A leading insurance broker has described impending European legislation to ban insurers from using gender to rate premiums as “ridiculous.”
Two European Court of Justice judges could ban gender discrimination in pricing insurance on March 1, leading to huge hikes in premiums, particularly for women.
But Gerry Bucke, general manager at Adrian Flux Insurance Services, said the new rules would not significantly benefit male drivers, but could see young women paying up to £1000 a year more.
“If people think that insurance companies will bring premiums for male drivers down to meet those for female drivers in the middle they are likely to be disappointed,” he added.
“Despite the hefty increases in premiums we are seeing, there is no profit in the UK car insurance market, and insurers are unlikely to reduce premiums for young men in the long run.”
Last year, analysts Tower Watson said that the UK motor insurance market would not be profitable until 2015 at the earliest, partly because of an estimated 30,000 annual fraudulent claims.
Mr Bucke is backed up by the Association of British Insurers (ABI), which says that if the initial decision is upheld it would be “extremely detrimental to UK consumers”.
A 2004 EU directive allowing insurers to use gender to rate premiums if they were backed by statistical evidence was successfully challenged last year, leading to next month’s crucial appeal.
Mr Bucke revealed that some insurers had already asked for the question of gender to be removed from the quotation process in anticipation of the ruling.
“It’s ridiculous really,” he said. Insurance is a discriminatory business where people pay the appropriate premium based on the risk of claims they represent.
“It’s a fact that, for a variety of reasons, male drivers cost insurance companies more than women, just as younger drivers represent a greater risk, or those with a string of motoring offences or a bad claims record.”
Young men are twice as likely to claim on their insurance policy than young women, while they are 10 times more likely to have a road accident involving serious injury, which is where the most costly claims occur.
“You have to wonder where it will stop,” said Mr Bucke. “Will a 50-year-old end up having to pay the same as a 17-year-old who claims age discrimination? Usually gender discrimination issues are, quite rightly, about giving women equal rights or equal earnings. But this will be unwelcome form of equality for women.”
Insurers may attempt to use alternative risk factors as a proxy for gender, such as occupation, vehicle type or even their first name, while attempting to steer clear of indirect discrimination.
Mr Bucke said that, with only a handful of insurers prepared to offer cover for young drivers, it was more important than ever for younger motorists to shop around.
“With premiums for young women expected to reach the £2,000 mark, it will pay for them to check specialist brokers and not just the comparison websites,” he added.