What does being a Girl Make a Difference?
By Dom Devore
Rough Draft
Adversity is one thing, but this takes it to a whole new level. On March 1st 2011, it is published in “The New York Times” and “Mail Online” that the European Court bans gender as a factor in insurance. This basically means that the ‘gender equality’ ruling means young men cannot be charged more for their car insurance – even though they are ten times more likely to have a serious crash. Also pension and medical will have to be adjusted when the new ruling will become permitted on the 21st of December this year.
An example would be car insurance. The Association of British Insurers’ predict that women drivers under the age of 26 may face a 25 percent rise in car insurance rates, with a 10 percent drop in rates for men within the same age group. Currently, the standard practice across Europe is to base insurance rates on statistics about differing life expectancies or road accident records of the sexes.
A woman driver under the age of 22 pays around $2,604.24 in car insurance while a young man is charged an average of $4,257.82. This is because men under 22 are ten times more likely to have a serious crash, 25 times more likely to commit a driving offence and twice as likely to make an insurance claim.
The risk difference between the sexes becomes less pronounced as both get older. But the ruling means that in future gender cannot be taken into account when accounting premiums. That means age will become the overriding factor when calculating insurance. Hence young women can expect a rate hike of up to 25 percent. But at the same time, an income a man receives for life from his pension will be cut by as much as 8 percent.
Insurers grudgingly accepted the ruling, but said the change will be bad for customers and they maintained that their current policies were fair. They insisted that the typically longer lives of women should be taken into account when offering life insurance policies, for instance.
Currently millions of insurance policies take gender into account. The court ruled that practice as inappropriate since there are myriad other factors that could be considered. Gender, however, is typically easy to check and can point to sound statistical conclusions, the industry says.
A statement the court said to this was, “Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination.”
Until now, discrimination in setting insurance rates has been explicitly permitted under EU equal treatment rules. It allowed the market to fix the price of a financial product based on the statistical likelihood of a person having an accident, falling ill or dying. All EU insurance policies will be affected by the new ruling.
