The Rights and Wrongs of Equality in Car Insurance
Discriminating on the grounds of gender in car insurance will be illegal from the 21st December 2012 in all European countries. This was the decision of the European Court of Justice (ECJ) after Belgian consumer group Test-Achats garnered massive support for their campaign to bring equality into the insurance market.
We therefore take a look at the rights and wrongs of this decisions, the possible impact on European motorists and examine whether it will have any bearing on car insurance premiums in countries outside of Europe.
The origins of the ruling
Car insurance prices have increased dramatically on the back of the global recession, with some European markets having witnessed increases of almost over 40% in the past 12 months. Young male motorists have been the most badly impacted by the price increases, with premiums of well over $5,000 commonly offered to newly qualified male motorists. This has resulted in 5% of British motorists being forced off the road according to research by UK based price comparison company MoneySupermarket.com.
This resulted in Belgian consumer group Test-Achats complaining that it was unfair that young male drivers were being forced off the road in this manner, stating that branding all young male drivers “dangerous” was inaccurate and unfair to those in the group who are responsible.
The campaign was ultimately taken to the European Court of Justice (ECJ) who accepted Test-Achats argument. It was decided that gender discrimination in car insurance would become illegal from the 21st December 2012, giving insurers plenty of time in which to adapt their policies.
Opposing arguments
The Test-Achats argument represented a growing level of unrest amongst motorists, with governments rightly becoming concerned about the reduction in the number of new car sales in their respective countries on the back of more and more motorists being unable to afford the running costs involved with owning a car. This obviously has a subsequent impact on jobs.
However, the AA’s Simon Douglas claims that the ruling is “bad news for motorists generally”, claiming that it is right to penalise drivers who are statistically more likely to make a claim on their insurance. Douglas believes that by making it easier for these motorists to find affordable insurance, it is penalising safer motorists who are less likely to make a claim by pushing up their premiums to account for these unsafe drivers.
This argument has been supported by the British Insurance Brokers Association (BIBA), who stated: “the system of risk based pricing awards discounts to lower risk drivers like young females who are statistically safer drivers”.
The impact on the regulation changes
The AA believes that female car insurance prices will increase by 30% on the back of this regulation change, with male prices dropping by just 10%. This is therefore set to have a massive impact on the insurance expenditure of the average family in Europe, with the average driver now paying $1,462 per year for a single car insurance premium.
However, the impact of these new rules are set to be much wider reaching than just European countries. With Europe adopting what is considered to be a forward looking perspective to equality, legislators in America and other countries outside of Europe will be under pressure to adopt a similar stance. This adds to the pressure which is being added to legislators in developed countries for a globally standardised set of regulations for financial and insurance markets.
In Summary
There are two sides to the argument on whether it is right to have banned gender discrimination in car insurance. While it is right to say that there are some young drivers who are unfairly stereotyped as “boy-racers”, statistical analysis that reveals that teenager motorists are ten times more likely to be killed or seriously injured in a road accident than a driver over the age of 35. The higher basic premiums they are offered reflects this.
The unfortunate by-products of this gender equality decision is that the household expenditure of the average family will end up increasing further, and that safer middle aged female motorists will end up covering the additional expenditure that unsafe younger motorists create for the insurance companies. The real question is, how far is too far when it comes to ensuring equality for all?
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