Short term car insurance policies don’t discriminate. At least not for the time being. With some temporary car insurance providers there is little or no difference in the prices quoted for males or females, but since the policies are underwritten by mainstream Insurers, whatever price increases they choose to pass on will also be reflected even in these one day car insurance costs. What’s almost certain is that the cost of car insurance for women looks set to rise towards the end of next year following an EU ruling which decreed that distinguishing the cost of cover based on gender contravened human rights law.
The European Court of Justice (ECJ) ruling means that any price discrimination must come to an end by 21st December 2012. The British Insurance Brokers’ Association (BIBA) maintains that any price differential is solely based on proven actuarial risk rather than gender discrimination. In 2010, the cost of the average car claim by an 18 year old man was £4,400, while that for an 18 year old woman was £2,700. As a consequence, the average female driver aged between 17 and 22 can still expect to pay about £1,682 a year to insure their car. That’s certainly expensive, but it’s about £1,000 cheaper than the equivalent male driver would be charged.
If the objective of the ruling is to inject an element of fairness into premium pricing, then presumably older, more sensible male drivers could also argue that they have been unfairly treated because of a few reckless boy racers. If it is illegal to discriminate on the grounds of gender, is it equally unfair to discriminate on the grounds of age? Even if the statistics demonstrate that older drivers of either sex tend to be better risks from the insurer’s point of view.
So does this mean that the costs for insuring males will tumble to match those of females? Of course not! The insurance industry has used risk based pricing to award what in effect are discounts to lower risk drivers like young females who are statistically safer. This, according to the insurance industry, is not discrimination but is simply pricing an individual risk as accurately as possible. In other words, exactly what they are supposed to do. That practice will have to change and those same safer drivers, be they young women or older men, will now pay a cross subsidy for younger males in their insurance premiums.
Women aged under 25 could see their car insurance costs rise by up to 25%, adding about £400 to the annual cost of insuring their car. What seems almost certain is that, unless you choose 1 day car insurance at least for the present, more people will end up worse off as a result of the ruling and that hardly seems fair to either gender of motorist.