ECJ ruling on gender ‘could be tip of the iceberg’

Age and disability next on EU radar?

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.

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.”

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