The ECJ ruling that insurance companies cannot charge different premiums for men and women is lunacy.
According to the ECJ:
Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination.
This is a rather absolutist view of gender equality, and ignores an important point: that gender differences may be the proximate cause of differences in observed outcomes, such as the ability to keep a car on the road.
Behavioural studies, as well as observed claim data available to actuaries who calculate insurance premiums, show that the risk of having a serious accident, and therefore having a large claim against insurance, is lower for females. (Other studies show that female drivers may be involved in more ‘low-claim’ accidents, and that over-75s are the riskiest group to insure). Essentially, the gender of driver is a reliable component in assessing the probability that a driver will claim against their car insurance.
The consequences of forcing insurance companies to ignore risk factors which may contribute towards the variance in the expected pay-out for a given individual is that some consumers are likely to overpay for cover – in the case of car-insurance, this is likely to be women who will be charged higher premiums.
Put another way, the link between the fundamental cost of the service and the price charged to some consumers will be distorted to the detriment of those consumers. Worse still, female drivers may now subsidise the cost of insuring more risky men.
Isn’t that a form of discrimination?
And where does the ruling end? Will insurance companies be banned from basing contracts on a person’s age? Or levying a higher price because someone is bad at driving – isn’t that discrimination?
A grown-up view of gender equality will recognise that there are some situations where acknowledging differences in gender is potentially important and desirable. The ECJ’s efforts would be better spent sorting out those situations where it is not.
Alex Baker is the Secretary of the Young Fabians.