Gender ruling’s impact unequal

Andrew Tully, pensions technical director at MGM Advantage. Picture: Contributed
Andrew Tully, pensions technical director at MGM Advantage. Picture: Contributed
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Women drivers have been hit by EU’s shake-up of car insurance, but they have benefited elsewhere

Women have been the biggest victims of a shake-up that took effect a year ago banning insurers from using gender as a factor when setting prices.

The cost of car insurance for young women has soared over the past 12 months, while hoped for reductions in life and protection insurance costs for women have failed to materialise.

The rules came into force on 21 December, 2012, after an EU directive removed the exemption of insurers from European gender equality principles. From that date, insurers were no longer allowed to take someone’s gender into consideration when setting their ­premiums.

The ban affected a range of products for which insurers differentiated between men and women, most notably car insurance, life cover, protection insurance and pension annuities. The consequences were expected to include hikes of up to 25 per cent in the cost of car insurance for women, while men were warned that annuity rates could plunge by more than 10 per cent.

But fears that insurers would use the change as a smokescreen for a wave of price increases so far appear unfounded.

The impact of the new rules has been cushioned by other factors that have boosted pension incomes and driven car insurance costs down. ­Annuity rates for both sexes have risen over the past few months due to a rise in gilt yields, partially reversing a 15 per cent plunge when quantitative easing was introduced in 2009.

Women have seen the biggest increases, as their longer average life expectancy meant they previously received lower payouts than men.

The average retiree buying a standard annuity now with a £50,000 pension pot would get an annual payout of £2,886, according to MGM Advantage. A year ago the annual income for men and women would have been £2,658 and £2,563 respectively.

Andrew Tully, pensions technical director at MGM Advantage, said: “Annuity rates have increased slightly through the year, however rates are still well below what they were even two or three years ago.”

The effect of the gender ruling has been less positive for women buying life cover and protection insurance. Average female premiums on income protection, life insurance and critical illness insurance were forecast to plummet once the gender ruling took effect, with male premiums rising sharply.

But it hasn’t turned out that way, according to Richard Rowney of insurer LV=, as prices have gone up across the board. “Shorter life expectancy and a higher risk of serious medical conditions meant men stood to see their life assurance and critical illness insurance premiums increase. ­Similarly, average female premiums were expected to fall by 30 per cent on income protection, and increase by 20 per cent for life assurance and 10 per cent for critical illness,” he said.

Instead premiums have increased, said Rowney, who pointed to a change in tax rules in January that blocked insurers from offsetting life insurance policy costs against the profits of the business.

Car insurance costs have gone down, however – except for the young women drivers that have been hit hardest by the EU ruling.

Almost all age groups have enjoyed reductions in car insurance premiums averaging almost £150 over the past year, according to price comparison site

Its figures, based on seven million quotes carried out over the past 12 months, found that only women aged between 17 and 20 have suffered an increase in the cost of car insurance. The rise has been far less severe than first feared, ­however.

While the average male driver aged 17 to 20 has seen premiums fall by almost £1,000, and premiums for male drivers in their 20s are also more than £100 a year lower, their female counterparts are paying just £9 more than a year ago.

Scott Kelly, head of motoring at gocompare, said: “The gender directive certainly shook up the car insurance market this year. No one was entirely sure how prices and products would be affected when it first came in last December, but with the exception of young female drivers, these reductions in premiums will be very welcome indeed.”