complicated driving test, involving psychological profiling, so that each individual’s risk profile could be established. Perhaps we could add to this the removal of the no-claims bonus: start everyone with an affordable premium, but massively load it after accidents; and take accident type into account. Periods of crash free driving would return the premium to the lower rate. This would incentives young drivers to i) get insurance in the first place; ii) drive safely to keep the cost low.

But then it occured to me that this approach has its own problems. If everyone is to carry individual risk profiles, then how long before this is applied to all walks of life. insurance premiums calculated on the basis off being a bit overweight, for carrying a gene for a particular disease, for being a chess player or stamp collecter (reductions I guess), a cyclist or a footballer, or doing DIY, or….. If every activity were to carry an insurance cost, having established the principle of individual profiles, then we come up against some possible paradoxes. For example, only women can get complications due to pregnancy, certain ethnic groups have problematic genetics making them more prone to specific diseases. Are these to be taken into account or not? If, as the ECJ ruling suggests, the answer is “not”, then the whole insurance industry, and related legal framework, is placed in a difficult position – it can’t be discriminatory, and it can’t operate logically. Perhaps the only way round this is to make insurance a state provision. This would eliminate the waste of sales and duplicated salaries and other commercial overheads; but I don’t see it happening anytime soon.

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Guest

I am against this EU ruling, as I believe that insurance should be primarily based on risk. If the ruling becomes law consumers will no doubt pay the price and find it harder to get realistic competitive quotes. Why not also remove Age discrimination – and then we all pay the same for our car insurance whatever age! And if the sex discrimination ruling is also applied to pensions and annuities the impact will be even worse on consumers particularly those with joint pensions where the pension provision is weighted to the male contributions.

Profile photo of pyghtler
Guest

I think this ruling shows an appalling ignorance of the facts of life, and that the legal industry cannot be trusted, either in this country or Europe.
Prior comments presume men will always pay more than women; very true with the young, but recently it’s come to light that some (not all) insurers charge higher premiums for older women than men of similar age, because statistics show higher risk. State this to middle-aged of either *** and many say it is unfair; if you then ask if that means that young people of both ***es should be charged equal premiums and they say ‘No’. Totally, wholly, illogical!
The biggest savings would come from driving the uninsured off the road; to which end EVERY deliberately uninsured car should be CRUSHED.