Sarah is our insurance specialist, reporting the latest important developments in the industry.
The European Court of Justice has made a verdict this morning ruling a ban in gender being used to calculate car insurance. Young women are the most badly effected and could see premiums rise by 25 per cent.
According to research conducted by the Association of British Insurers (ABI) last year, motor insurance for women under the age of 25 could see and average rise of 25 per cent to their premium.
The new pricing system comes in to effect from 21st December 2012, giving less than a year for the transition period for insurers. The European Court's ruling under the sex discrimination laws state that gender can no longer be used as a risk factor to calculate annuity rates and insurance premiums.
"The judgment ignores the fact that taking a person's gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance.” The Association of British Insurers, Acting Director General, Maggie Craig said.
"This gender ban is disappointing news for UK consumers and something the UK insurance industry has fought against for the last decade. It will be crucial to ensure this news does not put people off having vital insurance that protects them against accident or illness, or provides an income in retirement. Insurance remains good value for people and not all customers will be equally affected as the use of gender can vary significantly between products and different companies,” continued Craig.
The ruling will have a significant impact on the insurance industry and will almost certainly see an increased premium for young women drivers. Under the current system whereby insurance is based on statistics showing that female drivers have lower accident rates.
The British Insurance Brokers suggest that currently the average 18 year old male claim cost is £4,400 compared to the average 18 year old female claims cost of £2,700.
The research by the ABI found that the new insurance ruling will change annuities. Men approaching retirement could see an 8 per cent reduction and women could see a rise by 6 per cent.
The study also shows that women could also see a 20 per cent rise in life insurance. Men would see their life insurance reduced by 10 per cent.
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