A new European law on insurance prices will result in a rise in car accidents and soaring motor premiums for women, according to the Government.
These findings are revealed in a new Treasury report into the possible effects of a ban on pricing insurance deals such as car cover and annuities according to gender.
The European Court of Justice ruled earlier this year that it was not legal for insurers to charge men and women different rates solely based on their sex.
The court has given companies until December 2012 to change their practices. (ECJ rule explained in full).
Insurers – and a significant proportion of consumers – believe that it is fair to set premiums based on gender, where it can be shown that differences between the sexes do genuinely exist.
Mark Hoban, the Financial Secretary to the Treasury, said: “While nobody should ever be treated unfairly because of their gender, financial services providers should be allowed to make sensible decisions based on sound analysis of risk.
“We continue to work hard with other Member States and the Commission to secure legal certainty for industry and reduce any detrimental effects for consumers.”
How things stand
At present, men are charged more for motor policies, other things being equal, because insurers’ statistics show they are more likely to be involved in accidents and make claims.
Similarly, men tend to get higher rates on their annuities because their life expectancy is shorter on the whole.
This also accounts for the fact that life insurance is currently cheaper for women.
What the government found
The Treasury report said that the cost of car insurance for women could rise by a quarter following the forthcoming changes.
Those hardest hit would be in the under-25 age group.
This is where the price difference between the sexes is currently the most pronounced, due to the fact that young men are the most likely to have accidents and make claims.
On average, women under 25 pay about two-thirds of what men of the same age pay at the moment.
The Treasury also suggested that men’s premiums would be likely to fall, albeit by less than women’s rose.
It estimates a fall of around 10 per cent from the current average of just over £2,000 for males drivers under the age of 25.
Patterns among other age groups are expected to be similar although not as dramatic.
No cheaper car insurance for males
However the Treasury did warn that in the long term, men may not benefit at all from the ruling.
The report said: “Given the uncertain nature of insurance provision going forward, and the fact that motor lines are currently generally loss-making, all prices could be equalised up to the male price, potentially resulting in no savings.”
A recent report from consultant Oxera supports this view to some extent.
It said that when unisex pricing for motor insurance was introduced in Belgium in 2007, premiums rose for young women by between 7 and 15 per cent, while they fell for young men by just 3 to 4 per cent.
Risky drivers
The Treasury also warned that the ECJ ruling could have unintended consequences in the form of a rise in road accidents.
It said that the current high premiums for young male drivers acted as a deterrent and kept many risky motorists in check.
The report stated: “In the field of motor insurance, studies have indicated that gender-neutral pricing would have consequences for road safety.
As premiums for (generally higher-risk) male drivers fall, they may purchase higher-powered cars or increase the riskiness of their driving.”
Professor Stephen Glaister, director of the RAC Foundation, said: “This is not an abstract issue confined to a cosy courtroom but a matter of life and death.
“Before ministers accept any change they need to know what the impact will be in terms of people being killed on the roads.”
