Full implications of the ECJ gender ruling are still unclear

"It is unsurprising that the ECJ ruling generated as much attention as it has and this will continue for some time given it is a landmark case with implications for both the insurance industry and consumers at large. While there is still uncertainty in the industry about the full effect of this ruling, as the dust begins to settle insurers are working hard to firm-up their strategies of how to structure their businesses going forward.

"While many headlines have focused on the fact that premiums for women are likely to increase, there is much more of a story to tell. This ruling will have a profound effect on business models - forcing insurers to look at alternative ways to price their products and the data they collect on their policy holders; as well as how they differentiate their brand and market their business.

"Given the highly competitive nature of motor insurance, the industry already invests heavily in marketing and advertising. Insurers will now need to be more strategic in their approach to marketing, in particular to women. It is important to note that the ruling does not make it illegal to market products specifically to women, nor does it rule out designing products that are more eye-catching to women in order to attract more female customers. This will be of particular importance to female-dominated brands, which are likely to do their utmost to strengthen their majority female base. The challenge will be to accurately target their marketing, new product development and loyalty schemes. If successful, female-dominated brands should be able to maintain a large volume of female customers which will help protect them if more men start joining. In fact, the pressure to cross-subsidise the premiums of men from the premiums of women may well be lower for female-dominated brands creating a potential pricing advantage they can promote.

"Marketing strategies will also need to take aggregators into account. The advent of aggregators has opened up a bigger market to insurers with little advertising budget, where customers will buy online driven predominately by price. Insurers who rely on aggregators as their main source of new business may fall behind the ‘big spenders' who can undertake strategic marketing to direct business to themselves, so affecting their female/male mix.

"Insurers who can price using different risk factors, for example driving behaviour, will be better equipped to deal with the upcoming changes. However to do this effectively the insurer must be able to collect, and interpret, reliable and high quality data on policy holders. This in turn means that insurers will need to invest in both the requisite technology, such as telematics, and the pricing analysis capability. While it is likely that the ECJ ruling will accelerate the mainstream use of these types of technologies, this will be an expensive investment for businesses to make. In addition, the availability of alternative information on customers, for example data gathered by those with loyalty cards such as supermarkets, could prove to be invaluable and used either directly in price differentiation or indirectly to develop targeted marketing campaigns.

"In contrast to motor insurers, annuity writers will be looking to maximise their number of male policyholders. For life business, the impact is less clear as the preference for male versus female policyholders will vary between the products offered. Therefore a more sophisticated marketing approach, which is unique for each segment of the life market, will be required. The main challenge for life insurers is how their modelling will evolve to separate out factors which reflect the underlying risk without seeming to be discriminating by gender.

"With regard to timing, many insurers breathed a sigh of relief that the ruling was neither retrospective, nor came into effect immediately. However, the seemingly ‘generous' deadline of the end of next year is actually a double edged sword. On one hand insurers have additional time to prepare and think at length about what strategy will work best for their business. On the other, looking forward almost two years is a sizeable challenge and there will undoubtedly be a lot of second guessing about what the initiatives competitors are adopting.

"It will be interesting to see how this ruling pans out for the industry. Amongst all the uncertainty, one thing is clear - insurers are going to be busy in the lead up to December next year."