Young Women Face Massive Rise in Insurance Costs

An upcoming legal ruling in Europe could result in young female drivers seeing their insurance premiums increase by £1,000 a year. This is the stark warning issued by auto insurers.

Insurance companies are warning that premiums could skyrocket after the court decision next month. The European Court of Justice is to determine whether it is illegal to base vehicle insurance rates on gender.

The ruling in March could hit young women the hardest. At the moment, young female drivers enjoy lower insurance premiums than male drivers of the same age. Women enjoy lower rates than men as insurers see them as less of a risk than their male counterparts.

A young male driver aged 17-22 years typically pays £2,750 a year for automobile insurance. A woman of the same age can currently expect to pay only £1,682 for car insurance.

The existing insurance rates are based on statistics that show male drivers are twice as likely as women to claim on their motor vehicle insurance. When looking at the rates for accidents involving serious injury, men come out even worse – they are at a 10-fold higher risk of such a crash.

Young men are also shown to be more of a risk when it comes to breaking the UK’s Highway Code. In their first three years behind the wheel, young men commit traffic offences at a rate 25 times that of young women.

The Automobile Association says the ruling is expected to result in a slight drop in premiums for young men but insurance costs for young women are expected to go up by nearly 100 per cent. The motoring organisation said women are proven to offer a much lower insurance risk than young men and currently enjoy premiums costing as much as 50 per cent less than those paid by young men.

The European community has long frowned upon the calculation of insurance risk based on gender. The practice, which is technically illegal, has been allowed to continue in the UK on the basis of evidence showing the country’s risk-based approach to providing insurance.

Simon Douglas, who runs AA insurance, said he feared the European Court of Justice will end its tolerance for this exceptional practice and Britain will be forced to meet European rules. An insurance expert at the AA said that insurance firms may try to exploit other factors as a proxy for the use of gender when calculating risk but it was currently unclear if this different approach would be allowed if it was considered to constitute a type of indirect gender discrimination.

The ruling poses less of a threat of increased insurance premiums for older drivers, as the gender difference concerning insurance premiums narrows as people age. However, the court’s decision is expected to have some effect on all drivers.

Insurance companies are warning that if they are prevented from using a key risk factor like gender, premiums could end up not covering claims costs. This would force insurers to raise prices in order to cover the increased risk.

Young women already face insurance costs that continue to escalate. In the last quarter, their premiums increased by an average of 18.2 per cent. Over the same period, young men only saw their insurance premiums go up by less than 12 per cent.

The accelerating insurance rates for young women are being driven by changes in young women’s behaviour behind the wheel. Young women are tending to drive longer distances and are driving in a style closer to that of young men.

The upcoming ruling is widely expected to become yet another casualty of the rule of unintended consequences. Following the implementation of the Charter of Fundamental Rights at the Treaty of Lisbon in 2009, there has been a protracted effort to eradicate any kind of discrimination in Europe.

The broad wording of the Charter led to the European Court of Justice reviewing how insurance companies in the UK calculate premiums. One of the court’s legal experts found that the use of gender when working out insurance premiums was not compatible with the Treaty of Lisbon.

In the past, such findings have been followed by an implementation of the recommendations. As a result, observers are united in their expectation that the court will rule against current UK practice.

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