YOUNG women drivers are being urged to turn to pay-as-you-drive insurance to avoid being hit by massive increases in their premiums.
Female drivers are the among biggest victims of a ban on the use of gender in insurance underwriting, which came into force last month. Comparison websites say car insurance costs for younger females have soared in the weeks since the new rules took effect, with some paying hundreds of pounds more a year for their cover.
The increases have sparked fears that many young women will be forced off the road altogether, unable to afford car insurance at a time when incomes are under pressure and living costs continue to rise.
It’s all because of a 2011 ruling in the European Court of Justice that ended the exemption of insurers from European gender equality principles. The resultant EU directive, which came into force on 21 December, means insurers can no longer differentiate between men and women when setting their premiums.
Grant Mitchell, head of motor insurance at The Co-operative, explained: “Statistically speaking, women are the safer drivers of the two genders, which is why they’ve historically paid less for car insurance than men. However, now that the directive has come into force, women will no longer pay less for insurance, which means that many will be getting an unfair deal.”
Women under the age of 25 will be the hardest hit because their premiums are likely to be brought closer to those of their male counterparts, he added – and young men pay the highest premiums of all because statistics show they are involved in the highest number of car crashes.
Women aged between 17 and 19 have seen the cost of car insurance leap by more than a fifth – £231 a year on average – since 21 December, according to analysis by Moneysupermarket.com.
Costs have remained unchanged for women of other ages, while young male drivers have seen premiums fall by an average of £184, although they still pay far more.
The latest Confused.com/Towers Watson Car Insurance price index produced similar findings. It found that for women aged 17 to 24, the cost of comprehensive car insurance rose by 16.4 per cent in the final three months of last year. The increases reached 22.4 per cent in parts of the UK, although women in Scotland were spared the worst of the hikes.
But young women taking out or renewing their car insurance over the coming months face a shock when they see their quote, particularly if they fail to shop around and compare premiums.
All is not lost, however, thanks to technology that can help careful drivers cut their insurance costs. A growing number of insurers are adopting systems similar to the black boxes used on planes, allowing them to track the way a car is used – including cornering speeds, braking, the time of day it’s usually used – and other factors that help them work out how careful their customers are behind the wheel.
Smart box telematics technology gives them a new way of assessing a driver’s risk and therefore the premiums to charge. Those demonstrating safe and responsible driving habits are rewarded by lower premiums.
Crucially, the system is gender neutral. Until now it has been of greatest value to young male drivers, helping them make their insurance more affordable after several years of huge premium increases. Now young female drivers are set to benefit too, with the technology allowing them to mitigate the impact of the gender directive.
“If you’re a good driver – and statistically women are safer than men – then you will pay less for your insurance,” said Mitchell.
“Opting for a box means that women will be able to pay a fair and personalised cost for their insurance which is determined by their own driving behaviour, and will avoid them having to bear the burden of a more ‘one size fits all’ approach that the new regulation may otherwise lead to.”
The Co-operative has doubled the discount that careful drivers can get on their telematics insurance scheme to help female drivers combat the post-21 December price rises.
“Although people of both genders will be entitled to the maximum discount, we expect more women than men to qualify as our data shows that young females tend to drive more safely,” said Mitchell.
“We can see that whilst 60 per cent of 17 and 18-year old females currently get the full discount, just 31 per cent of males of the same age do.”
His assertion is supported by research from telematics specialist Wunelli. It shows that females are less likely to exceed the speed limit or brake hard. They have a driving score 20 per cent better than males, on average, and are 28 per cent less likely to drive at night.
Whether young women drivers are taking advantage of the pay-as-you-drive technology will become clearer in March. That’s when car sales hit their annual peak, triggering a surge of insurance renewals and the end of any ‘free insurance for a year’ deals, according to telematics specialist Coverbox.
Its executive chairman, Johan van der Merve, predicts that March will be “mayhem” for the car insurance industry.
“What women are going to discover is that they can pull back some, and in some cases all of the gender directive-inspired increase in insurance premium by switching to pay-as-you-drive. But the timing of the perfect storm means that there’s going to be a lot of women discovering pay-as-you-drive at the same time.”
He expects a surge over the coming months in the number of people taking out smart box-based insurance.
“The issue, however, is that many insurers are going to be stuck without the option of a pay-as-you-drive or telematics product. There are basic telematics products out there, but the industry is going to rocket forward this year. The countdown has started.”