Changes to women-only car insurance premiums

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genderThe European Court of Justice is due to make a decision in the coming months about enforcing a ban on using gender as a factor in setting car insurance premiums.

Rises across the board?

If this ban is put in place, it could mean rises across the board for car insurance. Women-only providers like Sheilas’ Wheels and Diamond will, no doubt, be taking a keen interest in the outcome of ruling.  Although the Sheilas’ Wheels brand claims that they will be unaffected by a ban on gender usage, providing that they only have to equalise prices within the brand. In an article in the Guardian, Spokesman Adrian Webb said:

“Sheilas’ Wheels underwrites men as well as women, but only a tiny proportion of our half a million customers are men. That means if prices were equalised, it would make no difference to premiums.”

Women may have to pay more

However, a change in the law could mean that women drivers across the country have to pay more for their cover.

The Equal Treatment Directive, implemented in 2004, included a ‘derogating provision’  to allow EU member states to let insurers use gender when mitigating risk, provided that this was justified by using thorough, published actuarial data. This is a key component when looking at this debate –  the decison to take a person’s  sex into account when determining prices is based on factual findings. It isn’t simply based on a preference for women or a dislike of men.

Currently, women can find cheaper cover deals because statistics show them to be a typically lower risk to insurers. In general, women have fewer serious collisions and any claims they do make are lower than those of their male counterparts.

Factors deciding driver ‘risk’

When deciding on the amount an individual will pay for any type of insurance, an underwriter will assess certain information, look at statistical data and determine how much of a risk that person poses to them. Sex is just one component of this. You may be able to change some elements that could  negatively affect your risk profile  – for example, you could enhance the security features on your home or car. However, some things you simply can’t change, like your sex. This is why it might seem rather unfair to some people (more specifically, some men). In addition, some insurers might attribute certain lifestyle choices to specific age groups or to your marital status – which I’m sure many people might also deem inappropriate.

The difficulty is, insurance companies have to base their pricing on certain factors to ensure they don’t continually lose money. By evaluating risk as efficiently as they can, it helps them keep prices manageable for a wider scope of people and also enables them to continue providing cover.

The upcoming ruling has been brought to light by the advocate general, Juliane Kokott, who is of the opinion that it’s legally inappropriate for insurers to be linking risk with an individual’s sex. If the ban is enforced, it’s possible that a widespread hike in insurance prices may follow.

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The views expressed here are solely those of the author and do not necessarily reflect the views of Policy Expert.