EU age Directive

Insurers cannot price on gender

The European Court of Justice (ECJ) has outlawed the practice of pricing insurance premiums based on gender.

Some UK lawyers argue that the ruling also suggests that 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The ECJ agreed with an earlier opinion by the advocate general that stated that the EU gender directive is superseded by the higher ranking gender provisions set out in the Charter of Fundamental Rights in the Lisbon Treaty.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, although it is permissible for insurers to gradually move to a unisex pricing system with appropriate transitional periods.

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

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.

Women could see a 20% rise in the cost of life insurance while men could benefit from a fall of about 10%.

Court of Justice of the European Union: Directive 2004/113/EC1 prohibits all discrimination based on sex in the access to and supply of goods and services. Thus, in principle, the Directive prohibits the use of gender as a factor in the calculation of insurance premiums and benefits in relation to insurance contracts.

The court ruling goes further than price as it applies to all premiums and benefits- so insurers cannot differ by gender alone any insurance by price, deductible or benefit provided.

Reports that the ruling stops insurers pricing on the basis of risk are not only very wrong but miss the point that real risk factors will become more important. The ruling only stops gender itself - and perhaps age- being used as simplistic underwriting tools. It will force insurers either to underwrite more simply while ignoring sex and age, or develop more complex underwriting that measures the real risk factors of each applicant.