Car insurance costs soar for young women

December 21, 2012 was an historic day for the insurance industry - this was when the European Court of Justice (ECJ) gender directive took effect.

14:11 29 January 2013

December 21, 2012 was an historic day for the insurance industry - this was when the European Court of Justice (ECJ) gender directive took effect and prohibited insurers from taking gender into account when calculating premium prices.

 

While many predicted that this move to 'gender neutral' pricing would lead to a dramatic rise in the cost of car insurance for women -  with young female drivers expecting price hikes of up to 30% - the reality is that that, overall, premium prices have actually decreased in recent times.

 

What is driving the changes?

 

Under the old 'gender specific' pricing regime, young women paid less than young men because the latter group made more and bigger claims. Now that pricing is gender neutral by law, insurers cannot assume a woman will be a safer bet than a man, so they are setting their prices accordingly.

 

MoneySupermarket's post-December 21 research shows that young women have indeed been hit the hardest by the new rules, and there are fears that the worst could still be yet to come as we enter the peak period for insurance renewals in March, when new number plates are released.

 

So can we all rest easy having avoided insurance 'carmageddon' or could we be on the cusp of simultaneous car and bra-burning by angry female motorists?
Let's see what the numbers say...

 

What impact has the gender directive had on prices?

 

Since December 21, 2012, MoneySupermarket's team of dedicated data analysts have sifted their way through some 1.3million car insurance quotes to try and determine what effect the new ruling has had on premium prices.

 

As expected, young female drivers in the 17-19 years age bracket have been hit the hardest, with price hikes of up 21% adding an average of £231 to the cost of cover. Although this is a considerable increase, it's still a fair way short of the predicted 30% rise.

 

On the other hand, male drivers in the same age bracket have seen a fall of 11.2% in the price of their premiums, but while this equates to an average saving of £184 per year, young male motorists are still paying more on average for their policies than their female peers.

 

As expected, young female drivers have seen the biggest price hikes overall, but all drivers in the 17-19 age bracket have suffered as a result of the ruling and now pay an average of £1,403 for a policy. This is an increase of 6.8%, which equates to an additional £89 per year.

 

A more unexpected outcome is that, despite the price hikes for 17-19-year-olds, female drivers taken as a whole are now paying 1.9% less for car insurance than at the beginning of December 2012, with an average premium now coming in at £416.
And male drivers, en masse, have also seen a drop in the cost of cover, with an average premium price of £490 representing a 7.2% drop since December last year.

 
So who are the winners and losers?

 

Before the ruling took effect, it was feared that there could be an overall rise in the cost of car insurance, with an HM Treasury report stating that: "The Government expects the impacts of the judgment to be broadly negative - in large part falling on consumers rather than industry."

 

But what we have actually seen since the ruling's implementation is that overall car insurance premiums have actually decreased by 4.9%, which equates to an average saving of about £24.

 

So it seems that, far from being broadly negative, the ECJ gender directive has only had a negative effect on the premiums of young female drivers as every other group has either seen no change or a drop in the price of their premium.

 

But why is this?

 

Peter Harrison, insurance expert at MoneySupermarket, said: "The introduction of the gender rules was always going to cause concern as the impact on premiums - in particular, female premiums - was always an unknown. However, the UK car insurance market is one of the most sophisticated in the world, with insurers using factors other than gender to calculate premiums. In addition, it appears that the competitive nature of insurance is helping keep premiums down."

 

So, one contributory factor could be that more people are now comparing quotes when their insurance is up for renewal instead of blindly accepting their renewal quote. This alone saves 40% of MoneySupermarket customers over £300 on the cost of cover.

 

Another factor could be the rise in popularity of telematics insurance which places more emphasis on driver behaviour rather than standard assumptions to calculate premium prices, something that benefits young drivers in particular.

 

It's also the case that insurance companies are clamping down on insurance fraud through initiatives such as continuous insurance enforcement (CIE) and the Insurance Fraud Register. The reduction in premium prices suggests consumers are directly benefitting from the savings being made by the industry.


Will premium prices continue to drop?

 

The cost of car insurance has been in steady decline for well over a year now. The MoneySupermarket car insurance monitor recorded a drop of 11% between summer 2011 and summer 2012.

 

However, as far as the impact of the gender directive is concerned, it's still early days and there are fears we could be heading for stormier waters in March, which is considered to be a peak season for insurance renewals.

 

This is because most people take out new insurance or renew when they change vehicle, and very few people buy new cars during December or January, instead preferring to wait until the new registrations are released in March and September.
In addition, March will mark the end of many 'free insurance for a year' agreements and so many motorists will be looking to renew. This could lead to the rise in premium prices that many have been expecting.

 

But, even with the ruling now in place, there are still some tried and trusted ways to keep the cost of cover down:click here for our extensive list of money saving tips.
Have you been hit in the pocket since the ECJ ruling took effect? Or have you seen a drop in the price of your premium? Lest us know on the car insurance forum.
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