Imminent threat to insurers use of gender

09 Feb 2011

Insurance companies across Europe await the outcome of an important case being heard by the European Court of Justice.

A decision in the case of Association Belge des Consommateurs Test-Achats and others (case C-236/09) is expected imminently. The case was brought by the Belgium Consumers Association and is concerned with the legality of gender based risk pricing in insurance contacts.

At the moment Article 5 of the EU Gender Directive as enacted in the U.K. via The Equality Act 2010 allows insurers to charge different premiums for men and women if sex is a “determining factor” in the assessment of risk and where it is based on “relevant and accurate actuarial and statistical data”. In the real world this means that insurers commonly have different premiums for men and women because for example men are more likely to have road traffic accidents or women live longer according to statistical data.

In September last year the Advocate General gave a preliminary view that the use of gender as a risk factor in insurance contacts was invalid. Effectively it is argued that it contravenes the basic principle of equal treatment for men and women which underpins European Union Law. The Advocate General’s preliminary ruling is not binding on the ECJ but generally it has a persuasive effect.

If the ECJ does uphold the preliminary view of the Advocate General this will have major implications for the insurance industry. The industry will no longer be able to use gender as a relevant factor in pricing and the same reasoning is likely to apply by analogy to other factors such as age.