Political correctness gone mad

by Ed Bowsher on 01 March 2011  |  21 comments
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Today's European Court ruling on alleged discrimination by the insurance industry is bonkers.

So the European Court of Justice has said today that insurers can’t charge different premiums to men and women because of their gender. This verdict must be implemented by December 2012 and has wide-reaching implications. It’s also a bonkers decision.

The biggest impact will probably be on car insurance. Currently, car insurers typically charge lower premiums for women than men because they know that women tend to be safer drivers than men. This difference between the sexes is especially striking when you look at younger people.

Now the European Court believes that the current approach is sexist. Women pay less for their car insurance purely because they’re female. But personally, I don’t think lower premiums for women is sexist at all.

For me, a sexist is someone who discriminates in favour of men even though women are just as capable as men. So a sexist hospital might only employ male doctors even though women are just as capable as men.

But when it comes to car insurance premiums, the different treatment has a real basis in fact. Women are safer drivers than men and I don’t see why they shouldn’t benefit from that fact.

The ruling won’t just affect car insurance premiums, it will also have an impact on retirement annuities and life insurance.

So who will be the winners and losers?

Winners and losers

I suspect the biggest winners will be young male drivers. Insuring a car for an 18-year old man can be horrendously expensive. Today’s ruling should mean that his premiums will fall a little. However, the best way for a young man to reduce his premiums is to sign up for a pay-as-you-go car insurance policy where an insurance company can monitor where and when he drives.

Women who are paying into a defined contribution pension scheme will also benefit. Currently, when women come to buy an annuity, they get a lower income than men because they are expected to live longer. Annuity providers will now have to pay the same rates to men and women. Male annuities may fall by as much as 13%.

When it comes to life insurance, men are the likely winners. Because women live for longer than men, they have a lower risk of death over a certain time period and therefore pay lower premiums during that period. That will now have to change – women will have to pay more for life insurance while male premiums should fall.

For me personally, this is nothing but bad news. On the downside, I contribute to a defined contribution pension scheme, so my annuity will probably be lower than it would otherwise have been. And sadly, I don’t benefit from either of the potential upsides for men. I don’t own a car so I won’t get cheaper car insurance. And because I don’t have any dependents, I don’t have life insurance either, so no gain for me there

So from a personal perspective, the ruling is annoying, but I’m much more annoyed from a public policy perspective. I think the ruling takes political correctness to a ridiculous new level and I see no sensible reason why the UK shouldn’t be allowed to make its own decisions on this issue.

If you want to find out what ordinary people think about this issue, check out our video: Insurance premiums set to rise.

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