Gender equality in insurance costs

The EU has just ruled that car insurance companies cannot charge men and women different amounts. Since women drivers are lower risk, they have until now paid lower premiums. So women’s insurance rates will rise, in the name of equality.

I’m somewhat puzzled by the ruling, since insurance companies are presumably still allowed to discriminate on lots of grounds that would be forbidden to e.g. employers. For example, I assume that they can still charge higher premiums for drivers of red cars. I’m genuinely unsure what to make of this.

(Thanks A!)

7 thoughts on “Gender equality in insurance costs

  1. Perhaps the thought is that while one could choose not to buy a red car (although this may not be true in all cases, especially if your choice is constrained by how much money you have) one cannot choose one’s sex.

  2. Damn good point! Does anyone know if they’re still allowed to discriminate by age?

  3. And also note that they reached for “equality” by bringing women’s rates UP to men’s rates – their goal was not “equality” per se but higher profits for themselves.

  4. There are many cases where rates of women will go down, especially for those insurances where women’s longevity is a negative (health, life, etc). I really don’t see how this ruling could be seen as anti-women.

  5. Chaja – I don’t think anyone is suggesting that the ruling is anti-women (at least not anyone here). We’re interested because the ruling is that using sex to decide insurance premium counts as discrimination. The issue is whether or not this ruling is justified. In other words, the question, as I understand it, is whether sex is a relevant factor. (It’s ok to discriminate on the basis of sex if sex is relevant, e.g., when choosing sperm donors. It’s discrimination if sex isn’t relevant, e.g., when choosing managing directors.)

    I think if you think about this in terms of race, we’re a lot more uncomfortable – I wouldn’t think it was ok to charge Chinese people higher premiums, e.g., on the grounds that they’re Chinese and statistically those people have more accidents (hypothetical).

    On the other hand, as Jender implies, this undermines the basic premise of the insurance industry, which is to insure against the probability of x happening, and for the insuree to pay according to risk – paying a higher amount the more likely x is to happen. This means, obviously, basing the premium on statistics that show the probability of x happening to a member of some particular group.

    J – I’m not sure that quite follows. I think if you remove gender/sex from the stats, you then get a new set of stats for particular age groups, people who have been driving for a certain length of time, etc., and the premium will be based on that. So men’s premiums will go down slightly, and women’s up. (As I understand it.)

  6. Just for information, most U.S. states allow the use of gender in auto insurance rates, but a couple (Pennsylvania, and I think one other) don’t.

    Also in case it’s interesting, there is probably not much difference in risk characteristics between men and women above a certain age. (For auto insurance I mean. Based on U.S. experience.)

    The use of credit information is another controversial one, but I think allowed in all states, though with lots of (varying) regulation.

  7. Yes – I think the big discrepancy in insurance payments in the UK is for young men and young women, because statistically young men have loads more accidents. Two friends of mine (both young men) added a third friend to their driving license – a young woman who couldn’t yet drive. This brought their premium down substantially, even though she was a learner.

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