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How insurers cope with new EU rules

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IOL mot pic dec19 Woman Driver

From December 21 women in EU countries will have to pay the same car insurance premiums as men, all other factors being equal.

Neo-natal nurse Laura Keely is convinced she is a safe and responsible driver.

The 21-year old from Birmingham doesn’t speed, has a light touch on the brakes and always takes the utmost care when parking.

Yet because of new European Union rules which will stop insurers from charging a different price for men and women, Laura, and thousands of other young women, will see their premiums shoot up on Friday.

The EU directive means that all other things being equal, women will have to pay the same price as men for car insurance. And as young male drivers are by far the most dangerous, premiums for the opposite sex could rise by as much as £300 (R4200).

So, rather than pay more, Laura decided to let her insurer be the judge of how good a driver she is.

She opted to have a little black box put in under the dashboard of her Opel Corsa by Insurethebox.

In a nutshell, the black box is a tiny computer - installed by a specialist - bristling with software which tracks her every move, driving style and habits.

At the end of the month, the insurer downloads the data and gives her a score out of 100.

The better she drives, the cheaper her policy will be at the point of renewal.

And Laura has been rewarded for her gamble.

In 2011, the first year with the new Insurethebox technology installed, she paid £1800 (R24 800) for a comprehensive policy.

Twelve months on, her premiums have dropped to £1000 (R14 000) - a 44 percent fall.

She said: “I regularly scored 80 or 90 out of a possible score of 100 each month. It’s only because I regularly drive on freeways that I lost marks.

“The good thing about this style of insurance is that you’re not all tarred with the same brush. You’re treated as an individual, regardless of age or whether you’re a man or a woman.”

She had been outraged by price comparison websites which quoted her as much as £3000 (R42 000) plus to insure her Corsa.

The British government is keen on black-box technology, known as telematics, as a way to give young drivers such as Laura more choice, and affordability, when it comes to car insurance.

INSURERS LOVE IT

They find black-box customers are 20 percent less likely to make a claim - and the average damage costs are a third lower than on a typical claim.

Many see the growing creep of the black box as the best way to bring down insurance premiums.

As fraud and claims continue to push up annual insurance costs for all drivers, being rewarded with lower premiums for being a low-risk driver is becoming increasingly attractive.

From December 21, insurers will still ask you to tick a box stating your sex and marital status. But they won’t be able to treat you differently because of this information. If the only difference between two applications is that one is a Mr and one is a Mrs, insurers will have to quote exactly the same price.

Young women drivers such as Laura Keely are expected to be hit hardest by the change.

At present, women pay less for car insurance than men because - statistically - insurers have to pay out less for accidents.

A 20-year-old female driver currently pays average annual car cover of £1707 (R23 500), according to comparison website Confused.

A man of the same age typically pays £3314 (R45 600).

As drivers get older, the price gap closes. But until they hit 70 females pay considerably less than men.

A 40-year-old woman is charged an average of £502 (R6900) for an annual policy, whereas a man’s is £603 (R8300).

From midnight on Thursday, premiums could rise by an average of £58 (R800) for women, but by around £300 (R4200) for those under 25.

That sounds as if it could be a disaster.

But there is still good news because men and women don’t drive the same cars, in the same way, or even at the same times of day - and insurers know it.

So even if you’re not ready to have your every journey tracked by a computer, there are still other ways you can cut your bill.

Number crunchers at these giant firms are finding new ways to reward better drivers. And they have mountains of data which is likely to mean women will still get cheaper premiums.

In the long run it could even lead to bad drivers paying increasingly more.

Gareth Kloet from Confused said: “Insurers will become more sophisticated in how they price premiums. Today insurers look primarily at a driver’s gender, age, the type of car they drive, how many miles they travel, their occupation and where they live.

“Take sex out of it and insurers will spread the weighting across the remaining factors. And they will look to reward predominantly female-like behaviour.

“So a man in an occupation held by more women, with a car typically driven by women will get all the benefits he might have missed out on.”

Kevin Pratt of comparison site Moneysupermarket, said: “There will be a period of adjustment in the new year as insurers work on their systems. But things will settle down.

