The Equal Cost of Motor Insurance

Posted on April 21st, 2011 by David Williams MBE

The Equal Cost of Motor InsuranceMany young female motorists will be cursing the European Court of Justice following the ruling that car insurance companies will no longer be able to take gender into account when determining premium levels.  Given that young female drivers in general have less crashes than their male counterparts, premiums for females have traditionally been lower.  It has been suggested that premiums for young females will rise by as much as 25% whereas those for young males will reduce by around 10% following the new ruling.

If this turns out to be the case it will mean that the tradition of penalising groups that cause accidents will be partly ended.  Perhaps a poor result for road safety?

However, despite the headlines the truth is that gender only accounted for part of the premium calculation.  Far more relevant are the factors which include age, location, car type, occupation, driving experience, no claims record and of course who else – male or female – may be driving the car.  Given that motor insurers now have until December 2012 to implement the changes it is our belief that the above factors and perhaps some new ones will be used to better estimate the risk of car insurance customers.  The more cynical amongst us may feel that some insurance companies will use this ruling to merely increase premiums and therefore profit but GEM Motoring Assist hopes this will not be the case and that market forces will ensure that premium levels reflect only the risk associated with each individual customer irrespective of their gender.

The road casualty figures do show clearly that females have less crashes than males, however, when factors such as mileage covered and indeed the overall number of female drivers on the road are added to the calculation the situation is less clear.

More worrying still is the effect that increasing premiums generally for young drivers will have on illegal driving.  Faced with insurance premium levels in the thousands of pounds it is not hard to understand why so many young drivers decide to ‘take a chance’ and drive uninsured.  A seventeen year old friend of my family was quoted £8,000 to insure a 9 year old 1.6 litre Ford Focus worth around £2,000!

Crashes caused by uninsured drivers currently add around £40 to every insurance premium.