Guide To The EU Gender Directive
The European Court of Justice (ECJ) has ruled that gender may no longer be used as a factor in the pricing of insurance products. At present, insurers consider gender because - for example - there is a difference between the sexes in life expectancy and the payouts they make as a result of road accidents.
This ruling comes into force on the 21st December 2012. From that date insurance companies must use gender neutral or unisex rates and some types of insurance, notably car insurance, the cost of an annuity and life insurance will be affected.
What is going to happen?
Insurance companies will no longer be able to charge different premiums to women and men solely based on gender following the rule coming into force.
The reasoning for this decision is that the ECJ considered that taking individuals’ gender into account when pricing insurance contradicted laws on discrimination.
How will this affect motor insurance premiums?
At the time that this guide is being published it is unknown exactly how much premiums will be affected by this ruling. Insurance providers have to calculate this and alter pricing structures to avoid breaking the rules.
Tiger Watch, the motor insurance pricing monitor, has been tracking month-on-month changes in car insurance quotes and prices for women drivers have not dropped by as much as for male motorists over the last six months.
Many people are likely to notice a change the next time they shop around for or renew their motor insurance.
How will it affect drivers?
The gender of a driver will no longer be allowed to be considered by insurance companies.
The biggest change is likely to be noticed by younger drivers. Historically, young female drivers have paid a lot less than young male drivers. The government estimates that young womens’ motor insurance premiums could increase by up to 24 percent for those aged between 17-25.
Top tip! Young or inexperienced drivers could benefit from taking out a telematics based product. Having a box fitted to your car that tracks your individual driving habits could prove a more affordable option.
What other factors affect premiums?
Clearly it is more than just gender that is considered when pricing insurance and this will remain the case.
Other risk factors will still be taken in to account. For example, insurance will still be more expensive for drivers whose vehicles have more powerful engines.
Age will also still form part of the evaluation criteria. The ruling does not prohibit discrimination based on age as it does gender.
What does the ruling mean for the insurance industry?
The ABI have announced that during the transition period, insurance companies will need to contact customers that are affected, change policy documentation and update their internal systems.
They must also ensure that brokers and car insurance comparison sites like Tiger.co.uk are provided with the correct pricing information and marketing is correct and current.