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Car insurance: Female drivers are being cheated
Premiums for women drivers are set to go up at the end of the year thanks to new equality rules, but it seems some insurers are already hiking rates.
In March 2011, the European Court of Justice (ECJ) in Luxembourg made one of the most bizarre decisions I've heard in 25 years of working in the financial world.
In a groundbreaking judgment, the ECJ ignored reality by ruling that insurance companies must ban gender-based risk assessment by 21 December 2012. In other words, the ECJ wrongly believes that men and women are identical in every way and must be treated accordingly.
A big headache for insurers
Frankly, this is a crazy decision, as it ignores nature, as well as throwing out hundreds of years of insurance statistics. It is a fact that, on average, women live longer than men. It is also a fact that male drivers have more accidents than female motorists, especially when they first start driving.
Nevertheless, thanks to the ECJ's absurd decision, with effect from 21 December this year, gender can no longer be used to underwrite car insurance, life insurance and pension annuities. What this means is that a driver's premium cannot be affected by his or her sex, as this is 'indirect sexual discrimination'.
This is a massive headache for the UK's insurance market, which is the biggest in Europe and the third-largest globally. What's more, it makes this the last year that car insurance will be cheaper for women drivers because they have fewer accidents.
In theory, car insurance should also become cheaper for male drivers, but this is hardly likely to happen. When it comes to premium changes, insurers prefer upwards-only increases, rather than reductions.
[Related link: Would another insurer charge you less for car cover?]
In some regions, premiums are already rising
Although this gender-equality ruling doesn't take effect for eight months, some insurance companies have already started raising their premiums for female drivers. However, the Confused.com/Towers Watson Car Insurance Price Index found a 'confused picture' across the UK.
Overall, insurance premiums for women had fallen 3% in the past 12 months, which is some relief. Even so, women drivers in some regions are being hit with premium hikes of nearly a tenth (9.7%).
For example, premiums for women aged 21 to 25 in Manchester and Merseyside have climbed by 4.7%. Likewise, women aged 26 to 30 in Leeds and Sheffield are paying 4.3% more.
Here are four English districts where women drivers have received higher insurance premium increases than men:
Region | Age group | Rise for males | Rise for females |
Leeds and Sheffield | 21-25 | 2.0% | 3.4% |
Leeds and Sheffield | 26-30 | 4.1% | 4.3% |
Inner London | 21-25 | 3.4% | 3.9% |
Inner London | 26-30 | 3.3% | 3.8% |
Manchester and Merseyside | 21-25 | 3.6% | 4.7% |
Manchester and Merseyside | 66-70 | 5.7% | 9.7% |
West Midlands | 21-25 | 1.4% | 2.5% |
As you can see, lady drivers in Manchester and Merseyside in the 66-70 age range have seen their premiums shoot up by 9.7%, which is a pretty steep upsurge.
[Related feature: How your driving style hits your pocket]
The UK's most expensive car insurance
What's more, this survey found that car insurance premiums today are 61% higher than they were at the end of 2006.
For men, premiums for comprehensive car insurance have dropped by 1.8% in the past year to an average of £869 at the end of March. For women, this average premium is £751, which is £118 lower than the average premium for men.
This research also revealed the UK's highest premiums for drivers.
For male drivers aged 17 to 20 living in Manchester or Merseyside, the average premium for comprehensive car insurance is a whopping £5,530. This may be more than these high-risk drivers' vehicles are worth.
For lady drivers, the highest premiums are paid by 17-20 year olds living in Inner London, who pay an average of £3,181 for fully comprehensive cover.
[Related feature: This blunder could void your car insurance]
Get ready for the big rise
What this survey indicates is that, later this year, insurance premiums are likely to leap dramatically for lady drivers, especially the younger group. Right now, female motorists aged 17 to 20 pay £1,766 less than young men in the same age bracket. In a matter of months, this 'discrimination' will be banned, so lady drivers everywhere will see their premiums sky-rocket!
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