“If you deserve a certain premium now and you don’t change as a driver, you should be entitled to the same price after the ruling comes in. Insurers need to find ways of identifying those safer drivers.”

But for drivers who aren’t keen on their insurer monitoring their every move, there are still ways in which better drivers - and in particular, women - will be rewarded with lower premiums.

YOUR JOB MATTERS

Despite the gender divide narrowing over the years, there are still many jobs that are predominantly held by women.

And the statistics show drivers in these roles have fewest accidents. This isn’t going to change just because insurers don’t differentiate between men and women, so these roles will be rewarded with lower premiums.

Take nurses. They have the cheapest car insurance premiums because they make the fewest claims, according to Moneysupermarket.

In 2011 nine out of ten nurses and 99 percent of midwives were women, according to the Nursing and Midwifery Council.

The most common professions stated by female customers to car insurers are: Student, housewife, retired, admin assistant, teacher, sales assistant, manager, care assistant, nurse and accountant.

For men they are: retired, student, engineer, manager company director, police officer, accountant, project manager, computer consultant and sales assistant.

Generally speaking, the better paid your profession, the higher your premiums.

This is largely because wealthier workers can afford to buy fast, expensive vehicles which are costly to repair.

Men earn, on average, nearly 10 percent more than women. Unsurprisingly, the highest premiums in the country belong to motor racing drivers and professional footballers - both professions dominated by men.

Bouncers have a notoriously hard time getting car insurance. Driving at night, working in inner cities and the danger they might upset someone who takes revenge on their car all mean they are higher risk.

YOU ARE WHAT YOU DRIVE

Men and women have very different taste in cars. Statistically, women prefer to drive those with smaller engines. Nine out of ten drivers who have one-litre cars are women, while nine out of ten drivers with three-litre cars are men.

There are also certain vehicles that are particularly popular with one sex, and men are also more likely to make modifications that enhance the performance of their car and increase the cost of their insurance.

Insurers already consider the type of car you drive when pricing your premiums. Each model is put in a group between one and 50, depending on how fast it can go, how costly it is to repair and how easy it is to steal. The lower the group, the cheaper your premiums.

From Friday, experts say insurers may begin to pay even more attention to this data, giving even higher discounts for safer, smaller engine, cars.

STUCK IN A FLOOD? YOU MUST BE MALE

If you’ve ever been involved in an accident - and chances are most drivers will be at some point in their lives - then this information will play an even larger part in pricing premiums.

Insurers know exactly what type of accidents the different sexes typically have and use it to decide whether you are low or high risk.

Men are much more likely to make a claim after hitting an animal, driving through a flood, or smashing into a crash barrier.

Women, on the other hand, have a greater tendency to hit parked cars, collide with other moving vehicles in car parks or have a shunt in a queue of traffic.

Men are much more likely to be involved in more serious crashes, meaning their accidents are more expensive to sort out.

A PERK FOR DOING THE SCHOOL RUN

Insurers also know the typical time of day the different sexes drive - and how their behaviour at the wheel differs.

For this reason, they are keen to put the black-box technology in to more vehicles.

A little on-board computer, installed under the dashboard, records not only when and how fast you drive, but how heavily you brake or how sharply you corner.

Those who drive well - that is, who don’t speed or brake suddenly - are rewarded with insurance discounts.

Figures from insurers show men drive faster, brake harder, corner more sharply and accelerate more swiftly than women.

They also drive more frequently and go for longer distances without breaks. There are a third more men on the roads at night — with women motorists much more likely to drive during the school run.

So black-box technology could really help women lower their premiums. Better drivers are likely to be rewarded more because it is easier for the insurer to identify who they are. Black-box figures show that only 31 percent of 17 and 18-year-old males earn a discount - but six out of 10 girls the same age get money off.

. . . BUT PREMIUMS WILL STILL RISE

Just because insurers will find new ways to reward better drivers doesn’t mean average premiums won’t go up.

Car insurance has been rising steadily for almost a decade now, and it is highly likely it will continue to do so. Red tape, more expensive cars, and high levels of fraud are all factors which have pushed up costs for ordinary drivers who have never made a claim.

And history shows that whenever insurers tinker with prices they can’t help but to pocket a little bit for their profits. - Daily Mail


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