Women count cost of car insurance as EU gender rules come into force

New EU gender rules mean women could pay up to 40% more for car insurance – and men will lose out on annuities

Insurers will no longer be able to offer women drivers reduced rates, or give male pensioners better incomes, following the introduction of new EU rules on gender equality.

While it is still unclear how the rules, which came into force on 21 December, will hit people’s pockets, male pensioners could be left up to £10,000 worse off in retirement, and some female drivers will pay 40% more for car insurance.

Following G-Day, as it is known in the industry, insurance companies are no longer able to vary premiums according to a policyholder’s sex, the result of a 2011 European court of justice ruling.

This will have an impact on how much everyone pays for car and life insurance, and the size of the income available to men and women when they use their pension pot to buy an annuity.

According to PricewaterhouseCoopers (PwC), male pensioners could see their annuity payouts reduced by up to £10,000 over the lifetime of their policy. Until now, men have on average received about 4% more income from their annuities than women, because women tend to live longer.

Because insurance companies will no longer be able to use the sex of a pension policyholder to determine the income they offer, they have said they will rely more heavily on other criteria to underwrite annuities, including the type of job a policyholder has done and whether he or she suffers certain medical conditions.

Raj Mody, head of pensions consulting at PwC, said: “While a small number of women will be better off from the ruling, eight out of 10 annuities currently sold in the UK are bought by men, so many more people risk losing out than gaining.”

Women who are beneficiaries of joint life annuities purchased by their male partner will also be affected, as they will end up with a lower income.

Legal & General brought in gender neutral pricing for its annuities on 20 December, and said it had reduced male annuity rates by an average of 3% and boosted female rates to the tune of around 3.2%. It pointed out that gender was only one factor used to price annuity products: health and lifestyle, for example, can have a greater impact on life expectancy and the resulting annuity income a customer may receive.

People buying life insurance will also be affected, with women now likely to pay up to 23% more for a policy and men 3% less. The Treasury estimates that life cover for women could go up by around 15%, while life insurance website Protected.co.uk puts the likely rise at 30%.

The Association of British Insurers (ABI) said the insurance market would “remain competitive”, but experts on car insurance suggest some groups will face huge jumps in cost.

According to the British Insurance Brokers’ Association (BIBA), motor insurance premiums for (predominantly) young female drivers are expected to increase by between 15% and 38%. Market research company Consumer Intelligence puts the possible rise in premiums at an average of 14% for women and drop of 5% for men, but says some motor insurance premiums have risen by as much as 39% for women.

Mohammad Khan, insurance partner at PwC, said: “For young female drivers aged under 25 this will probably result in motor premium increases of between 10% and 40%. For young male drivers conversely, the directive could result in premium decreases of up to 10%, depending on their claims experience.”

For income protection insurance or critical illness cover (usually pricier for women before the ruling), men can expect to pay as much as 50% more. For income protection alone, LV= predicts policies for men will rise by 20%-25%, while for females they will come down by around 28%. It reckons critical illness with life cover could rise by 6% for men and 16% for women.

Of the few companies that have announced new prices, Legal & General says it will charge men an average of 49% more for income protection insurance, with women enjoying a 5% cut. For life insurance with critical illness cover included, L&G has hiked average premiums for women by 9% and cut them for men by 4%.

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