EU: Sex-Based Auto Insurance Rating is Discriminatory

The European Union Court of Justice ruled Tuesday that charging men and women different rates for insurance is unfairly discriminatory and that European coverage providers must stop the practice by December 2012.

Graph showing each sex's involvement in fatal crashes

Click graph to enlarge

When the change happens, it’s likely that many of the EU’s women will see higher prices for car coverage.

The EU ruling highlights the decades-long debate in the United States over whether car insurance companies should be allowed to charge higher or lower rates for coverage based on factors that are outside of a driver’s control–like age, gender and marital status.

According to the Insurance Information Institute, a handful of groups have been pushing to ban the use of these factors since the 1970s, saying–as the EU court decided–that they establish an unequal playing field.

All insurers in the US are allowed to set varying rates for people with different driving histories and types of cars. Use of these factors raises few eyebrows, since they are based on decisions and actions made by the motorist him or herself.

Even age-based factors receive little protest, even though it can affect prices so greatly while being out of the driver’s control. The fact is that younger drivers tend to get involved in accidents at such a higher rate when compared to older drivers that most people accept age-based rating as an acceptable practice.

But beyond driving history, vehicle type and age, insurers are restricted in most states to determining premiums based on any other factors that are considered “actuarially sound,” meaning they have been proven to be effective and accurate indicators of risk across the spectrum of drivers.

Breakdown by sex of property damage and injury crashes

Click graph to enlarge

Gender has been shown to be a relatively accurate predictor of risk, with women drivers tending to be less risky drivers than males.

Data from the US Department of Transportation show that male drivers were involved in a higher proportion of all three major types of accidents.

In 2009, 74 percent of the drivers in fatal accidents, 55 percent of those in injury-only accidents and 57 percent of motorists in accidents with only property damage were male.

But despite the statistics, a handful of states deny insurers use of this factor.

At least five states–Massachusetts, Montana, North Carolina, Michigan and Pennsylvania–do not allow auto insurers to take sex into account when setting rates.

Whether more states will take the EU decision as a symbolic queue to ban sex-based rating remains to be seen.

About Ben Zitney
Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.

No comments yet.

Comment on this article