Red light for women-only insurance

2011-03-05 10:32

A landmark European Union (EU) court ruling this week has sent a frisson of fear through the South African insurance community.

The court found that UK insurers may not offer cheaper car ­insurance to women – even though extensive research shows that they are safer drivers.

The court also ruled that insurers could not use gender when determining retirement annuity prices. This means that men, who tend to have shorter life spans and pay lower rates, will pay more in future.

Some industry experts think that this could be the beginning of an actuarial horror story.

In South Africa, most insurers offer women lower rates. According to one large insurer, the average discount for car insurance is ­currently in the region of 10%.

This is based on empirical data that show a marked difference in accident rates.

Robyn Farrell, MD of 1st for Women Insurance Brokers, said: “We have statistical evidence that proves that women are involved in fewer accidents than men and that the average repair cost involved for a vehicle that was driven by a woman is less than one driven by a man.”

Christelle Fourie, MD of MUA Insurance Acceptances, a specialist underwriter owned by Hannover Re, says that below the age of 35, men are much more likely to be involved in accidents and their ­accidents are of a larger scale.

By 35, the risk starts to level out.

According to a representative of a large life insurer, when it comes to pension savings, there is also a big difference between the annuity products for males and females.

On average, though, women here only live a year longer than men.

In most Western countries, women live three years more than men, and in Japan eight years longer.

Fourie thinks the local market may be affected by the European ruling.

“While the ruling of the EU is not binding on South Africa’s ­insurance industry, it is becoming increasingly apparent that foreign judgments carry persuasive authority and can influence the decisions of our courts and legislators.”

Should a party decide to go to court to even out rates, it will take a number of years before a definitive ruling is made, she reckons.

But gender could only be the start. Fourie says in France there is momentum to remove “age discrimination” in insurance policies.

Danny Joffe, legal director of Hollard Select Brokers, does not believe that South Africa should follow the EU, and says that all ­indications are that government and legislators understand that risk differentiating is based on ­extensive empirical data.

The Constitution, which expressly prohibits all forms of discrimination, could provide food for thought in future lawsuits.

But Suzette Strydom, legal manager at the South African Insurance Association, says the Constitution refers to the term unfair ­discrimination as opposed to some countries that only define the term discrimination.

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