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Why is the EU interfering with our car insurance prices?

Almost 50 per cent of motorists haven’t heard of the EU gender directive, according to research by Confused.com. Are you one of them?

If you are, you better get up to speed and quickly as it will result in increased car insurance premiums for many UK motorists by the end of this year.

In 2011, the European Court of Justice (ECJ) ruled that the long-established practice of setting insurance prices according to gender is illegal discrimination.

The Court's decision forced members of the European Union to introduce a ban on gender-based pricing, and this ban will come into force on 21 December 2012.

What does this mean?

Currently, women drivers typically pay less for car insurance than their male counterparts because they are statistically safer behind the wheel – that is, women drivers have fewer accidents.

But, as of December, women’s car insurance prices will be brought into line with men’s.

This means that women's premiums are likely to be raised significantly.

Now, gender is only one factor insurers use to set insurance prices. Age is another, as is location, the car you drive, mileage etcetera.

What the EU gender ruling means is that if insurers are presented with a male and female driver with the same car, location, milage etcetera, they'll have to offer the same price to both.

Whereas before the ruling the woman would probably have received a cheaper insurance quote than her male counterpart.

Unhappy

The UK government is not happy with the European ruling.

Indeed, a report by HM Treasury states financial services providers should be allowed to make sensible decisions based on sound analysis of relevant risk factors.

However, the fact is that the ECJ ruling is binding in British law. So the gender ban is going to happen.

24% price hike for women

What’s more, young women will feel the effects of this ruling the most – a 24 per cent rise in the cost of car insurance for 17 to 25-year-old females, according to government figures.

Car insurance price rises for women

Age Group

Current car insurance cost*

Average % increase**

Change in £££s

New car insurance cost

17-25

£1,247

+24%

£299

£1,546

26-30

£711

+18%

£128

£839

31-35

£534

+10%

£53

£587

36-40

£502

+3%

£15

£517

41-45

£625

+1%

£6

£631

*Figures taken from the Confused.com/Towers Watson car insurance price index which shows the average annual cost of a comprehensive policy between July and September 2012.
**Figures from HM Treasury

Good news for men

However, while the EU ruling is bad news for women, it’s good news for men’s prices, particularly young male drivers who can expect their premiums to fall.

Car insurance price changes for men

Age Group

Current car insurance cost*

Average % decrease**

Change in £££s

New car insurance cost

17-25

£1,998

-9%

£180

£1,819

26-30

£996

-8%

£80

£916

31-35

£721

-5%

£36

£685

36-40

£603

-3%

£18

£585

41-45

£630

-2%

£12

£618

 

Prices for men and women tend to level out after the age of 45 so they're not as affected by the gender ban as younger motorists.

However, don’t assume that this means you’ll be unaffected by the EU gender ruling – consider if you have younger drivers on your policy as named or additional drivers.

Click the link to find out more about the EU Gender Directive, including top tips on how to beat the price hikes.

What do you think?

Women are safer on the roads, but the EU gender directive will mean that have to pay the same as their riskier, male counterparts. Is this fair?

We want to hear from you! You can share your views on the message board below.

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Naphtalia Loderick

Naphtalia Loderick

Naphtalia Loderick reports on all things personal finance at Confused.com. She started out on a weekly newspaper, via a national news agency and a stint in the fun but ‘not as glamorous as it appears on screen’ world of TV at the BBC researching consumer films for The One Show.

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