WOMEN buying car and life insurance will be the hardest hit when new legislation banning insurers from using the customer’s gender as a pricing factor comes into force next month.
The window in which premiums can be secured at the current lower rates is still open, with few insurers having switched to “gender-neutral” pricing – but it is closing fast.
Women who need to buy or renew their car insurance over the coming weeks are being urged to do so now, before the new rules drive premiums up by as much as 25 per cent. The increase in the cost of life cover is expected to be more modest, but significant savings are still on offer for those planning to purchase it in the near future.
The change is set to cost millions of people money at a time when many are trying to cut costs – and it is all the result of a ruling in the European Court of Justice last year.
The court found in favour of a challenge to the exemption of insurers from European gender equality principles and the resultant ban comes into force on 21 December, dubbed G-Day.
Put simply, it means that insurers will not be able to differentiate between men and women when calculating their premiums. A range of products are affected, most notably life, car and protection insurance, plus pension annuities.
In some instances, women will benefit, in others, men will be the winners. In the bigger picture, however, insurers are likely to raise prices for both sexes (see side story for more on this).
Insurance already in place isn’t affected, but you may find your premium going up if you request an amendment to an existing policy once the gender rule is in force.
Here we look at how the change may – or may not – affect you if you buy car, life or protection insurance any time soon.
The cost of car insurance is where the rule change will have the most visible impact. Premiums for women are currently far lower than those for men, as they are considered lower risk. But that will no longer be reflected in premiums, under the ban, so women will have to pay the same as men.
The insurers that have moved to gender-neutral status have raised premiums by up to 25 per cent. That equates to more than £100 for the average female driver, with the increases in the thousands of pounds for some younger women.
The higher costs will make car insurance unaffordable for some women, according to uSwitch.com, which said 13 per cent of women will be unable to afford insurance and 11 per cent could have to sell their cars.
Yet only 23 per cent of women drivers quizzed by uSwitch plan to renew their insurance before the new rules come into force, with most content to pay more on renewal next year.
However the good news is that only a handful of car insurers have changed their rates so far, meaning cover is still cheaper for women than men. That will change quickly, so anyone wanting to beat the hike should act urgently.
WHO NEEDS TO ACT?
Women whose car insurance expires over the coming months or who are planning to buy some, particularly younger drivers. The potential savings from buying now rather than waiting for a current policy to expire early next year may make it worth terminating the existing one and starting a new one before 21 December (provided the new quote is secured before cancelling the current cover).
For older women the difference is marginal – those aged above 45 or so are already priced at a similar risk level to men.
Men should sit tight – they could see their premiums fall slightly after 21 December.
Both men and women will pay more for life insurance after 21 December, with the latter taking the biggest hit.
Their higher average life expectancy means women benefit from cheaper premiums. That distinction will be removed from the equation on 21 December, adding considerably to female life insurance costs.
They could jump by up to a fifth under unisex pricing, according to forecasts, but early evidence suggests that prediction may be conservative. PruProtect has already unveiled gender-neutral rates that come into effect on 21 December and while some older women will actually gain, others could pay 50 per cent more.
The table above should help illustrate the extent to which women will see their life cover costs increase.
WHO NEEDS TO ACT?
Anyone reviewing their life cover or considering taking it out over the next few months should do so now, with women making the biggest savings (as the table shows).
Whether you secure the savings depends on how quickly you make your application and with which insurer.
In some cases you can ask for the policy to start after the gender ban comes into effect and still take your gender into account. It varies with insurer, so make sure you check their quote guarantee period. Aviva, for example, will allow customers to have gender-specific applications on its standard policies for up to 120 days after 20 December;
Others, including Friends Life and LV=, will use gender-neutral pricing for all policies, starting on or after 21 December, according to LifeSearch.
INCOME PROTECTION & CRITICAL ILLNESS INSURANCE
This is one area where women will gain from the gender ban – they currently pay more than men because they are more likely to claim on income protection. So men will see premiums go up from 21 December, with women benefiting from a move in the opposite direction.
With women paying up to 65 per cent more than men for income protection, the impact could clearly be significant. LV=, the insurer, has predicted that women will enjoy a premium reduction of around 28 per cent, while men could be paying 20 per cent more in premiums on income protection taken out after 20 December.
The opposite applies to critical illness cover, for which men typically pay around 10 per cent more than women. Rates for women over 50 years could jump by up to 20 per cent, while men could pay around 3 per cent more, on average.
WHO NEEDS TO ACT?
Men planning to buy income protection any time soon should consider doing so before 21 December, after which it will become more expensive.
Women planning to do so are advised to wait until they can take advantage of gender-neutral rates.
The reverse is the case for women thinking of taking out critical illness insurance, as premiums will be higher after the onset of G-Day.