Car insurance changes

Equality wins over fairness

1 March 2011

AA Insurance is disappointed at today's decision by the European Court of Justice that UK insurers can no longer use gender as a risk factor when calculating premiums.

The transition period until 21st December 2012 is welcome though and will give the industry time to revise its rating structure. This should minimise the risk of sharp premium increases, especially for young women.


Simon Douglas, director of AA Insurance, says that "this comes at a time when many insurers are struggling with sharp rises in claims costs, which have already led to record premium increases over the past year.

"The use of gender in calculating insurance risk has been a fundamental principle of the UK's risk-based motor insurance structure for decades, although it has been a thorn in the EC's side since 2002.

"Following the Court's judgement, I fear that many insurers will find the young driver market too risky and pull out altogether. That would reduce competition, leading to higher prices."

Equality and fairness

The Court has now agreed with EU Advocate General Juliane Kokott's view that the opt-out enjoyed by the UK and some other countries, is not compatible with the principles of equality guaranteed in European legislation.

It's important not to confuse equality with fairness though. The calculation of car insurance premiums based on risk is by definition fair, but is incompatible with gender equality.

Individual risk

Young women have until now, paid car insurance premiums that are typically up to 50% cheaper than men. In the short term, they will see their premiums rise significantly while those for young men are likely to fall a little.

This is an extremely competitive market though and premiums will settle down as insurers quickly start to adjust their pricing in a way that puts greater emphasis on the individual risk presented by motorists.

Making insurance more affordable

The insurance industry is working on a range of new initiatives such as technology-based insurance that tracks driving standards. This could help to make car insurance more affordable, especially for young drivers.

It's vital that the industry, road safety organisations, the education sector and the government focus on helping young people start their driving careers safely and responsibly which, in turn, will help to make car insurance more affordable.


The issue came to the attention of the European Court of Justice in 2009 after Test Achets (the Belgian consumer association) launched a legal challenge in 2008, questioning Belgium's implementation of the 2004 Gender Directive. The Court argued that the opt-out of the Gender Directive, enjoyed by the UK and some other countries, was not compatible with the principles of equality guaranteed in European legislation. In September 2010, Advocate General Kokott issued an opinion in favour of this challenge. Today's ruling makes the use of gender as a risk factor in insurance illegal from 21st December 2012.