Few of us would single out the existence of cheap car insurance deals as the most serious manifestation of gender-based discrimination in our society. But yesterday's verdict of the European Court of Justice that these sort of deals constitute unfair discrimination is, nevertheless, justified. Discrimination by insurance companies based on gender might be relatively inoffensive, but it is still discrimination.
Statistics on the involvement of each gender in accidents are used to support the fact that women can generally get cheaper car insurance deals than men. But statistics could be used to present a host of grounds for discrimination by insurance companies. Yet we would regard discrimination based on ethnic background as unacceptable. And there are limits on insurers discriminating based on health grounds too. One of the achievements of President Obama's landmark healthcare bill in the US last year was the prohibition of discrimination by health insurers against those with "pre-existing" medical conditions.
A more significant aspect of this judgement is the impact on the annuity rates offered by insurance companies. Men have a shorter life expectancy than women so have, up until now, been able to benefit from larger annuities when they convert their pension pots. But now annuity rates will have to equalise.
Yet while this judgment is sound, there is a caveat. The overall impact of the ruling should be fiscally neutral for society. The car insurance premiums of women should rise and those of men should fall by a corresponding amount (allowing for the relative numbers of each gender applying for insurance). Meanwhile, the annuity rates of men should fall and those of women should rise in a similar way (depending on the relative numbers buying annuities). But yesterday the insurance industry was suggesting that young men's insurance premiums will remain static and that women's annuity rates will not rise by very much. The difference would, presumably, be pocketed by the insurance companies.
The Financial Services Authority must keep a close eye on this. A ruling to curb gender discrimination must not become a pretext for profiteering by the insurance industry.Reuse content