20 News analysis ECJ ruling on gender ‘could be tip of the iceberg’
MADELEINE DAVIES n Anger and dismay as women face 20% rise in cost of protection insurance
The European Court of Justice’s (ECJ) ban on the use of gender to calculate premiums could spread to other factors currently used in pricing, insurance industry experts fear. Age and disability are two areas under consideration in a draft equality directive
set to go before the European Council in June. Both factors are “very key” to pricing in the UK market, according to Phil Brown, underwriting and claims director at insurer Zurich. “We would be very concerned if there was any contagion risk for this legislation,” he said. The court’s ruling on gender, published on 1 March, followed a case brought
by a Belgian consumer association, which sought to remove from gender equality legislation an exemption which enabled insurers to take gender into account in pricing. The court ruled that the exemption “works against the achievement of the objective of equal treatment between men and women”. It will be invalid from 21st December 2012. Research commissioned by the Association of British Insurers (ABI),
carried out in autumn 2010 showed that women could see a rise of as much as 20% in the cost of life insurance if the derogation was removed, while men could see a fall of 10%. While insurers have expressed relief that a transition period is in place,
questions remain about the impact of the ruling on in-force policies. Alan Joynes, senior risk governance manager at reinsurer Swiss Re, expects this
to be clarified in the coming months and suggested that different governments within the EU could implement it differently. “National contract law may also have to be considered,” he said, warning that
the costs for insurers and consumers of a retrospective application of the ruling would “almost certainly” outweigh any benefits. The sense of frustration among some parts of the protection industry have
led some commentators to urge the Association of British Insurers (ABI) and the Treasury to appeal against the ruling. However, Swiss Re’s Joynes said the ruling was not open to appeal or opt
out, with the UK government bound to incorporate the decision of the court into national law.
THE ECJ RULING ON GENDER – DID THE ABI DO ENOUGH?
Frustration across the protection industry – and the wider insurance industry in general – in the wake of the ECJ ruling has led to some criticism of the ABI for failing to use its influence as a trade body to prevent it. However, while the ABI did not to make much noise in the national or trade
media in the immediate run up to the ruling being made, much work had taken place behind the scenes. Ahead of the case coming to court, the ABI had:
Lobbied for two years in the European Parliament to get the insurance exception in the Gender Directive
Worked with the Treasury to ensure reasonable data publication requirements
Provided figures and evidence to Treasury to support its legal case to the ECJ
Commissioned a study last year from Oxera on the impact of the loss of gender as a factor in insurance
A spokesman for the ABI said: “We have been fully engaged in this process throughout and will assess very carefully the details of this important judgment once made, to assess the full impact on UK consumers and insurers.”
HealthInsurance Nigel Cooke n Fears that age and disability rulings could lead to fewer people taking out cover While there appears to be “little demand” to legislate on age, according to
Joynes, Roger Edwards, proposition director for protection providers Bright Grey and Scottish Provident, believes that it cannot be ruled out. Law firm Norton Rose has urged insurers to put pressure on the European council to prevent the removal of a derogation on using age and disability in pricing. “There are some concerns related to proportionality and in particular the use of
age limits for some forms of insurance, and we would hope these can be discussed and solutions found by the industry rather than leaving the door open for what would be extremely damaging legislation,” said Joynes. Steve Groves, chief executive of long-term care provider Partnership, said it was
important not to “confuse ‘not discriminating’ with ‘believing everyone is identical’.” “Healthy older people are more likely to die in any year than healthy
middle aged ones and therefore it is not discriminatory to charge a higher premium to insure against this risk,” he said. “In fact it can easily be argued it is discriminatory not to as the lower risk people would be paying the same and getting a lower benefit in return.” Disability is also a key area of concern, with Joynes warning that price “would spiral out of control” if insurers were unable to assess health when measuring risk. HI
COULD THE USE OF AGE AS A RATING FACTOR FOR INSURANCE BE BANNED IN THE EU? A SENIOR ACTUARY’S VIEW
“The principles of equality in European law extend beyond gender. The UK’s Equality Act (2010) is derived from the EU Directives on equality and it prohibits discrimination against anyone with a ‘protected characteristic’. It is to be expected that all of these protected characteristics will need to be handled in a manner that is consistent with the ECJ ruling on gender equality in the pricing of services and goods.
“There are nine protected characteristics which are: i) gender ii) age
iii) disability iv) gender reassignment v) marriage and civil partnership vi) pregnancy and maternity vii) race viii) religion or belief and ix) sexual orientation. Were these all to follow the same path as gender the impact would be dramatic, notably in relation to age, which at present has a very similar exemption to that which will be lost to gender pricing from the end of 2012. “While the arguments remain compelling for the use of age as a rating
factor in certain insurance products (most notably the same ones as affected by gender) and the legal position in EU law for a continued pricing exemption is stronger than it was for gender, we are still expecting a heightened debate on age following this ECJ ruling. Were the exemption for rating on age also to be lost it would have a substantially greater impact on pricing for the affected products than the removal of the exemption for gender. The idea of pricing for a pension product, for example, without allowing for age hardly bears thinking about. However, the political knock-on into employment law and into state retirement provision is likely to create a more principled resistance across the EU than occurred with gender pricing. “The other seven protected characteristics are unlikely to create major
changes to pricing practice, based on the justifications used for the gender ruling. In most cases these factors are already ignored or are priced based on an individual risk assessment (eg disabilities) but they do need to be thought through with the underwriting community.”
NIGEL COOKE, SENIOR LIFE ACTUARY, GRANT THORNTON
www.hi-mag.com April 2011
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