Court rules gender-based insurance premiums are unlawful
Separate insurance rates for men and women are unlawful, the European Court of Justice has ruled.
The much-anticipated decision, in the Test-Achats:C-236/-9, confirms Advocate General Kokott’s Opinion last September that the “opt-out” clause, Art 5(2) of the Gender Directive, permitting gender-based premiums is incompatible with the principle of equal treatment under EU law.
This means it is discriminatory to take gender into account when assessing risk, even where the differential is based on objectively reliable statistical data.
The decision is binding on all member states, and insurers have until 21 December 2012 to change their practices.
According to research commissioned by the Association of British Insurers, the decision could lead to a 25% rise in motor insurance for women under the age of 25; an eight per cent reduction in annuity rates for men approaching retirement and a six per cent rise for women; and a 20% rise in life insurance premiums for women, accompanied by a fall of 10% for men.
Laurence Besemer, CEO of the Forum of Insurance Lawyers (FOIL), says: “Insurers should be free to assess risks based on their own and market
stats.
“Assessing risk, based on empirical evidence, is fundamental to the concepts of insurance and risk transfer. It is, for example, statistically true that under-21s and over-75s are more likely to have an accident than those aged in between.
“Differentiation of premium on the basis of date of birth could be construed as discrimination on the grounds of age in some sense but it is also prudent underwriting, the like of which has ensured the continued success of our industry for hundreds of years. Being able to differentiate proposals for insurance, on any grounds, and thereby assess the premium required to reflect the risk brought to the common fund is a fundamental right of companies that charge a premium to carry risk on behalf of others.”
Stephen Netherway, partner, CMS Cameron McKenna, says the decision will have “far reaching implications for the insurance industry. It will affect the cost of buying an annuity because as women live for longer than men they receive a smaller sum than men—the likely impact of the decision is that in the future men will receive smaller annuity income”.
