Why women should pay more for car insurance

Is it fair to take gender into account when setting insurance rates? Robert Powell considers the arguments...

We all have the legal right to be considered innocent until proven guilty when facing a criminal trial. But should this right be applied to other aspects of our lives?

Take this example; is it fair that a car insurer should assume that I am more likely to be guilty of careless driving just because I am male? All the stats may suggest that male drivers are indeed more accident prone than female drivers. But should that mean I have to prove my innocence as a safe driver through a large no-claims bonus before I am granted a lower premium?

It basically boils down to this question: how much can you tell about a person from their gender?

Ask any life insurance, car insurance or pension annuity provider and the answer will be ‘a lot’.

But ask the European Court of Justice and they’ll tell you to come back on March 1st when they’re expected to make a ruling on whether gender specific financial rates breach equality laws.

The ruling

As we reported in Male pensions could be cut by 13%, the actual ruling is directed at pension annuity rates. Currently men will, by and large, get a higher income on their pension annuity than women for the simple reason that woman, on average, live longer than men.

But if the new European laws are passed next month, pension providers may have to overlook gender when setting annuity rates. This could see male rates shoot down and female rates rise slightly.

The laws would also have ramifications for life insurance providers. The gap in life expectancies between sexes currently means that men pay more for life cover than women. If the equality laws are passed this would also be made illegal.

Unisex car insurance rates would also have to be offered, spelling an end for women-only car insurance companies.

Pandora’s Box

The problem I have with these proposed laws is that once you open Pandora’s Box of equality legislation, when do you shut it again?

I’ve previously written about how postcodes can affect your life insurance and annuity rates as providers will take the average life expectancy of your area into account when quoting you a deal. Surely if gender is off limits to insurers and pension providers, then postcodes should also be? Indeed, I’d hazard a guess that life expectancies profiled to gender are a lot more accurate than life expectancies profiled to a postcode.

Postcodes can also now affect your credit-worthiness – if you live in an area with high levels of fraud, then a lender will scrutinise your application for credit more closely. Has the European Court considered this? As next to gender specific annuity rates, postcode level credit rating seems like totalitarian-style discrimination!

The possibilities really are endless. Should smokers be discriminated against by being forced to pay high life insurance rates? Why should someone living in a rough part of Hackney have to pay more for their home and car insurance than a millionaire living in Kensington?

Extreme examples I know, but they do highlight what a slippery slope we’re stepping onto if these rules come into force.

Innocent until proven guilty

The European Court of Justice is in fact considering the wrong question. Contrary to what I wrote earlier, the real dilemma is not, ‘how much can you tell about a person from their gender?’ It is in fact, ‘what is fair information to consider when setting insurance and annuity rates?’

Needless to say, if you’re asking the wrong question to begin with, your chances of reaching the right answer are extremely slim.

Ultimately any insurance claim has to be based on individual risk, but a burden of proof for justifying an expensive rate should always lie on the insurer. However, this is where I believe decisions based on gender-specific life expectancy and decisions based on other arbitrary, gender-based stats differ.

In terms of car insurance, it’s my choice whether I drive sensibly or like a lunatic –gender plays no part in that. Granted, survey after survey has shown that men are more prone to aggressive driving and hence accidents, meaning they will claim on their insurance more frequently than women. But that has no bearing on how I will drive – innocent until proven guilty after all.

Yet when it comes to age and car insurance, it is a reasonable assumption to make that a driver who has been on the road for six months will be more at risk from an accident than a motorist who has been driving every day for 16 years – practice makes perfect after all.

Making decisions based on life expectancies are completely different as how long you live is – by and large – out of your control. I cannot really make a concerted effort not to die in the same way that I can make a concerted effort to ensure I drive sensibly. Granted I can exercise and live a healthy lifestyle but by and large, how long I’m alive is really not up to me.

The fact that there exists a direct biological, unavoidable, link between gender (another fact we have no choice in) and life expectancy means that it is appropriate for sex to be taken into account when setting insurance and annuity rates. That link is simply not there between gender and car crashes as I can easily avoid causing frequent collisions by just driving sensibly.

What do you think?

Should gender be taken into account when setting insurance and annuity rates? Is it fair that women get cheaper car insurance than men? Do you think these new European laws would be a good thing?

Let us know your comments in the box below.

And for some tips on lowering your insurance premiums read 10 tips to beat rising car insurance costs and Switch your life insurance policy - quick! or head over to our life insurance and car insurance rate calculators to get a quote quickly and easily.

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