The end of gender-based insurance will cost both sexes dear

4 October 2012

I find it a little strange writing a piece that is pro-sexual discrimination. Perhaps even stranger writing one that defends the rights of insurance companies. But try as I might, I really cannot get my head around the European Court Ruling that will - from 21 December this year - prevent insurers from taking an applicant's sex into account when pricing insurance. It's political correctness gone mad.

It would be different if insurers were refusing to insure one sex altogether but all they are wanting to do is use gender in addition to a whole host of other factors to come up with a price that genuinely reflects the risk of the person applying for cover. Is that particularly unfair? I don't think so. When it comes to insurance men and women really do present very different risks.

Take car insurance. As far as insurance companies are concerned, women make better drivers - particularly at younger ages. According to the comparison website Tiger, young men are 10 times more likely to be involved in a serious crash than young women, while a report from the road safety charity Brake states 95% of dangerous driving convictions are against men.

It also found that men are three times more likely not to wear a seatbelt and twice as likely to regularly overtake blind. That's why men pay more for car insurance.

Men also typically pay more for life insurance.

According to the Office for National Statistics, women live an average of four years longer than men, and they are also less likely to die prematurely.

Given that I'm a woman you might not be surprised that I'd like to maintain the status quo: I'm doing alright out of it with cheaper car and life insurance. But women don't always cash in from gender-based pricing.

When it comes to annuities, men get a much better deal because they aren't expected to live as long, so that means their pension will typically create a higher income than a woman with the same size fund.

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Of course, I believe in equal rights between the sexes, but this isn't about rights. It's about maths and common sense. As far as I'm concerned, it's only fair my pension buys a lower income than my husband's because, the chances are, I'll outlive him and so my annuity will need to pay out for longer.

Come 21 December, the only people to be celebrating will be the Belgian consumer association Test-Achats, which challenged the existing law through the European Court of Justice.

Theoretically, the new rules should create winners and losers. Where some people once paid more for their insurance, they'll now pay less and where they once paid less they may now pay more. But thanks to this legislative tinkering, I think we'll all be losers.

While researching the feature "Why it doesn't pay to be treated equally", which follows, I spoke to a wide range of experts who agreed the number of people who would enjoy any sizeable savings will be small.

For example, while males can expect to see their annuity incomes fall by 5 to 10%, women are not expected to enjoy any real increase in the short term at least. And while the AA says young males may see token reductions to the cost of insuring their cars, the view at is that female rates will just be bumped up so they're in line with males.

As much as we may want to think otherwise, insurance companies are businesses with shareholders to pay, they do not exist solely for our social welfare. So, when we take away one of they key tools that allows them to accurately price insurance, they will start having to factor this uncertainty into their premiums as they seek to develop improved ways of ascertaining risk.

As far as I can see, that's only going to mean bigger bills for all.