Gender Rules Trip Up Insurers

by Hester Plumridge

Wall Street Journal
March 2, 2011

Discrimination on grounds of sex looks unfair. But it's hard to see how a new ruling against it will benefit either Europe's insurance industry or its consumers. The European Court of Justice says insurers can't offer men and women different priced products. That could lead to higher premiums and lower demand for insurance. It also sets a worrying precedent for the industry in an upcoming debate on age discrimination.

Because women cause fewer car accidents and live longer on average than men, insurers across Europe currently offer them cheaper car insurance, and lower annual income from annuities in retirement, since they'll be drawing on it for longer. The new ruling means equal prices must be offered to both sexes on all insurance products sold from December 2012.

That's bad news for consumers, since insurers say premium increases are likely to be passed on. Young women, among the hardest hit, could see the cost of car insurance rise by a quarter. And because insurers won't know the relative proportions of men and women taking their cover, total price increases could be more than just averaging them our between the sexes. In the U.K., the biggest market for annuities, the use of "unisex" rates could see retirement income fall by 2% or more, estimates the Association of British Insurers.

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