Insurance premiums set for radical change if EU ruling goes through

A ‘unisex’ ruling by the European Court of Justice is expected soon which could throw the insurance industry into turmoil.

The Court is to rule on whether it is illegal to take gender into account in setting insurance premiums.

The ruling, due to be made on March 1, could come into effect immediately. It would mean that UK insurers will no longer be allowed to differentiate between men and women when underwriting a whole range of financial products, including mortgage protection products.

Among those likely to be most affected would be specialist insurers. The Association of British Insurers (ABI) says that women drivers would have to pay 25% more for their cover and has warned that millions of women drivers would have to renew their existing insurance policies.

It also warns that insurance costs would rise across the board, although a notable exception would be young male drivers.

Men would, however, have to pay more for their annuities. Currently, they pay less than women because they have a lower life expectancy than women, but pay more for life insurance.

Private medical insurance rates would change. Men between 35 and 50, who are statistically less prone to illness than women of the same age, would have their premiums raised by 15%, whilst female premiums would be cut. 

Malcolm Tarling, spokesman for the ABI, said: “We believe this will be extremely detrimental to UK consumers. If insurers aren’t able to take into account risk factors, it will have widespread implications.”

Sheilas’ Wheels spokesman Adrian Webb expressed concerns that insurance premiums for young male drivers might be ‘artificially’ reduced. 

He said: “It is particularly alarming, given that the head of the Association of Police Officers in the UK in 2005 noted that the biggest killer of young women in Britain is their boyfriend’s and male friends’ driving.”

The Equal Treatment Directive, implemented in 2004, included a ‘derogating provision’ to allow EU member states to permit insurers to use gender in their calculations so long as this use was backed by robust and published actuarial data at a national level. 

But this exemption was challenged last year and an initial decision found it was wrong to charge men and women different premiums.