However the AA is pleased that the ruling will not take effect until 21st December 2012, which allows insurance companies a period of time to develop alternative mechanisms for measuring risk. This at least means that there should not be an immediate increase in motor insurance costs generally, which would have happened had the ruling taken immediate effect.
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John Farrell, Director of AA Insurance, says:
“The use of gender in calculating insurance risk has been a fundamental principle of Ireland’s risk-based motor insurance structure for decades.
“The Court has now agreed with EU Advocate General Juliane Kokott’s view that the opt-out enjoyed by Ireland and some other countries is not compatible with the principles of equality guaranteed in European legislation.
“However, there is a fundamental difference between equality and fairness. The calculation of car insurance premiums based on risk is by definition fair, but is incompatible with gender equality,” he says.
“Young women crash their cars far less often than young men, a fact that is beyond dispute. This has been the basis for lower insurance premiums for females.
“This is a bad day not just for Ireland’s female drivers but for all motorists. We will see premiums rise across the board as insurers struggle to find new ways of pricing accurately based on risk. In the long run insurers will be compelled to systematically overcharge all women, especially young women, in order to subsidise the under-charging of young men.”
“Young women have until now paid car insurance premiums that are typically up to 50% cheaper than men. In the short term, they will see their premiums rise significantly while those for young men are likely to fall a little.”
The transition period until 21st December 2012, giving the industry time to revise its rating structure. This should minimise the risk of sharp premium increases, especially for young women.
Mr Farrell believes that insurers will quickly start to adjust their pricing in a way that puts greater emphasis on the individual risk presented by motorists and that premiums will start to settle down.
“This is a very competitive market,” Mr Farrell points out. “We are likely to find that the initial increase will start to be eroded as insurers begin to develop a more sophisticated response to the loss of gender for rating purposes.
“But following the Court’s judgement, I fear that many insurers will find the young driver market too risky and pull out altogether. That would reduce competition, leading to higher prices.”
“It’s vital that the industry, road safety organisations, the education sector and the government focus on helping young people start their driving careers safely and responsibly which, in turn, will help to make car insurance more affordable.”
The issue came to the attention of the European Court of Justice in 2009 after Test Achets (the Belgian consumer association) launched a legal challenge in 2008, questioning Belgium’s implementation of the 2004 Gender Directive. The Court argued that the opt-out of the Gender Directive, enjoyed by Ireland and some other countries, was not compatible with the principles of equality guaranteed in European legislation. In September 2010, Advocate General Kokott issued an opinion in favour of this challenge. Today’s ruling makes the use of gender as a risk factor in insurance illegal.