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Car Insurance Gender Directive- How Will It Affect You?

Posted by rafael on January 25, 2013 in Cars

Insurers and the insured alike have been up in arms about the ruling from the European Court of Justice (ECJ) against gender pricing on insurance policies, which came into effect on 21st December 2012. The ruling bans insurance companies from taking the gender of their customers into account when calculating their insurance premiums.

Along with their vehicle, age, postcode and driving history, gender has long been used by underwriters to calculate risks and premiums for individuals, and concerns are now being raised over the significant increases industry experts are expecting, and beginning to see, in the premiums for young female drivers as a result of this ruling.

Before the ruling, young male drivers paid on average 40% more than women for their car insurance, until the age of 40 when premiums between men and women tended to equalise. The price differences between genders were most prevalent in younger drivers between the ages of 17 and 25, but as insurers approached the effective date for the gender directive of December 21st, we saw this gap closing.  The average cost of an insurance policy for a female driver rose steadily throughout 2011 and 2012, whilst premiums for males stayed relatively stable. This was until the start of November 2012, which saw the deadline for the EU gender directive approaching and its full effect beginning to show on insurance policy prices. Through November and December 2012, it is estimated that female drivers aged 17 and 18 saw an increase on their insurance premiums of around 32%, whilst male drivers of similar age saw the average cost of an insurance policy fall by around 10%.

Male drivers have long complained about the cost of their insurance premiums in comparison to those of female drivers, but the fact is that young male drivers pose a bigger risk to insurers. They tend to drive faster, more, and later at night than women, and the typical insurance claim for a young male aged between 17 and 22 is around £3000, compared to that of a female driver at £2125 (according to the AA). In the same way that faster and more expensive cars pose a greater risk to insurers, male drivers tend to cost insurance companies more – hence the premium difference.

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Car insurance companies have been trying to help young drivers cover the cost of their insurance with schemes such as no deposit car insurance, and payment via monthly instalments, but there was a genuine fear that with the new gender directive coming into force, many insurers would find the young driver market too risky altogether and refuse to insure certain age groups, leading to reduced competition and higher prices. However, it now appears that the ruling has just served to close the gap between male and female premiums, with sharp increases in insurance costs for female drivers and some relatively small drops for males.

So how will these changes affect you? Many motorists complained that the gap should be filled by drops in male premiums, however, the general response from the industry seems to be that male drivers are being charged correct premiums based on the risks they pose for insurers, so to meet the EU gender directive requirements, female premiums must rise.

It seems then that women have got the raw end of the deal, with the EU directive putting equality before what many insurers and motorists, both male and female, consider a fair rating system. Being such a competitive market, insurers will be looking for ways to get around these directives so that they can offer competitive prices and attract the most custom from the young driver market, and this is expected to rely heavily on emerging industry technologies such as telematics, or the ‘black box’. This systems records information such as location and time of driving as well as speed and distance travelled, and uses it to help calculate insurance premiums. If this technology takes off, it may be a great way for insurers and their customers to get insurance policies and premiums based more on specific individual’s driving habits, and less on group factors like gender, age and address. Telematics technology may end up being the best way for safe young drivers to get the best insurance premium they can, but for now, female drivers can expect to continue to see their insurance premiums rise as a result of the ECJ ruling.

If you have any questions or concerns about how these changes will affect your insurance premium, your insurer should be able to tell you how they plan to address the new directive, and what the best options are for you.

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