ECJ gender ruling: Early impacts revealed

, Jan 30 2013 at 11:38 am

Every six seconds, a woman thinks about the impact of sex on her car insurance premiums.

Actually, we don’t know whether that’s true or not (we’re gussing not). But it’s undeniable that gender has become a hot topic as far as insurance prices are concerned.  On 21st December 2012 the European Court of Justice (ECJ) gender ruling came into effect, changing the way the price insurance policies are calculated.

Since the introduction of the new European legislation on gender equality, young women in particular have been hit by rising car insurance prices. As 2013 rolls on and women’s policies come up for renewal, more will find out just how big the changes are.

The new legislation is a massive change to the way the insurance market works (its effects stretch beyond motor to life insurance and pension annuities), so it’s worth a look in detail. We’ve crunched through 1.3million quotes run on our site to get a precise picture from real data.

And as price rises are evident, it makes sense to also look at the practical steps young drivers – and women in particular – can take to lower their car insurance premiums.

No sex please, we’re European

On the December 21, 2012 European legislation came into effect forcing insurers to become “gender-neutral” when pricing insurance policies. This followed a European Court of Justice (ECJ) decision in March 2011 which ruled that insurers can no longer consider whether you are a man or a woman when calculating insurance premiums.

Insurance companies had previously used gender as one of a number of different factors to determine risk when providing insurance quotes, so they’ve had to change their underwriting processes to comply with this new legislation.

Equal rights?

So men and women will now pay the same, right? Er, not quite. In reality, this change does not mean that average insurance prices for men and women will be aligned.

When providing you with an insurance quote, insurers are still able to assess your driving experience, the type of car you drive, your claims and where you live. So even now, following the introduction of the new legislation, men on average still pay a higher price for car insurance than women due to these factors.

But what this does now mean is that, when all other factors are equal, a man and a woman will be quoted the same car insurance price by a particular company. Previously this was not necessarily the case.

Concerns and queries

Much of the media attention surrounding the gender ruling focused on the concern that insurers would not be able to properly assess the risk of insurance, potentially leading to higher car insurance prices overall.

The specific concern has been about the effects on younger women drivers. Until now insurers have relied heavily on gender when determining prices for less experienced drivers, as they only have a limited driving history to assess.

This, coupled with higher overall premiums, means younger women drivers could have the most to lose from ‘gender neutral’ pricing when their policies come up for annual renewal.

So what’s happened to prices?

Early indications taken from 1.3 million quotes run through MoneySupermarket since the beginning of December show that widespread concern about rises in overall car insurance costs as a direct result of the ruling was misplaced.

In fact average prices derived from data from online comparison services have fallen since the beginning of December.

The particular outlook for younger women drivers is less positive, though, with price rises beginning to become apparent. As was expected, young men – who traditionally paid the highest premiums because of their risk profiles – are seeing their premiums fall.

Keep calm and carry on?

So, despite the doom-mongering in December from certain quarters, cool analysis of car insurance prices for all motorists quoting through MoneySupermarket shows that premiums have remained stable.

Female drivers overall are now paying 1.9% less for car insurance than at the beginning of December, with average premiums now £416. Male premiums are also falling with the average overall premiums of £490, a decrease of 7.2% since December 2012.

Overall cost of car insurance (3 December 2012 to 13 January 2013)

fender bender graph 1

Teenage angst

Our analysis shows that, since the ECJ ruling came into effect, the cost of car insurance for young female drivers aged 17-19 have risen 22.1%, or £231 on average. However, prices for male drivers in the same age group have fallen 11.2%, or £184 on average – but they are still typically higher than females in the same age group.

Car insurance premiums for young drivers (3 December 2012 to 13 January 2013)

fender bender graph 2

Young driver? How to cut the cost of car insurance

  • If you are young and safe, still expect to save every year

Every year you drive without making a claim or incurring a traffic penalty is a year in which you have demonstrated safe driving, which should lower your insurance renewal price.

  • Consider protecting your ‘no claims bonus’

Inexperienced drivers are more likely to make an insurance claim.  Protecting your no claims bonus can help protect you from large increases should the worse happen.

  • Consider your first car purchase

Insurers calculate premiums based on a number of factors, but the type of car you drive, particularly its the engine size, help determine the premium price. Opting for a smaller car with a small engine will give cheaper premiums. Pricing insurance for different cars through a comparison site can be a great help when deciding what car to buy.

  • Share your driving with an older family member

Adding a parent to your policy may reduce the cost of your premiums, a particular benefit to younger drivers. However, don’t add a parent as the main driver if you are the main driver of the car as this could invalidate your insurance.

  • Consider a telematics policy

Many insurers now offer ‘black box insurance’ technology which monitors your driving habits and rewards good drivers with lower premiums.

  • Shop around

Shop around for the best price on a policy that meets your needs – it’s quick and easy at MoneySupermarket.

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