A Bumpy Road Ahead For Female Drivers?

Financial Services Team Blog

James Carnegie

Many female drivers are bracing themselves for uncomfortable journeys in the coming months when looking for car insurance. A ruling from the European Union, which came into force on 21st December 2012, has banned insurers from discriminating between men and women when setting car insurance premiums.

Will this mean parity in the amount men and women pay in the future, with increases in premiums paid by female drivers matched by equivalent decreases for their male counterparts? Harris Poll data, recorded just before the change in law, suggests this is not the perception of most drivers currently holding a car insurance policy. Whilst 61% of female policy holders, unsurprisingly, expect their premiums to go up as a result of the law change, only 12% of male policy holders believe their own prices will fall. Many expect insurers to not implement this fairly with over 1 in 3 males (37%) expecting to also receive an increase in price as a result of the changes.

Despite cynicism about how insurance companies will implement the changes to the law, there is a widely held belief amongst both male and female policy holders that pricing car insurance premiums based on gender was unfair. Indeed, only 3 in 10 females believed that prices should be set based on gender. Car insurance policy holders deem ability, experience and car usage as much more important factors than gender in determining prices. However, 55% of female policy holders believe it was fair that they previously received a preferential rate on their car insurance on the basis of their gender. This suggests many female drivers believe there is a correlation between gender and the aforementioned factors, which in the past lead to better prices for them when compared to male drivers.

Interestingly, one way that could help ensure people pay a fairer price for their car insurance premiums, irrespective of gender, is rejected by the vast majority of car insurance policy holders. Only 32% of policy holders think that in-car devices that monitor driving style should be used when determining the price of car insurance. Whilst many may feel this is a “Big Brother” style invasion of privacy, surely if you are a good, safe driver then you would be rewarded by paying less to ensure your car?

Such contradictory views seem to present a “no-win situation” for car insurance companies. Most people do not think gender should be a factor in setting prices; many expect their car insurance premiums to go up in the future and a way to potentially make policy prices fairer (in-car monitors) are widely unpopular. As a result, car insurers are going to continue to have a very difficult task in convincing already disgruntled customers that the prices they are charging are justified now gender can no longer be a factor in setting car insurance premiums.

Maybe a starting point would be to improve the way in which premium increases are explained, with only 1 in 5 (21%) car insurance policy holders believing insurance companies do this “clearly”. Twice as many policy holders (41%) currently deem explanations to be “not at all clear”.