When you need car insurance, there are numerous factors that typically come into play in determining an individual’s premium costs. These factors can be things such as the type of vehicle you drive, how far you drive annually, driving history, credit rating, and even things such as your age or gender. While there are certainly valid reasons that many of these things are factored into your insurance rates, there are other countries, outside of the U.S., who are no longer taking gender into consideration when determining car insurance rates, age still plays an important factor in U.S. auto insurance rates. The question is: will the U.S. follow this trend and provide unisex car insurance rates as well?

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In Europe, car insurance rates have been calculated by taking into consideration the higher risk that young male drivers often carry; however, in December 2012, gender will no longer be an acceptable factor in determining auto insurance rates for European drivers. Experts believe that Ireland, Italy and Britain will see the biggest changes when this new law is implemented. Under this new Gender Directive, car insurance rates will likely rise dramatically for young female drivers.

In the United States, like in most other countries, insurance companies use generalizations or statistics to determine the potential risk of insuring a particular individual. Obviously, if the risk is perceived to be higher for a certain group of people, their auto insurance rates will also be higher in order to cover the likelihood of more frequent claims to the insurance provider. Some risk factors, such as a person’s previous driving history, can certainly point towards higher insurance costs; however, other generalizations, such as the age or gender of a driver, may at first seem to point towards some bias. When looking at age in relation to insurance costs, it is important to realize that years of statistics have been used to determine an insurance providers risk for all types of drivers.

Statistics have shown that male drivers between the ages of 16 and 25 not only drive more frequently than females in the same age group, but they often engage in riskier driving habits as well. This puts this particular group of drivers at a higher risk; so, their car insurance rates are typically higher than female drivers in this same age range. While this might not seem fair for the young male who falls outside the generalizations made for his peers, these figures have been studied for many years and the statistics clearly show that on average, young males will be more costly for an insurance provider.

While no one wants to see unfair gender bias when it comes to auto insurance rates, it is important to take into consideration the nature of providing coverage for today’s drivers. When there are clear statistics to demonstrate that a particular gender poses a much higher risk to the insurance provider, the financial aspects must be taken into consideration. With the European Union ruling out the possibility of charging higher premiums for young male drivers, the outcome will certainly be that the risk will be leveled out through other less risky groups. It’s hard to imagine that the U.S. would follow suit, especially when statistics can be used to clearly demonstrate which individuals pose the greatest financial risk for an insurance provider; however, as these changes are implemented in Europe, it will be interesting to view the long-term effects, and however unlikely it may be, if it works, the U.S. could adopt a similar system as well.

Written by Steve Whiley, an industry writer for American Auto Insurance.
 

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