ECJ rules that gender-based insurance pricing is unlawful

The ruling, which will be formally handed down later today, means that premium pricing based upon other areas of discrimination, such as age or disability, is also incompatible with European law.

The ECJ agreed with an earlier opinion by the advocate general that stated that the EU gender directive is superseded by the higher ranking gender provisions set out in the Charter of Fundamental Rights in the Lisbon Treaty.

The ruling states that gender premium pricing was illegal from 21 December 2007, adding that it is permissible for insurers to gradually move to a unisex pricing system with appropriate transitional periods.

The insurance market has now been given until 21 December 2012 to move to unisex premium pricing.

Forum of Insurance Lawyers (Foil) chief executive Laurence Besemer slammed the decision, saying: “How long before Ferrari owners demand to be charged the same as a moped rider?

“Perhaps the European Court of Justice should consider whether denying individual underwriters freedom to exercise their skills, free from accusations of prejudice, is a breach of their human rights.”

The case was brought by Belgian consumer group the Association Belge des Consommateurs Test-Achats ASBL and two individuals, who originally brought the action before the Belgian Constitutional Court to gain an annulment of the Belgian law transposing the directive.

The Belgian court requested that the ECJ assessed the validity of the derogation provided for in the directive in light of rules governing sexual equality.

Reaction:

Laurence Besemer, CEO of Forum of Insurance Lawyers: “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. Decades of stats have proved that to be true. 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.”

Ashley Prebble, insurance partner, Norton Rose: “There is going to be uncertainty in the insurance market for some time as a result of this decision. It is likely that the decision will require the European Commission to clarify the position with regards to other potential areas of discrimination, particularly age and disability.  This might be done through a Protocol setting out exactly what insurers will be able to do in terms of differentiating the risks posed by different categories of policyholders”.

Kingsley Napley head of employment Richard Fox: “The Court (of Justice of the European Communities) may have gone too far with this one. Today’s ruling does not reflect reality and is going to do nothing for sex equality. This judgment needs to be looked at long and hard to ensure it doesn’t result in distortions and unfairness in the charging of premiums – females could suffer every bit as males. It seems it is due to apply to premiums and benefits from the end of the year so we haven’t got long to sort it out.”