European Court Outlaws Gender-Based Insurance Rates

Insurance companies in the EU will no longer be able to use gender when assessing risk, according to a ruling today. This means women’s car insurance premiums will probably go up, and men’s retirement income could go down. And of course, everyone’s arguing over whether the new rules are fair.

The Guardian points out that women currently pay less than men for car insurance, because they tend to have fewer accidents. Under the new rules, their premiums could rise 25% — or up to 60% for the youngest women. Life insurance would be affected too — women would pay higher premiums, men lower. But women might get higher payouts from retirement annuities, while men’s would decline — men had traditionally received larger sums under the theory that they were likely to die sooner than women, thus drawing on their annuities for a shorter time.

Insurers are unhappy with the new rules — says Maggie Craig of the Association of British Insurers, “The judgment ignores the fact that taking a person’s gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance.” And female drivers are angry too — one tells the Guardian that the ruling is unfair because while she has never been in an accident, her brother is “a typical boy on the roads.” However, some feel the new rules correct bias — says Martin Lewis of MoneySavingExpert.com, “With car insurance I think there is some logic to this ban – gender price differences are based on behaviour. Why should one man pay more because others behaved badly? Would we allow the same to happen based on racial differences?”

Car insurance companies may not directly consider race, but they do set premiums based on neighborhood — and at least in the US, poor and minority neighborhoods tend to have higher rates. This pretty clearly perpetuates socioeconomic inequality. The question is, do gender-based rates produce an unacceptable gender inequality? When is considering gender a legitimate business practice, and when is it discrimination?

Health insurance is another relevant example — though the practice is banned in some states, many US companies charge women higher premiums than men, because they tend to go to the doctor more. This makes sense and points, but it means that women, who already make less money than men on average, take home a smaller portion of their paychecks as well. Governments have good reason to regulate these kinds of inequalities to make sure that the needs of daily life don’t weigh more heavily on one group than another. That means making sure men don’t pay a penalty for their gender too — insurance regulations need to make policies fair to everyone, even if that means women have to give up the price breaks they currently get.

ECJ Gender Ruling Hits Insurance Costs [Guardian]
Gender Insurance Ruling: Case Study [Guardian]