AA Statement: Gender discrimination in car insurance: European Court decision expected 1 March 2011

A decision from the European Court of Justice is expected on 1 March on whether the use of gender to assess insurance risk is unlawful. This is potentially a serious issue for the motor insurance industry. If this measure comes to pass we would expect an initial price rise for all motorists, followed by an ongoing situation where young women are substantially overcharged in order to subsidise the under-charging of young men. 

If the Court does make the expected ruling next Tuesday it is not known whether the industry will have to conform immediately or whether a future date will be set by which insurers must comply.

Do you think this ruling is fair? Click here to take part in our instant poll

Read more…

A decision from the European Court of Justice is expected on 1 March on whether the use of gender to assess risk is unlawful. This is potentially a serious issue for the motor insurance industry. If this measure comes to pass we would expect an initial price rise for all motorists, followed by an ongoing situation where young women are substantially overcharged in order to subsidise the under-charging of young men.

Comment by John Farrell, Director of Insurance AA Ireland: “If this comes about it will have serious implications. At the moment in Ireland insurers are allowed to charge differently on the basis of gender provided that they can establish a genuine actuarial difference.

 “It is undeniably true that female drivers are less risky in insurance terms than their male equivalents, and the age of the driver is also very relevant. Women will typically pay as much as 50% less than men based on their claims record. Allowing insurers to use these undisputed facts in pricing motor insurance has never been considered unfair discrimination in Ireland.

“If insurers are prevented from doing so it will have immediate consequences. The first thing that we would expect is that prices will rise for everyone, right across the board. This is because underwriters will need time to develop different risk assessment criteria and in the interim they will have to protect themselves against losses, which they will inevitably do by charging higher premiums. 

“In the longer term, applying this rule would mean winners and losers. The biggest losers would be those who are currently the safest drivers, ie women. For young women especially, forcing insurers to ignore gender would mean they would all end up paying more for their insurance than could be justified by their real rate of risk. This hardly seems a positive step. 

“The ‘winners’ would be the drivers who are currently highest risk. In effect young women would be compelled to subsidise young men. This is an important road safety point as well; safe driving is rewarded with lower premiums and that clearly incentivises young men especially to drive more carefully.

“At the opposite end of the age range, there is again a gender difference but it is less pronounced.

“Insurers may look to use other risk factors as a proxy for gender – for instance occupation or vehicle type, but it isn’t clear to what extent this will be permitted if it constitutes a form of indirect discrimination.

“In summary, if this measure comes to pass we would expect an initial price rise for all motorists, followed by an ongoing situation where young women are substantially overcharged in order to subsidise the under-charging of young men.”