Starting from 2012, insurance companies will no longer be able to charge different premiums for men and women, after the European Court of Justice ruled against using gender-based criteria to set prices.
Background
European Union law (Directive 2004/113) and the Charter of Fundamental Rights prohibits discrimination on gender grounds in accessing and supplying goods and services.
A derogation in the Directive, however, allows EU member states to use sex-specific differences in the calculation of insurance premiums and benefits where sex is considered a determining factor that can be substantiated by statistical data.
Belgian consumer association Test-Achats brought a case before the Belgian Constitutional Court calling for the annulment of a Belgian provision transposing the directive.
The Belgian Constitutional Court asked the European Court of Justice (ECJ) to rule on the compatibility of the derogation with the principle of equal treatment for men and women under European law.
The ECJ Advocate-General issued a non-binding opinion on 30 September 2010 that concluded that the use of risk factors based on gender in connection with insurance premiums and benefits is incompatible with the principle of equal treatment. She recommended that the ECJ Court should declare the relevant derogating provision in EU directive invalid.
“Taking into account the sex of the insured as a risk factor in insurance contracts is discriminatory,” the court said in a statement.
The court was ruling on a case submitted by Belgian consumer group Test-Achats, which argued that current exemptions for women contradicted EU legislation on anti-discrimination and gender equality.
Insurance companies lamented the court’s decision, which is due to enter into force on 21 December 2012.
“The decision of the judges not to recognise that gender is a legitimate factor in insurance pricing and that insurance pricing is based on a fair risk assessment process could be bad news for insurance customers,” said Michaela Koller, director-general of the European Federation of Insurers (CEA).
According to the insurance federation, some insurers will now face significant additional costs in reassessing data, transforming premiums, and changing terms and conditions and marketing materials for certain products.
“This judgement could ultimately have an impact on the prices insurers need to charge consumers,” warned Koller, adding that the decision could push up motor insurance costs for women, who currently pay less than men because statistically they have less accidents.
On the other hand, men could also see their retirement annuity payments reduced, as currently they get more than women because insurers take into account the fact that statistically women live longer than men.
Earlier this week, British think-tank Open Europe published a note in which it estimated that, on average, a 17-year-old female driver will now have to pay an extra £4,300 (roughly EUR 5,000) in insurance premiums by the time she is 26 as a consequence of the ruling.
Overall the Eurosceptic think-tank estimated that the EU ruling could increase insurance costs by £1bn from 2012.
Affordable insurances for both men and women
Speaking to EurActiv, European Women’s Lobby spokesperson Leanda Barrington-Leach noted that affordable insurance products are equally important for both women and men.
“We feel in particular that the use of sex as a basis for the calculation of premiums should be forbidden – just like the use of race – since these factors are beyond the control of the individual concerned,” she said, adding that there are other factors linked to lifestyle that play a more important role, like smoking, alcohol consumption, stress factors and health awareness.
As an example, Barrington-Leach noted that being involved in fewer car accidents rather than gender should be used as a criterion for the calculation of premiums.
The same applies for pension schemes, which are mostly based on life expectancy.
“If differences in mortality between different groups were so important in calculating risks to obtain the cheapest options for all, then insurers would need to use other determining factors such as race, social status and working conditions, which are more relevant with regard to mortality risks,” reads a paper spelling out Test Achats’ case.
Reliability of statistical data at stake
According to Anne-Sophie Parent, director of the AGE Platform, the impact of today’s working conditions on young and middle-aged women’s life expectancy are not known. But women are nonetheless offered much less favourable conditions in pension schemes compared to men.
Women and elderly people’s organisations also question the reliability of data used by insurers. They said all data used by insurers should be made available on the Internet page of the public institution responsible for the supervision of insurance companies.
“Contrary to what the business sector says, the existence of a legal framework for non-discrimination presents an opportunity for business – like banking and insurance – and not a threat,” said Parent.
“It would provide business with access to new markets and generate innovation […]. Arguments that legislation would cause business additional costs and red tape is short-sighted,” she added.
Positions
UK Conservative MEP Sajjad Karim said that “this decision is pure folly. It is a setback for common sense”.
“The fact that young men have more accidents than women is a statistical reality and this should be reflected in their premiums,” he said.
“Once again we have seen how an activist European Court can over-interpret the Treaty. The EU’s rules on sex discrimination specifically permit discrimination in insurance if there is data to back it up. Unelected judges have overruled the will of democratically elected MEPs and governments; is it any wonder people are do disenchanted with the EU?”
UKIP MEP Marta Andreasen described the move as “nothing short of idiocy”. She said the decision “will spell the end of cheap car insurance deals for women and cause the loss of many jobs in this sector of the insurance business”.
“It is a cast-iron fact, based on solid data, that women have fewer accidents than men and claim less than men. On the whim of the European Commission and the Advocate-General this evidence is ignored,” she said.
