Gender neutral insurance may be on the way

Covered mag, presented by
  • | by Adair Cameron

On March 1st 2011, the European Court of Justice will vote on whether gender can be used as a factor in the calculation of insurance premiums.

At the moment, insurers are allowed to give men and women different prices according to their sex, as long as it is backed up by hard statistical evidence. In the case of car insurance, there are significant differences between men and women when it comes to their risk of being in an accident.

According to the Association of British Insurers (ABI), the cost of claims from women ages 25 and under is about a third less than men in the same age bracket, so insurers charge young female drivers less. But it isn’t just gender that risk is calculated with. Age, health and many more considerations are built into the equation. Scott Kelly, head of motor at is of the opinion that gender should remain a factor in the calculation of insurance, a view which is shared among most in the insurance industry.  He says: “It’s difficult to see who the winners are with gender-neutral insurance. Premium calculations are based on decades of evidence and fact that women make smaller claims than men. Ignoring this fact seems to go against common sense."

The argument that male drivers, particularly young ones, will have cheaper polices is one which Kelly rebuts. “Women’s rates may well be increased to those paid by male drivers,” he says. “Women’s premiums could increase by 25 per cent and so insurers will be sitting on more capital." He continues: “Not letting insurers use a driver’s gender will lead to less precise premiums. If insurers can’t look at form, they’ll have to generalise. A change in gendered insurance could come as a shock for many female consumers when they receive their renewal notices. “A lot of people will be unaware of the change until it hits," says Kelly. "Increased premiums could also lead to an increase in the already high number of uninsured drivers on the road. And perhaps people will consider whether they can afford to run a car at all.”