Peace and goodwill, but not for women drivers

On the 21st of December a new EU ruling comes into force that will prevent insurers from discriminating on the basis of gender when setting premiums.

Why should women care? Because up until this ruling comes into effect, women have been the major beneficiaries of this discrimination – enjoying substantially lower car insurance premiums than their “riskier” male peers.

Over the years it has been widely accepted that men between the ages of 17 to 25 are the most risky drivers – and their boy racer mantel has come with a hefty price tag attached in terms of insurance premiums. For most drivers this makes complete sense. Young men are more likely to claim so it’s better that their premiums are heavily loaded rather than other “safer” drivers having to pay higher premiums to help meet the cost of younger drivers’ claims.

But let’s look at this again. Say you have twin children – a boy and a girl. At 18 they both pass their tests and are given the same old second-hand car. But when it comes to arranging their insurance, you end up paying up to £400 more for your son than for your daughter. Your son has been classified as a high risk before he has even had a chance to prove his worth on the road. You know that statistically his sex and age make him a higher risk, but somehow now it doesn’t seem quite so fair.

You wouldn’t be alone in thinking that – two out of three men (66 per cent) say that the new rules to end this discrimination are long overdue. Almost two in ten (18 per cent) argue that they have been treated unfairly in being forced to pay the lion’s share in premiums, while almost half (45 per cent) believe they have been unfairly discriminated against.

So the new ruling does address these issues, but what does it mean for women drivers? Until now women could be confident that their insurance premiums would be cheaper as statistically they have fewer accidents than their male counterparts. This thinking was supported by specialist women-only insurers, such as Diamond and Sheila’s Wheels, whose whole business has been built around the premise that women, as safe drivers, shouldn’t pay more to subsidise men.

And this is the real sting in the tail for women drivers. As a result of this new ruling, women can expect their premiums to rise by as much as 25 per cent. In these cash-strapped times, and with many women earning substantially less than men, this could cause financial hardship. As many as one in four (24 per cent) could be forced off the roads, while over a third (35 per cent) will have to cut their living costs to continue motoring.

Should premiums rise by as much as 25 per cent, six out of ten female drivers (63 per cent) would be forced to find ways to cut the cost of their cover. Some may have no choice but to downgrade their cover to third-party, leaving themselves financially exposed in an accident. Others may be forced to downgrade their car to benefit from lower premiums. Yet, an older or less reliable car could actually end up costing them more.

And of course the spectre of an increase in uninsured drivers on our roads is another danger.

So, although trying to create equality between the sexes, the unfairness of this ruling is that women will have to pay more.

And while women’s premiums will shoot up to match men’s, there is little hope that men’s premiums will fall even slightly to lessen the impact on women. In the short-term this ruling will be a source of angst and will do little to improve the popularity of insurers. Already a quarter of women are concerned that from next year they will foot the bill for riskier drivers. But in the longer-term the hope is insurers will still be able to reward better drivers.

Until then, all drivers should watch closely next year’s renewal premium and e shop around. In the case of women drivers, it could even be enough to keep them on the road.

• Michael Ossei, is a personal finance expert at uSwitch.com