Gender ruling and insurance

Posted on Tuesday, August 25, 2015

Women – young ones in particular – are paying much more for car insurance than they were a year ago in Europe where there has been a ban on insurance companies using gender as risk rating factor.

Rather than equalising the playing field between men and women, Robyn Farrell, managing director of 1st for Women Insurance says the Gender Directive, which prohibits insurance companies using gender as a risk rating factor and stops them from offering cheaper insurance to women based on their gender, is discriminatory against women. “Women are losing out now because they are effectively subsidising the premiums of young male drivers,” she says.

Over the last 12 months, and since the Gender Directive was passed into European Union legislature, figures from independent car insurance comparison site show that insurance premiums for 20 year old female drivers have increased by over 25%. Young male drivers are however enjoying significantly lower premiums.

Car insurance premiums for 20 year old men are around 14% less than a year ago, while 25 year old men are benefitting from rates almost 25% less. In the UK, younger women historically enjoyed lower premiums than their male counterparts as they were perceived by insurers as being lower insurance risks. But, the difference in pricing between genders typically narrowed as men aged and were considered less risky drivers.

This pricing “bias” was based on decades of empirical actuarial analysis and reflected the fact that young female drivers tend to have lower impact accidents than young male drivers. Banned from using gender as a core rating factor, insurers have had to re-price their policies which resulted in a marked upswing in policy prices for younger women.

In South Africa, there is no such law as the Gender Directive on the immediate horizon and Farrell says that for as long as women are statistically-shown to be safer drivers than men, they should have access to cheaper car insurance. Short-term insurance premiums are calculated based on the risk profile of the policyholder and this is affected by a number of things.

The entire insurance industry differentiates in terms of age, gender, geography, years of insurance, type of car, and licence period, for example. “Our products are geared for women who are statistically-proven to be safer drivers than men. They take fewer risks, make more careful decisions, and generally claim less often than men.

When they do, the claims value is considerably lower. Our premiums reflect the fact that women are less of a risk to insure. This is not going to change.” Farrell concludes saying that 1st for Women offers lower premiums to women because statistical evidence shows that they have a lower risk profile. “Women should benefit from lower premiums because they deserve it. A law similar to the Gender Directive in South Africa would drive up women’s insurance premiums as it has in the UK. That wouldn’t be fair.”

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