Auto insurance might well be the most blame field in which sex discrimination is still tolerated and even encouraged. Men, even guys with great driving records, still pay more for car insurance than women do.
A 25-year-old man who lives in Oakland, Calif. and has no tickets or accidents on his record would pay $358 more for auto insurance in a year than a woman who lives in the same city, according to a recent Bloomberg Businessweek article. The gap narrows as people get older, but it is still very wide, according to the Insurance.com study Bloomberg cited.
It’s easy to see why many men get angry each month when they open their insurance bills. A guy who goes out of his way to drive safely pays higher rates than a woman with a pile of speeding tickets in her glove compartment.
How Insurance Rates are Determined: It’s Not Rocket Science
The reason men pay more than women is not because insurance companies are sexist. Instead, it is rooted in the fact that auto insurance rates are often set by pure guesswork. When they assess risk for drivers, insurers usually have little or no hard information or data about individual drivers.
That means they have to rely upon broad and very inaccurate generalized categories, such as sex, career, job, age, and geographic location. These categories are neither very accurate nor realistic, but they are all the insurers have to go upon.
This is why some insurance companies are pushing telematics devices, which directly monitor driving habits. These provide a more precise picture and allow insurers to set realistic rates.
Why Men Pay More than Women
Most people assume that men pay higher auto premiums because they are worse drivers than women. That’s not true, because studies have found that women are just as likely to get into accidents as men. The problem is that men do more damage when they get into an accident.
Basically, men are more likely to speed, drive aggressively, or drive while intoxicated. That means they are more likely to get injured or killed or cause injuries or deaths in an accident. The biggest expenses for auto insurers are paying for medical care and damage settlements to accident victims or their survivors.
Men are more likely to get involved in the kind of accidents that result in serious claims. Women are more likely to get involved in fender benders or low-speed crashes that only damage the vehicle. Those are the cheapest kind of accidents for insurers.
Interestingly enough, women are more likely to engage in one very kind of driving, distracted driving. A study by the American Automobile Association (AAA) found that teenaged girls were twice as likely to text or talk while driving. Women’s tendency to multitask actually becomes dangerous behind the wheel.
There is some good news for men here. Newer and better ways of determining auto insurance risk and tailoring policies to individual drivers are here or coming soon. Telemetric devices allow insurers to give drivers with very safe habits a lower rate regardless of sex.
A telemetric device is a wireless gadget that records specific information about your driving habits, such as speed, the number of miles you drive, and the time of day that you drive, and relays it to your insurance company. That lets the insurer know how you actually drive, so it doesn’t have to rely on categories like sex when writing your policy.
How Google Could Reduce Your Auto Insurance Premium
Self-driving cars could reduce rates even further by giving insurance companies accurate data about driving habits. It is no coincidence that Google (GOOG) is developing the self-driving technology. Google’s business is collecting data and selling it.
One of the real reasons for Google’s self-driving car program is to gather information about driving habits and sell it. Insurance companies would be the obvious customers.
At some point in the future, men who drive safely might find themselves rewarded, while some women will start getting a nasty surprise when they open their auto insurance bills. Technology may put an end to sexism in car insurance within the next two decades.