This is no secret: car insurance premiums are much more costly for young American men than for young women. Insurers claim the discrepancy is justified, since young men are statistically more involved in accidents and since their claims are higher than those of other categories of drivers. Many argue, however, that this practice is tantamount to gender discrimination as it targets a specific group without regards to individual behaviour: the European Union thinks so, and European auto insurers will soon be prevented from systematically imposing higher premiums on young men.
To most of us, December 21, 2012 currently rhymes with the end of the world, according to the Mayan calendar. To European drivers, it represents the day on which women’s auto insurance premiums will become more expensive… and on which those of men are likely to go down: the latter are celebrating, the former are mourning. But why exactly is this change suddenly taking place?
Back in 2004, the Council of the European Union implemented the principle of equal treatment between men and women in the access to and supply of goods and services. Article 5, paragraph 2 of the declaration, however, allowed States to derogate to the rule for premiums where gender was considered essential in the determination of risk. Just over one and a half years ago, the Court of Justice of the European Union reconsidered this and delivered the Test-Achats Ruling invalidating the possibility of continuing gender discrimination in this area. The ruling takes effect on December 21, 2012.
European women under 40 will be the hardest hit by the decision. If insurance companies are not allowed to keep asking young men to pay more while they keep being more involved in crashes, they certainly will not accept to lose money: insurance premiums will go up for young women, who have always paid much less than their male counterparts. To balance the new numbers, it is also likely that a bonus-malus approach will be adopted, thereby adapting insurance premiums to individual records instead of penalizing an individual off the bat based on the sole fact that he belongs to a targeted group.
An article by Patrick Collinson in The Guardian shows that the typical insurance claim by a young European male adds up to 4,500£ as opposed to 1,200£ when the driver is middle-aged, whether male or female. “It’s the main reason”, says Collinson, “why men pay around 40% more than women for car insurance until the age of 40, when accident rates and claims tend to equalise between the sexes”. Starting on December 21 of this year, however, European divers’ gender won’t factor in anymore. Now that the EU has disqualified the practice as discriminatory, will the USA eventually follow?
Over the course of their lifetime, American men pay $15,000 more in auto insurance than American women, according to the numbers reported by CBS’ Kathy Kristof. An 18 year-old male living in Nevada has a premium 50% higher than that of his female counterpart. The gap only narrows when the male driver is middle-aged, that is, when men and women seem to be equally involved in car crashes and to file in similar insurance claims.
Still, the Insurance Institute for Highway Safety’s numbers reported by MSN’s Gina Roberts-Grey show that men are 2.5 times more likely than women to be involved in fatal crashes, that they tend to wear their seatbelt less, and that they are twice as likely to drive with a suspended license. These statistics, and many others, contribute to the idea that it is legitimate for insurers to impose higher premiums on men since they are more at risk than women motorists.
But women are more present on the road than they were many years ago, and they slowly are catching up with men in terms of the number of crashes they are involved in. In effect, fatal accidents involving women have risen 10% over the past 35 years whereas they have gone down 32% for men. Statistics even tend to show that the gender gap we still observe today reverses itself when divers are past 65 years of age: in fact, elderly women are 20% more involved in fatal crashes than their male counterparts.
As a result female senior drivers face higher premiums than elderly men, but the cost is not anywhere near that to which young men are exposed. In a way, then, tackling gender discrimination in the auto insurance industry just like the EU did is not only likely to benefit young, responsible male divers, but also good older female motorists. The bonus-malus approach which will probably be favoured as a result of the Test-Achats Ruling will not only ensure that the European drivers who cost more pay more, regardless of their gender, but it will also prevent systematic penalties against responsible car owners and social stigmatization. Will the USA eventually follow the leader?
About the author:
Alexandre Duval is a blogger for Subaru Rive-Nord, a dealer that offers Subaru Forester deals and Subaru Impreza for sale. Alexandre writes about cars, insurance and other topics he is passionate about. He is currently completing his master’s degree in political science at the University of Quebec in Montreal.