women

The recent court ruling at the court of justice of the European Union (CJEU) that will ban insurance companies from offering cheaper car insurance to women on the basis of their gender from December 2012 is unlikely to have any implications on the South African consumer in the near future.

 

We support the position stated by the South African Insurance Association (SAIA), which has said South Africa is unlikely to see any impact from the decision as the country’s current legal framework has been drafted to allow for any differentiation that is ultimately beneficial for consumers.

 

Last week, insurance executives in the UK said the ruling could result in female drivers paying as much as 50% more in the cost of insuring their cars, particularly newly qualified drivers.

 

The ruling is ultimately a bad result for the European consumer as it is only likely to impact on young female drivers. Newly qualified drivers tend to pay the most of any demographic as statistically they are more likely to have an accident due to their lack of experience. However, both local and international statistics show that young men have more frequent and more serious accidents than women, hence the reason for the massive discount for their female peers.

 

Many of the European insurers affected by this ruling, have said it is highly unlikely that this ruling will lead to a reduction in insurance costs for men. The premiums men pay accurately reflect the risk they pose, so all that will happen is that women will lose out by paying more and men will gain nothing as they will continue to pay the same.

 

Insurance companies use a range of factors when determining the risk profile of a client in order to accurately assess the level of premium they should be paying. This includes not only gender but also their age, their claims history and many other factors. The ratings that are applied to clients are based on actuarial science and are determined on the basis of accurate information collated over a period of time.

 

Taking the European ruling to the logical conclusion would suggest that insurance companies could also not discriminate against younger drivers by charging them more to insure their vehicle, despite the fact that young drivers are statistically also at greater risk of being involved in an accident.

 

While the ruling of the European Union is certainly not binding on South Africa’s insurance industry, it is becoming increasingly apparent that foreign judgments carry persuasive authority, which influences the decisions of our courts and law-makers, so one cannot rule out an impact in the future.

 

For any similar development to take place in South Africa, the Constitutional Court would have to undertake a comprehensive and thorough review, meaning any such change would still be many years away.