Insurance for girls

We've all heard jokes about women drivers. Men love to make fun of the struggles girls supposedly have with everything from spatial awareness and parallel parking to three-point turns and map-reading. But for some time now, women have been having the last laugh as statistics consistently prove that they are safer drivers and have fewer car accidents. Consequently, women are rewarded for their careful driving with lower car insurance premiums, often 20% or 30% less than men of the same age. And the gap between motor insurance rates for men and women has widened in recent years.

Are you born to be wild - or mild?

Diamond Insurance, one of several companies which specialises in covering female drivers, points out that men are convicted of 92% of driving offences and account for 98% of dangerous driving convictions. It says that both genders typically have the same number of accidents but while women are prone to minor bumps around town and 'knocks when parking', men tend to run up bigger repair bills through more extensive damage. Women in their late teens and 20s enjoy the largest discounts in comparison to men. Young men tended to drive faster and commit more traffic offences than women. They are also more likely to drink or take drugs before driving and to drive for long periods without a break. This is reflected in premiums, with Diamond Insurance quoting for a 19-year-old woman driving a 2003 Ford Fiesta in London about £800 less than a man of the same age. However, the difference between the genders narrows as drivers reach the age of 30 and premiums typically even out. Among motorists over the age of 75, men are regarded as a better risk and generally benefit from cheaper insurance.

A study by the AA found that women tend to drive shorter distances, have lower annual mileages and typically drive more slowly. Insurers rely on statistical evidence pointing to differences in risk between men and women, based on driving experience and other factors when they calculate premium rates. Insurance underwriting is a skilled exercise and a one-size-fits-all approach is not appropriate. But the financial benefits available to young women drivers came under threat from the European Union when a Gender Directive threatened to ban insurers from treating men and women differently. The change in law would have made car insurance much more expensive for many women and considerably cheaper for younger men. But following a British-led rebellion in January 2005, the plans were dropped and a deal agreed which will still allow UK insurance firms to use gender as a basis of risk if objective data can justify the difference.

Gender bender

Sex discrimination in goods and services is already illegal in the UK under the 1975 Sex Discrimination Act which has been successfully protecting men and women for nearly 30 years. However, after last week's change of heart, insurers such as Diamond will have to justify their methods under the new EU sex discrimination law, and explain discriminatory pricing policies to the industry, anti-discrimination bodies and member states. 'If they don't come up with a satisfactory explanation to us and their customers, we'll come back with a tougher proposal,' said a commission spokesman, adding that it was now up to the industry to explain why it thought sex was 'the determining factor'.

David Stevens, the underwriting manager at the Admiral Group, which owns Diamond, says.'It should be illegal to discriminate on the basis of sex, but it should be legal to price on a basis of objectively demonstrable risk difference. The fact that women motorists have different driving characteristics to men should be reflected in pricing.' Malcolm Tarling of the Association of British Insurers agrees, pointing out that the Directive 'would have penalised the people it was looking to protect'. Jacqui Smith, the deputy minister for women and equality, said that a 'sensible argument' had 'won the day'.

Despite the chance to save money, women are 50% less likely to shop around for car insurance quotes than men, according to research from Bradford & Bingley. Not known for being shy when it comes to shopping, women could be paying well over the odds if they ignore the chance to find a better deal on car cover. 'Premiums do vary considerably between insurers, so it is vital both female and male car owners do their research or visit a broker to do it for them, so as to ensure they are getting the best deal possible,' says Bradford & Bingley's Nigel Asplin. The total potential loss in the UK by not shopping for motor insurance around is £1.3bn a year. The average potential saving which could be made by people looking for a competitive premium is £130.

Live long and prosper?

It's not just car insurance which would have cost more for women if the EU had its way. Life assurance premiums would have increased. Currently, insurers and actuaries - who calculate risk - attach importance to the assumption that women live longer than men and use it as a key factor when calculating premiums and benefits. On this basis, women tend to benefit from the assumption with cheaper life assurance

But living longer can have a negative impact on some financial calculations. The UK is the only EU Member State which has compulsory annuities. An annuity is a financial scheme which pays a regular income from your pension pot. Women have traditionally received a smaller annual income because living longer means their pensions needs to last longer. Although the EU climbdown on the Gender Directive brings positive results, it means insurers will be able to continue paying smaller annuities to women, on the ground of longer life expectancy.