By Myles Neligan
LONDON Dec 21 A European Union ban on insurers
using gender to set prices, which comes into force on Friday,
will likely lead to higher insurance costs for consumers.
The EU's highest court outlawed insurers' practice of
charging men and women different prices as sex discrimination in
March 2011 after Belgium's consumer association brought a test
case against it.
The move has drawn criticism from insurers who say gender
exerts a strong influence over how likely a person is to claim,
and should be reflected in the premiums they pay.
"It is bonkers, absolutely bonkers," said Kevin Ryan, an
insurance analyst at Investec in London.
"It is extraordinary saying people cannot compete on
underwriting factors. But, broadly for insurers, it will be
viewed as good news because prices will go up."
Higher prices would be welcomed by a European insurance
industry squeezed by rock-bottom interest rates and recession in
several key markets.
Insurers typically charge lower prices for women drivers
because they are statistically less likely to crash than men.
They also offers male retirees who buy annuities -
investment policies that pay a regular income for the remainder
of the customer's lifetime - more generous payments than women
because men die sooner, on average.
The biggest changes were expected in the motor insurance
market where women below the age of 25 will, from Friday, pay up
to 40 percent more to eliminate the discount they enjoy relative
to men, accountants PricewaterhouseCoopers estimated.
Insurers won't match the increases in female motor premiums
with lower rates for male drivers, boosting revenues, although
the gain will be competed away over time, said Bjorn Norrman, an
analyst at credit rating agency Fitch.
"I would assume that in the beginning you will see much more
increases for younger female drivers than you will see decreases
for young male drivers," he said.
Insurers' new prices will also likely include an extra
margin to absorb set-up costs and provide a buffer against
changes in the ratio of male to female customers, which could
alter the number of claims they receive, Norrman said.
European motor insurers have been faced with sluggish price
growth because of intense competition, exacerbated in the past
decade by the rise of price-comparison websites.
Insurers seeking to comply with the ban face a choice
between introducing a "unisex" rate pitched between the higher
and lower prices they currently charge, or by bringing the lower
rate into line with the higher one.
German insurers' association GDV said there would be no
price benefit to consumers overall as supposedly unisex prices
will, in practice, be too high for either men or women.
"At the end of the day, unisex tariffs will always
systematically disadvantage one or other of the sexes," GDV
said. "Unisex tariffs do not lead as much to equal status as to
Insurers could try to sidestep the ban by basing their
pricing on proxy gender indicators such as the customer's
profession or model of car, although this would be vulnerable to
legal challenges, law firm Eversheds said.
The ban was also expected to boost demand for so-called
telematics insurance, where insurers monitor customers'
behaviour through devices installed in cars, and charge
according to how riskily they drive, irrespective of gender.
Europe's biggest motor insurers include Allianz,
Axa, Direct Line and Generali,