Motorists face higher insurance costs

A landmark ruling by the European Court of Justice means that some motorists young women, in particular are facing higher insurance premiums.

Under the ruling, the court has said that insurers who evaluate risk and set premiums accordingly based on the policyholders gender are acting in contravention of the fundamental principles of EU law.

From December 21, 2012, it will be illegal for insurers to charge men and women different premiums. This will force insurers into a complete revision of their practices and it is widely expected that female motorists will no longer benefit from the lower premiums they have enjoyed until now.

According to research by the Association of British Insurers (ABI), making it illegal to assess risk by gender could result in a 25 per cent rise in premiums for women under 25.

Maggie Craig, acting director general of the ABI, said: This gender ban is disappointing news for UK consumers and something the UK insurance industry has fought against for the last decade. The judgment ignores the fact that taking a persons gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance.

Until the ruling comes into force there will be a transitional period, but Noleen John, legal consultant at international legal practice Norton Rose LLP, said: This transitional period is less than that recommended by the Advocate General and means that insurers will need to review their policies and practices as soon as possible.

It also seems likely, in view of the length of the transitional period, that insurers may need to use uncertainty premiums until they have sufficient data in relation to this new basis. This could result in higher premiums or lower benefits for certain policyholders.