City backlash against ECJ insurance rule

MOTOR insurers and annuity providers attacked a European Court of Justice (ECJ) ruling that banned insurers from using gender to calculate policy prices yesterday.

The ruling will mean women no longer pay lower car insurance premiums than men despite male drivers under 21 being twice as likely as young women to have a crash.

Annuity providers will also be unable to offer men higher payments than women although they live about two-and-a-half years less. Life and medical cover will also be affected by the ban, which takes effect in 2012.

City experts condemned the move. “In defiance of common sense and logic, insurers will be barred from pricing their products on the basis of risk,” said Ros Altmann, director-general of over-50s insurer Saga.

The Association of British Insurers estimates the ruling will add 25 per cent to car insurance for women under 25; reduce men’s retirement income by eight per cent and add 20 per cent to women’s life insurance.

Darren Philp at the National Association of Pension Funds said the ruling would “lead to a worsening of people’s pension incomes.”

Mohammad Khan, director of PwC’s actuarial practice, said: “The majority of motor claims arise from young male drivers and there is a real risk that if their premiums drop, it could encourage them to buy more powerful cars causing even worse accidents.”

ld add to insurers’ administrative burden.

“Over the next 20 months insurers will have to make large scale changes including updating and changing computer systems; ensuring insurance brokers have the right pricing information; adjusting insurance renewals and updating all sales material,” it said in a statement.

Others expressed fears that the ruling may be extended to decisions based on age – another key factor used by pension and insurance providers.

“Any ruling against discriminating an insurance premium based on age would have a far greater impact on consumers and the insurance industry,” said Khan.

Related articles