Why do men pay more for car insurance?

Why should a young male pay more for car insurance than a female vehicle owner/driver? Why is the life insurance premium higher for a man versus a woman? Why does a woman get a lower rate on an annuity than a man?

This issue has been addressed by the European Court of Justice (ECJ). On March 1, 2011 the court ruled that taking the gender of an insured individual into account as a risk factor in insurance contracts constitutes discrimination.

The result of the ruling is that insurers must provide unisex premiums and benefits as of December 21, 2012.

The insurance industry has long held that the statistics show that males have a higher risk for fatal or physical injury car crashes compared to young female drivers. So the car insurance rates have reflected this disparity.

Life insurance expects that women will pay less then men because they will likely live longer. Pension income for men is usually higher because men will have fewer years to collect while retired.

The Association of British Insurers (ABI) has stated that the effect of this change could result in the following:

  • For motor insurance: women under the age of 25 could see an average rise of 25 per cent to their premium.
  • For annuities: men approaching retirement could see an eight per cent reduction in annuity rates while rates for women approaching retirement could rise by six per cent.
  • For life insurance: women could see a rise of as much as 20 per cent in the cost of cover, while men could see a fall of 10 per cent.

“Insurers will no longer be able to use the exemption for insurance to base female driver premiums on statistics which show that they have lower accident rates and costs. The average 18 year old male claim cost is £4,400 (CAD $6,981) compared to the average 18 year old female claims cost of £2,700 (CAD $4,283),” the Association said in a statement.

Steve Foulsham, BIBA Technical Services Managers said: ““Unisex rates will have to apply for motor insurance with the likelihood of an increase in premiums for females which could typically be up to 25% but in some cases more than 50%. However it’s unlikely that premiums for male drivers will reduce much as their risk is still considerable.”

If this thinking spreads to North America then it could have the same results. It is interesting that the plan is for women's rates to increase for auto insurance and yet men's rates will stay the same. Life insurance is where the men will see a savings and women will still pay more. Ah, the cost of equality!