Equality & Risk Women and Insurance
Equality set to cost UK female drivers £900m
Women could pay £900m more collectively for their car insurance and men £600m less each year when the UK introduces legislation to make the pricing of cover gender-neutral, the government said yesterday.
Young drivers will see the biggest swings in pricing as a result of the changes. Males aged 17-25 are likely to see their hefty premiums cut on average by £188, while their female contemporaries could pay £326 more, according to research by Oxera, the consultancy.
The changes, which come into force at the end of 2012, follow a European Court of Justice ruling in March this year that gender should not be taken into account as a risk factor in insurance contracts because the practice breached European Union rules on sex discrimination.
Mark Hoban, financial secretary to the [UK] Treasury, said that, although the government believed the judgment was detrimental for consumers, it was obliged to implement it into law.
“While nobody should ever be treated unfairly because of their gender, financial services providers should be allowed to make sensible decisions based on sound analysis of risk,” Mr Hoban said. “We continue to work hard with other member states and the Commission to secure legal certainty for industry and reduce any detrimental effects for consumers.”
Other changes resulting from the ruling include male retirement incomes, known as annuities, possibly falling by 13 per cent a year if insurers no longer take account of the fact that men generally die younger. For the same reason, premiums for female term life policies, which pay out a set sum on death, might rise by 10-15 per cent per year, the government said in its consultation paper.
However, the [UK] government warned that information on the impact on business was scarce.
“Although consumer impacts are clearly adverse and any available data have supported the central assumptions, it must be recognised that quantitative calculations are based on very limited sources of data,” the paper said.
When the ECJ issued its ruling in March, insurance executives said companies would rush to equalise their pricing between the genders without hurting their profits.
The government’s consultation paper, however, said sharp price increases would most likely be temporary and that competition was expected “to help drive prices back down towards their original price before the removal of the risk factor”.
It also expected changes to affect buying patterns. Riskier individuals would buy more cover as it became cheaper for them, while the less risky would be discouraged from buying insurance entirely or would buy less of it as their prices rose.
For insurers, this “adverse risk selection” was likely to mean “that the market will stabilise with premiums at a higher level overall than they were before”, the paper said.
By Paul J. Davies, Insurance Correspondent
Copyright The Financial Times Limited 2011