This morning the European Court of Justice (ECJ) delivered its
much anticipated Decision in the Test-Achats case. The case,
brought by the Belgian consumer association, had challenged the
legality of provisions in an European Directive which permit
insurers to use gender as a risk factor when setting premiums and
benefits under policies.
In September 2010 Advocate General Kokott delivered her Opinion in
the case in which she proposed that Article 5(2) of the Gender
Directive (2004/113/EC) - which permits insurers to charge
different premiums and to provide different levels of benefit to
men and women provided that sex is a "determining factor"
in the assessment of risk – was incompatible with the
principle of equal treatment under EU law and hence was
unlawful.
Today the ECJ essentially came to the same conclusion as the
Advocate General regarding the impermissibility of setting
different premiums and benefits in the insurance sector based on
gender, and confirmed that:
- Taking the gender of an insured into account as a risk factor in insurance contracts constitutes discrimination.
- The derogation within article 5 of the Gender Directive (2004/113/EC) that permitted exemptions so long as differential premiums and benefits were based on objectively reliable statistical data should not be permitted to subsist indefinitely, as it is incompatible with the principle that men and women must be treated equally, which is set out in "higher ranking European law".
- Accordingly, from 21 December 2012, it will not be possible for UK and other European insurers to rely on the derogation to be allowed to use differential pricing of insurance policies for men and women in comparable situations. This date is the date that the derogation would be subject to review.
The Judgment therefore does allow the insurance industry a
period of grace within which to consider and make necessary
amendments to its business and pricing models as necessary.
The Advocate General did recommend a longer period in her Opinion
(3 years) and the time by which changes need to be reviewed and
implemented is much shorter under the ECJ's ruling, although
there was no ruling that immediate changes had to be made.
The Decision, which is binding on all Member States, will have far
reaching implications for the insurance industry. Insurers
will now need to consider how insurance premiums and benefits
should be priced and calculated to be compliant with the Judgment
from 21 December 2012.
Immediate potential business impacts going forward include:
- Increases in premiums chargeable to men or women who have been perceived to be of a lower-risk because of their gender, and whose policies have been priced accordingly.
- Specifically it seems that women drivers will have to pay more for their car insurance as it will not be permissible to charge them lower premiums than male drivers simply because overall women have a statistically better accident record than men.
- Annuity cost and benefits will change. Currently as women generally live for longer than men they receive a smaller sum than men; going forward men are likely to receive smaller annuity income.
Further reading: Association Belge des Consommateurs Test-Achats and Others (Case C-236/-9)
This article was written for Law-Now, CMS Cameron McKenna's free online information service. To register for Law-Now, please go to www.law-now.com/law-now/mondaq
Law-Now information is for general purposes and guidance only. The information and opinions expressed in all Law-Now articles are not necessarily comprehensive and do not purport to give professional or legal advice. All Law-Now information relates to circumstances prevailing at the date of its original publication and may not have been updated to reflect subsequent developments.
The original publication date for this article was 01/03/2011.
