The European Court of Justice has ruled that insurance companies cannot use gender as a factor when setting premiums. Until this ruling, women had enjoyed lower rates on car insurance owing to statistics which proved that they are more careful drivers than men.

Women will now be paying as much as 60% more for their women’s car insurance, with the highest increases being borne by young women. In essence, women will be subsidizing the insurance costs of men, who will see their average premiums decline by 10-25%.

As could be expected, the European insurance industry is very displeased with this ruling. Basing prices on gender was not done as a result of anything other than legitimate statistical research. This research shows that men are far more likely to become involved in accidents, so that they therefore pay a premium reflecting their higher risk.

Under the new rules, not only will women be charged more, but men will be charged less, which means that the entire risk to cost ratio, which is the basis for any determination of premium cost, is completely skewed. The resulting situation is not fair to women or to insurance companies.

Gender equality certainly makes sense when it comes to employment and other laws. However, in the case of insurance premiums it actually punishes women for their responsible driving habits. It also allows men access to lower premiums for more dangerous high performance vehicles, making them more affordable for drivers who would otherwise eschew them in order to avoid increased insurance costs.

Therefore, the new ruling only serves to promote potentially dangerous situations, and it may even deter the youngest female drivers from starting to drive as early as possible. Instead, they will be passengers in their male friends’ cars, which is a situation that is already known to have caused deadly or disabling car accidents among young women.

Auto insurance companies have no choice but to comply with this controversial ruling, which will only serve to raise premiums for the safest drivers on the road. At present it is not known or predicted whether there is any way for insurers to somehow preserve lower rates for women, or at least for those women who indeed have the safest driving records. Some insurers may abandon all or part of the European auto insurance market altogether rather than granting risky young male drivers lower and unprofitable insurance rates.

 

Sam Callaghan writes around motoring and personal finance.

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