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The impact of the gender ruling 2012

The impact of the gender ruling 2012

Financial services firms had to overhaul pricing of insurance, annuities and health cover following the European Court of Justice ruling that pricing based on gender was banned from December 21, 2012.

Basically, insurance firms are professional risk takers. The basic business model is to calculate the cost of insurance so that the premiums generate a large enough pool of money to pay out any claims made against policies while leaving a margin to run the business and make a profit.

Premium costs are costed on the risk of a claim. For instance, young women drivers under 25 statistically have less accidents than their male counterparts, and if they do claim, the average cost is less than that of men.

This lets car insurance firms charge women drivers less than men. Other insurance products are affected as well –  women live longer than men, so gender affects the pricing of annuities. Women often suffer more gender-related illnesses than men, so the cost of health cover varies between the sexes as well.

This court ruling stopped financial firms offering the price differentials based on gender.

Belgian consumer group Test-Achats initiated the case by questioning if offering different pricing for insurance to men and women was gender discrimination. The full court ruling stated that insurers cannot fall back on the opt out clause of the European Union gender directive that previously let firms offer men and women different pricing.

So what has been the impact of these rules?

The gap between men’s and women’s car insurance premiums has actually widened. In 2012, men on average paid £27 more for a car insurance policy than a woman, but in 2017  they paid £101 more.

What has happened in reality is that insurance companies are now using other data to set pricing without actually directly asking for gender. The price being quoted reflects risks such as occupation, annual mileage, the sort of car you drive  and any modifications to the car. Based on this data the difference in pricing has increased so the gender ruling, unlike what was first anticipated, seems to be beneficial to women.