The European Court of Justice has ruled that Europe’s insurers will no longer be able to use gender as a determinant when underwriting from December 2012.

The ruling has raised concerns that using age when rating risk may be the next area to be challenged, consultancy firm KPMG says.

Mark Winlow, Head of General Insurance at KPMG, says age-based rating will be another “European-based challenge”.

“This is a more significant factor than gender, as age is used much more widely to differentiate risks.”

The ruling on gender, which was handed down on March 1, follows a challenge by a Belgian consumer rights group. Insurers had previously been granted an exemption to the EU’s Equal Treatment Directive to allow the industry to continue using gender in risk pricing, providing it was backed by published actuarial data.

The Association of British Insurers (ABI) says the decision is “disappointing news”.

Research commissioned by the ABI found the gender ban will lead to a 25% rise in UK motor insurance premiums for women under 25, while life insurance for women could rise by up to 20% and annuity rates for women approaching retirement could rise by 6%.

KPMG is even more pessimistic. “The most immediate effect of this ruling will be felt by women who will see their motor insurance premiums increase by up to 50%,” Mr Winlow said.

However, the ABI says men could see their life insurance premiums fall by around 10%, and men approaching retirement could see an 8% reduction in annuity rates.

Acting Director-General Maggie Craig says the court judgement “ignores the fact that taking a person’s gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance”.

The ABI says insurers will have to make large-scale changes over the next 20 months, including amending policy documentation, contacting customers with new information, updating and changing computer systems, ensuring brokers have the right pricing information, adjusting insurance renewals and updating sales material.

KPMG also predicts that the ruling will encourage many European insurers to fast-track their use of driver tracking technology, called telematics. This uses black box technology to capture driving information, allowing for pricing that accurately reflects each individual’s risk.

Mr Winlow says telematics could have “far-reaching effects on the market, removing the traditional annual renewal in favour of monthly statements determined by that month’s driving habits”.