So despite fierce lobbying the European Court of Justice has decided that insurers can no longer discriminate in favour of the fairer sex. A ruling earlier this week has thrown most branches of the industry into chaos and effectively alters insurance buying forever. By 12th December 2012 the face of insurance underwriting and rating will be changed and we will all feel the effects.
It really beggars belief how governments across Europe have allowed this situation to come about. The whole principle of insurance is or perhaps was based on risk. As a broker for over 30 years I was taught right from my early days the principle of risk and how insurers calculated premiums using statistics. It wasn’t ever said with a caveat “but you cannot use them if they relate to someone’s gender”. The facts are there for all to see. From motor insurance to health insurance and even life cover your sex does matter.
For the motor insurance underwriters they have many risk factors to consider, the make and model of car, it’s value, where you live, your age and experience to name but a few. They also know that statistics have proved over many years a couple of irrefutable things. Women drivers have fewer accidents than there male counterparts. Men might not always acknowledge that fact but it is true. Secondly when women are involved in accidents the average cost of each incident is substantially less than where men are involved.
So claims frequency and the associated repair costs are solid statistics. The younger drivers statistics are even starker by comparison. For the under 25’s, women drivers have enjoyed, quite rightly, considerable savings on their car insurance compared with their young male counterparts. These have in some case meant 50% less to pay given all other risk factors are the same. That may seem harsh on your average boy racer and that is one of the reasons, apparently the ECJ has made its decision. However, lets be realistic, the real problem here is not simply one of sex discrimination or sexism instead its bureaucratic law makers not understanding how insurance works and pandering to the table thumping hard noses demanding we all get treated equally.
Well I have news for them; we are not and will never be equal. Men and women are not just anatomically different from one another; we are emotionally different as well, as some shrink once said the “we are wired differently”. We think and react to tasks and events that crop everyday in a totally different way and that is just the way it is. Nature’s way you might say. It’s not just about wearing make up, high heels and skirts.
As well as the long-term effect on motor rates, which are bound to climb for women drivers, this ruling has very wide ranging effects on many other aspects of insurance too. Let’s look at health insurance. Again, many years of painstakingly gathered statistics are being thrown into the dustbin. Women’s premiums will undoubtedly increase as a result just how much is very difficult to say. On the life cover side of insurance underwriters and actuaries have statistics going back over a hundred years on mortality. These figures show women in general live longer than men. Part of the risk factors they use to price life cover is therefore importantly what sex you are.
One step further is the dilemma of the pensions providers. When we reach retirement, hopefully we will have a pot of money to buy an annuity, the thing that’s pays us an income every month. When actuaries are working out how much they can offer to pay they use, yes, you have guessed it, statistics. At the moment because women tend to live longer than their male counterparts the insurers pay less to women a month on their annuities than for the equivalent man. Why, because as women statistically live longer the insurers will end up paying out more or less the same over the life of the annuity to a woman. It might be less each month but over the whole cycle things balance out.
The ruling will affect so many aspects of my profession and the premiums we all have to pay. What it most certainly won’t do is make things fairer in fact quite the opposite. Men’s motor insurance my come down slightly as the ladies pay more. Ladies will pay more for the health cover and the chaps get a slight reduction. Men will get paid less per month in their annuities, women a little more, anyway you get my drift.
It is too early to say what the actual cost of this ruling will be to families across the country. Like with most things some will win a little some will lose. I do fear for the young female drivers in particular where rates are likely to climb quite a bit. This will probably lead to even more uninsured drivers but the ECJ seem oblivious to this menace and are actually making them more likely in the future. The rest of the effects on health insurance, life cover and annuities is very unclear at this stage but insurance has changed that much is certain. In closing I would say to women and men alike this ruling is fundamentally flawed and bad for everyone. It only goes to show that in life some things are done in a certain way for good reason and the old adage “if it ain’t broke don’t fix” would have been good advice in this instance.
Darryl Carpenter
Operations Director – IFM Insurance Brokers Ltd