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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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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.

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.

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.

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?

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.

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.

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!

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.

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.

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.

Ms Ketenci says:
3 March 2011

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

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?

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.

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.

graham says:
4 March 2011

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.

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.

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.

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.