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Should women pay less than men for their auto insurance?

In the West, we all take to the road as soon we come of age — in some states, that's earlier than others — although not everyone gets to drive a race car or even to pose in front of a race car pretending she's allowed to drive it. But in other parts of the world, there are quite strict limits on who can drive. For example, in some Middle Eastern countries like Saudi Arabia, there are strict laws prohibiting women from driving.

That solves all the car insurance problems at a stroke. This says a great deal about sex and gender, and the roles considered appropriate for each to have. Here's a discussion of what gender is.

So why are we interested in women drivers for this article?

Auto insurance in Europe

We tend to forget Europe is a foreign country (that's a way of telling you there's not quite a united state of Europe but they're working on it). They have a federal parliament and judicial system so if anyone in a member state has a problem with local laws, they can push the case up to Europe and, if the European Court agrees the member state's laws are out of wack, the court can order the law changed in every member state. Ah ha. So one case can change the law across all Europe. That's a pretty big deal. The case we're interested in decided that insurers are no longer allowed to take gender into account when setting insurance premiums. Naturally the insurance industry has traditionally reflected reality in setting life insurance premiums — women live longer than men — and auto insurance quotes — women drive more safely than men. As from December 2012, this practice has stopped. The European Court ruled it discriminated against people on the ground of their gender. They have some very strong equality laws over there.

With six month experience under the law legal regime, the news is in for the United Kingdom.

The biggest change has been in the annual premium rates for drivers in the 17 to 20 group. In 2011, young men on average paid £1,787 ($2,720) more than young women. They have now seen their rates drop by 30.7%. In the last six months, the average difference between young men and women has fallen to £498 ($760). That's a massive swing, not quite equalizing the annual premium rates in just six months. Obviously this is a good time to be a young male driver. If you take age out of the calculation, all men have seen an average drop of 18.5% while women's rates have dropped by 10%. Yes, it's official! Having taken gender out of the calculation, the average impact has been a fall for both genders. You might have expected the women's rates to rise to offset the fall in male rates. Bur the car insurance quotes have become cheaper for all drivers. That says something very interesting about what happens to rates when the courts become interested in how they are calculated. No European insurance company has gone out of business. They are all still profitable even though now taking in less revenue. So how did they do it? Well up to December, the insurers steadily increased the premiums payable by women — by an average of 16.4% in the final quarter of 2012. So it's not surprising everyone's rates can now start to fall again.

Gender in America

According to auto insurance shopping services, men in America pay an average of $15,000 more than women over their lifetimes. But the actual rates vary dramatically depending on where you live. If you're a young male driver in Nevada you'll pay an average $6.270 to insure your sedan. A young woman with an identical profile would pay $4,150. The difference only equalizes when they get to about 40 years of age. Later, the difference widens again. The reason is that men drive more aggressively than women. But in Pennsylvania, men pay an average 25% more than equivalent women throughout their lives. In Illinois and Texas, women pay more than men for a period in middle age. So it's not automatic that women will pay less than men. The rates vary quite significantly by state. It's all down to the detailed statistics of how the risks play out in your area.

According to the New York Times, even among women, the rates can be very unequal. Married women with at least a degree and a professional job who own their own home are likely to pay almost 70% less than single women who rent their homes and have relatively poor educational results. Insurers build up these detailed stereotypes of policyholders from decades of data about the claims made by each group. Assuming the insurers are setting premium rates honestly, some women live up to their high reputation while others are less than perfect. What does seem true is that women consistently pick up fewer tickets and are involved in less serious accidents than men. This is most obvious during the early years of driving when the difference in auto insurance quotes is most pronounced.

Some people might like to argue the gender discrimination case before an American court but, so far, no one seems inclined to follow the European line of argument. It would seem Americans are prepared to accept different treatment between people based both on their gender and on their age. In a perfect world, everyone would start off with the same annual premium rate which would then be adjusted up or down depending on actual driving performance. With the technology for pay-as-you-drive now cheap and easy to instal, we could quickly see who the good drivers are and reward them with lower car insurance quotes while the reckless immediately start to pay more as their driving styles are analyzed by the machines. Let the machines judge between the genders to discover who's most entitled to cheap auto insurance quotes.

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