1 Mar 2011

Insurance premiums based on gender ‘discriminatory’

Insurers cannot charge different premiums to men and women because of their gender, the European Court of Justice rules. An insurance expert tells Channel 4 News it’s a “dark day” for female drivers.

Insurance premiums could rise as a result of EU gender ruling (Reuters)

The EU court ruled that setting premiums based on gender was discriminatory.

Insurers have warned that female drivers under 25 in the UK could face a 25 per cent rise in car insurance rates as a result of the ruling – while men could see their costs fall by 10 per cent.

The European Court of Justice in Luxembourg said that using differences between men and women in setting risk premiums for car and medical insurance and pension schemes breaches EU rules on equality.

This is a victory for boy racers and a major blow for both democracy and careful women drivers. MEP Sajjad Karim

The verdict will apply from 21 December next year and force changes in the standard practice of basing insurance rates on statistics about things like reckless driving, road accidents or life expectancy differences between the sexes. Women traditionally can access cheaper car insurance because statistics show they have less accidents and make less claims – and also cheaper life insurance as they have longer life expectancies. Pension or annuity income for men is higher as well, typically, because men have fewer years in retirement on average.

But these differences will be wiped out by the ruling.

Today’s judgment said: “Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination. The rule of unisex premiums and benefits will apply with effect from 21 December 2012.”

The case was referred by a Belgian court after the Belgian consumers’ association brought the case.

The Association of British Insurers (ABI) said the decision was “disappointing”, and highlighted the potential changes in costs for consumers.

According to the ABI, research has shown that for motor insurance, women under the age of 25 could see a 25 per cent leap in their premiums; for annuities, men approaching retirement could see an 8 per cent reduction in annuity rates while rates for women could rise by 6 per cent; and for life insurance, women could see a rise by as much as 20 per cent in the cost of cover, while men would see a fall of 10 per cent.

‘Dark day’

Julie Owens, insurance expert at moneysupermarket.com, told Channel 4 News it was a “dark day” for female drivers, who would face higher payments.

“It’s absolutely a dark day for women drivers, who will be hit the hardest,” she said.

“We have already been seeing car insurance premiums increase, and seeing more convergence on pricing already. Out of 21 million quotes on the site, we have seen premiums for women, particularly younger women, already rising faster.

“Over 2010-2011, a female driver aged between 17 and 25 has seen a daily increase of 75p – that’s 34 per cent. For men, it’s been 12 per cent, of 47p a day.”

Changing insurance premiums based on age is still acceptable, but this could be what the courts look at next, Ms Owens said.

But for now rising insurance costs, added to other increasing driving costs like petrol, could put people off driving, she said.

Over 2010-2011, a female driver aged between 17 and 25 has seen a daily increase in their insurance payments of 75p. Julie Owens, moneysupermarket.com

“The last thing we want to see is people forced off the road, or even worse, tempted to drive without insurance,” she said. But she stressed that the latest price hike was not the fault of the insurance industry.

“Of course, it’s a hit for consumers, but it is not a hit that the insurance industry wanted to be charging. Clearly insurance premiums have been rising on the back of the high costs of bodily injury claims and fraud, but these are good reasons. The industry does not want to charge more based on these changes.”


Tory MEP Sajjad Karim said: “This ruling is utter madness. It is a setback for common sense.

“It is a statistical reality that young men have more accidents than women so it should be reflected in their premiums. Once again we have seen how an activist European Court can over-interpret European human rights legislation.

“The EU’s rules on sex discrimination specifically permit discrimination in insurance if there is data to back it up. Unelected judges have overruled the will of democratically elected MEPs and governments; is it any wonder people are do disenchanted with the EU?

“Boy racers will now have even more money to buy unsafe fast cars, whilst safer drivers will be hit hard in their insurance premiums. This is a victory for boy racers and a major blow for both democracy and careful women drivers.”

But Ronnie Bowie, President of the Institute of Actuaries, told Channel 4 News that insurers would come up with new ways of offering discounts – involving no-claims bonuses, the type of car and where people live. But he warned that the longer-term impact of the ruling would probably be on pensions, where men – who usually die younger – have been getting a better deal than women.

“As people reach retirement, they need to buy a pension – and men will find they will not get anything like the pension they thought, with a reduction of about ten per cent, which doesn’t sound much in the first year – but if you think that man is going to live for about 25 years, then that adds up to a very sizeable sum of money” he said. “So motor insurance is the short-term headline catcher, but pensions is the longer-term issue.”