Goodbye gender discrimination, hello fairer premiums
“Can’t believe the ruling on driving insurance – it’s about risk, not discrimination,” tweeted Laura Moore, ex-Apprentice candidate, this morning, after the European Court of Justice ruled that from December 21st, 2012, insurance companies will no longer be permitted to use gender as a factor when deciding premiums.
“@ApprenticeLaura – Hopefully the cost of insuring my £55,000 sports car will go down now and you’ll be paying for it! Cheers!” replied her former television colleague @StuartBaggs.
Most people are more sceptical about the insurance industry than Stuart Baggs the Brand, however, and reckon that while insurers will be quick to push up women’s premiums, they’re unlikely to be quite so eager when it comes to whacking a few quid off men’s. But while some premiums will undoubtedly be higher, this ruling has the potential, at least, to make the insurance market fairer for all.
Moore’s tweet sounds like a reasonable objection to the ECJ’s decision, but she is only half-right. When men and women are charged substantially different insurance and life assurance premiums, it is usually a combination of both risk and discrimination. Insurers love citing the “boy-racer” factor, but the truth is there has been little transparency when it comes to insurers’ calculations of the “loadings” applied to men’s premiums. The ECJ ruling today means insurers will no longer be able to use gender as an excuse for mining profits from either male drivers or, crucially, from female pensioners.
The flipside of the ECJ gender ruling is that it will also affect the cost of buying an annuity – an annual pension – from an insurance company. As women live longer than men (and not just because we’re safer drivers), we currently receive a smaller annual pension for the same pot of money, which, don’t forget, is collated from smaller average earnings. The effect of the ECJ’s move is that men will get a lower annuity than they do currently, but women will get more. The gender pension gap narrows just a little.
The insurance industry has been distinctly unhappy with the ECJ this morning, behaving as if it will no longer be able to calculate the risk that their customers might do the unthinkable and actually make a claim. That’s nonsense, of course, as the technology for basing an individual’s premiums on their own detailed driving record, as recorded by in-car devices, already exists and is indeed used by some forward-thinking insurance companies. Ultimately, these devices will be able to give a far more accurate assessment of risk than simply utilising crude gender stereotypes. Not all men go drag racing on the weekend.
Whether premiums go up or down as a result of this ruling is almost beside the point, however. Insurers’ gall when it comes to milking premiums from their customers is enabled by more than either gender discrimination or a ban on gender discrimination. Instead, this is about a principle. “Today is an important moment for gender equality in the European Union,” says EU Justice Commissioner Viviane Reding. I agree.