EU gender legislation coming into effect later this year will create a level playing field in motor insurance but also require insurers to review both the products they provide and the way they market them, Defaqto said today.
In its latest review of the motor insurance market, the consultancy said the December 21 introduction of the European Court of Justice's Gender Directive was one of the greatest challenges facing the industry.
Premiums will rise for many female drivers, while male drivers will see their premiums drop, it explained. Providers with a large female book of business will therefore have to address the risks involved in retaining this business, as well as looking to provide cover for the riskier male driver.
It is therefore essential, Defaqto said, that motor providers offer product differentiation in cover, marketing and sales processes to make their products stand out.
The consultancy's insight analyst for general insurance, Mike Powell, said: 'The market faces one of its biggest challenges when the gender directive comes into force at the end of this year, both in terms of the underwriting and pricing of risks and how it markets products to its target audience.
He added: 'The introduction of the gender directive will create a level playing field. Although premium will still be one of the main purchasing decisions, this is a clear opportunity for the market to move consumer focus away from price and onto the quality of the actual product they are purchasing - and to differentiate their products in a crowded marketplace.'
Defaqto said recent months had seen 'positive results' in providers' efforts to increase their profitability by addressing low premiums and claims inflation. A concerted push to bring about major increases in premium levels saw the average premium increase by 15% during 2011 and 33.2% during 2010.
Annual results published recently by major providers have shown the benefits of this, it said, with some 'notable' improvements in profitability and combined operating ratios.