Gender and insurance cost

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From 21 December 2012, insurance companies will no longer be able to take account whether you are a man or a woman when deciding on the price to charge you for new insurance policies or benefits that might be paid.

This includes the premiums you are charged for motor or life insurance, and the amount of benefits you are paid if you buy an annuity or claim against life, critical illness, income protection or health insurance.

This follows a ruling from the European Court of Justice which says taking account of gender is discriminatory.

In theory that might sound fair, but in practice what is going to happen? Do you think some people will pay less in premiums, and some will get paid more in benefits?

We have been searching for sensible guidance, but are not sure we have found it yet.

In my simple way I have always seen insurers as bookmakers. They have to take on a wide range of punters so that the overall pot is big enough to pay out where necessary, and leave them with a profit. Insurance companies have huge amounts of data. That is why they ask about your employment when insuring your car. They know rock musicians are more likely to be involved in an accident than clergymen. That is just a statistical fact, in the same way they know young women are going to have less insurance claims than young men. So in future a car insurer can look at what you do for a living but cannot take account of your sex.

A report in The Independent on 2 November 2012 suggests car insurance premiums are actually falling, and this is in anticipation of the change due in December. They say the cost of cover has dropped by 10.3 per cent over the last 12 months.

The latest Towers Watson/Confused car insurance price index shows that average comprehensive cover stands at £757, a fall of £87 over the year. Young women drivers under 20 have fared best with premiums 17.3 per cent lower than a year ago. But with insurers outlawed from differentiating the cost of cover on the grounds of gender from 21 December, prices for young female drivers could rocket 24 per cent, according to Treasury forecasts.

“Insurers have been targeting younger drivers in the hope that when they renew next year they will simply renew with the same company,” says Gareth Kloet of Confused. “But steep price hikes loom with the advent of the EU gender ruling.”

Lee Griffin from Gocompare agrees: “The apparent slight decreases in car insurance premiums is welcome news for motorists, but it could be a temporary blip caused by insurers gradually implementing changes to their pricing strategies as they approach gender neutral underwriting.”

He advises drivers not to be complacent when they get their insurance renewal. “Any reductions in premiums come on the heels of several years of steep price rises, so consumers should compare their renewal quote with those offered by competing insurers,” he said.

Insurance Guardian tip – many insurers will allow you to arrange your insurance in advance. Try it with your own and other insurers as it should create at least one years saving for women. We understand Direct Line allow 90 days in advance, and Aviva will allow 60 days. Let us know your experience with others.

Click here for advice from the Financial Services Authority.