Today’s decision in the European Court of Justice might, at face value, seem sensible. Currently, insurers enjoy an exemption from the EU Gender Directive. The Directive is intended to prevent discrimination – and surely all discrimination should be removed from the business arena?
Well, today we heard that insurers will now have to treat men and women the same when they price their products. So what does that mean for customers?
In general, commercial insurers do not consider gender when they are pricing business insurance. They use huge amounts of statistical and risk data to help them decide how likely it is that an individual will make a claim – and how severe that claim is likely to be. So as things currently stand, it is not a disaster for business insurance customers.
But today’s ruling becomes problematic for things like personal accident or car insurance. Like it or not, women cost insurers less than men. This is a fact, and it has been proved by reams of statistics. It makes sense, for both businesses and consumers, that the price should reflect this. Today’s ruling makes that impossible.
But the implications of the Court’s decision are potentially far worse. Where does it end? Could the next step be for the Court to decide that insurers cannot factor age into their prices? Or a person’s claim history? It is perfectly conceivable that we will end up with a situation in which a 17 year old with three previous accidents enjoys the same car insurance premiums as a 50 year old who has been driving for three decades without making a claim.
That is why this decision is such a bad one for consumers. The Court says it will mean lower premiums for women. But in reality, insurers need to be able to price their products in a way that accurately reflects the levels of risk they are exposed to – and if they are unable to do this, the likelihood is that many will simply price all their products less favourably in order to insulate themselves.
At Simply Business, we have found that our female policyholders make fewer claims – and when they do, those claims are less severe. We do not currently consider gender when we price our products. But we would like our insurers to be able to price their products in a way that is fair to everyone – and pass on the discounts to customers who deserve them. Today’s ruling threatens to make that impossible.