Why gender-based car insurance is preferable to a black box spy

For the first time since the 2016 referendum, I’m sensing the faint glint of a silver lining to the UK’s looming exit from the EU.

Alongside the vital issue of market access for goods and services, the rules governing gender-based car insurance are niche. But they’ve been on my mind all the same. This month my daughter will turn 17 and will begin to learn to drive. Adding her to the insurance has cost me £760 — tripling my previous premium.

Years ago, in the dreamy days before the EU’s gender equality directive obliged insurers to stop discriminating on the grounds of gender, the premium might have been less. And it would have been a snip compared with adding a 17-year old son. Rightly so, in my view. As a reckless teenager, I am ashamed to say I wrote off my parents’ car within weeks of passing my test. I don’t wish to tempt fate, but I am confident my daughter’s risk appetite is more modest.

And yet back in 2012 the EU gave boy racers a big break. Up until then it was almost twice as expensive for a male aged between 17-20 years to get a car insurance policy as for a female. The average £1,600 premium gap has dwindled to £650, according to price comparison site Confused.com.

Gender discrimination legislation is normally assumed to protect women from centuries-old prejudices. But in an unpleasant twist for women drivers, this EU rule barred insurers from recognising the underwriting reality that if you are a female driver, particularly a teenager, you are on average a lower risk.

Post-Brexit, assuming the UK has the freedom to ditch this kind of rule, underwriters could revive the right to penalise male drivers, particularly young ones.

Insurers point out one upside of the EU rule: it forced them to adopt more sophisticated underwriting techniques — to the benefit of everyone. Despite apocryphal predictions, women’s premiums did not rocket after 2012. Even among the 17 to 20-year-old population, premiums on average are now slightly lower for women, and have fallen by nearly a third for men.

Without gender-based underwriting, men across all age groups still pay on average 15 per cent more for their car insurance than women.

The difference now is that safe male drivers are not punished simply for being male. Some of the “sophisticated” underwriting is just a matter of assigning a greater weighting to other rating factors that were always used — occupation, location, model of car, size of engine and so on — many of which are seen as proxies for gender.

If you drive a BMW 5-series and work as a scaffolder, you’re pretty likely to be both male and a relatively high-risk insurance proposition.

The real underwriting innovation, though, has been the advent of so-called telematics — devices that measure how safe a driver you are by monitoring acceleration, braking habits and your propensity to break the speed limit. An insurer will typically charge a 30-40 per cent higher premium to a young driver without a telematics device. If you do have a device fitted, and drive alarmingly, you will receive a warning or could have your policy cancelled.

Back in 2012, the insurance industry was vociferous in its opposition to the Brussels ban on gender-based underwriting. But even if the government does strike a Brexit deal that permits regulatory divergence, there may be little pressure to return to the bluntness of preferring women drivers to men.

Insurers see no need to revive such practices, so effective is the risk monitoring that comes with telematics. Not only does the technology allow them to underwrite more accurately, it helps moderate aggressive driving, cutting down on accidents and hence reducing premiums. In one corporate example, that of car-parts supplier Andrew Page, the accident rate nearly halved after it introduced telematics across its 900-vehicle fleet.

I grew out of my boy-racer ways pretty soon after my fateful accident, aged 17. But personally I’d still rather be penalised under gender-stereotyped underwriting than have a black box spy on my every move. I’m clearly out on a limb, though: insurers say up to 90 per cent of young drivers now use telematics devices. For them, it’s just another data intrusion in their increasingly monitored lives — and one that clearly saves them money, regardless of gender.

patrick.jenkins@ft.com

Source: https://www.ft.com/content/0e54a5da-8148-11e8-bc55-50daf11b720d

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