Has the market closed the gender gap?

Ladies: it’s not yet time to panic. Gentlemen: it’s not yet time to rejoice.

Research from price comparison site Tiger.co.uk shows that motor premiums are shooting up for women and falling for men ahead of the EU gender directive, which comes into force on 21 December this year.

However, while the Tiger statistics hail the death of the gender pricing gap in UK motor insurance, more established pricing indices published by the AA and Confused/Towers Watson show it is still large and very much alive.

Rate hike for 20-year-olds

Tiger found that rates in August for 20-year-old women were up 9.2% on the previous year, and rates for 25-year-old women were up 0.6%. All other driver types enjoyed falls in premium.

Furthermore, Tiger found that while prices for men were 12.4% higher than for women on average back in March of this year, a steady erosion of the gap means men’s prices are now 1.9% cheaper.

However, the AA numbers show a consistent gender gap of about 30%. Its most recent shoparound index, which shows the average of the five cheapest quotes available on price comparison sites and direct, gave a price of £3,002 for young men and £2,125 for young women, following increases of 7.5% and 6.5% respectively.

Tiger vs AA

So who’s right? The AA indices have been running for longer (since 1994, compared with January 2010 for Tiger) and also factor in the whole market, rather than just price comparison sites. The two also focus on different age ranges.

It should also be remembered that motor insurance prices are being pulled in many different directions for a whole host of reasons. Rising bodily injury claims have prompted high rate rises in motor personal lines over the past two years. The rate of increase has started to tail off, but price rises are still being put through as the claims inflation trend continues apace and insurers wait for the outcome of next year’s Jackson reforms.

Meanwhile, several sources indicate that some insurers are engaged in a market share grab, particularly those looking to float on the stock market, which is putting downward pressure on prices.

Predicting the inevitable

In addition, the effects of gender-based pricing will continue to be seen for some time after 21 December. It only applies to ‘new contracts’ issued after that date, and there is still uncertainty about what that means.

That is not to say the Tiger stats are inaccurate or meaningless. They are likely an early indication of the inevitable: that the gender gap will narrow when insurers have to stop charging based on the sex of the policyholder. The AA concurs that the gap will narrow ahead of the ruling.

So the time of gender neutrality will come, but it is probably a little early to call it across the whole market just yet.