The European Court of Justice's (ECJ) ban on using gender to price insurance is bad news for UK consumers, according to insurers.
Maggie Craig, acting director general of the Association of British Insurers, said the industry had fought against the outcome for the last decade.
"The judgment ignores the fact that taking a person's gender into account, where relevant to the risk, enables men and women alike to get a more accurate price for their insurance," she said.
"It will be crucial to ensure this news does not put people off having vital insurance that protects them against accident or illness, or provides an income in retirement."
ABI-commissioned research by Oxera carried out in autumn 2010 highlighted the possible impact of removing gender from assessing risk. It showed that women could see a rise of as much as 20% in the cost of life insurance, while men could see a fall of 10%.
Craig said that the next 20 months would see insurers make "large scale changes", including amending all affected policy documentation, contacting customers with new information, updating and changing computer systems, ensuring insurance brokers have the right pricing information, adjusting insurance renewals and updating all sales material.
Legal reaction: far-reaching consequences
Law firms were quick to highlight the potential for anti-discrimination claims to be brought retrospectively and for further restrictions on the factors insurers can use to price contracts.
Nigel Cooke, an actuary at law firm Grant Thornton, said all differential pricing that has occurred since 2004 (when the directive on anti-discrimination was issued) may yet be challenged "as a fundamental infringement of rights enshrined in the European Union Treaty", despite the existence of the derogation.
"Whether this would be the fault of insurers, the regulators or the EU itself would then have to be considered." he said.
Given that the EU treaty and the directive on anti-discrimination cover other areas such as age, race and disability, which insurers currently use a proxy for other underlying risks associated with these factors, there could be "even more severe" consequences for insurers ahead, he warned.
Katie Tucker, a lawyer at Pinsent Masons, said uncertainty about the impact of the judgement on premiums and benefits for policies written prior to 21 December 2012 was a "real concern" and called on the Financial Services Authority to provide guidance to insurers.
Protection industry: prices will rise
Protection consultant Kevin Carr welcomed the transitional period put in place by the ECJ but expressed concern about the ongoing impact of the ruling.
"Comprehensive insurance products can only exist if risks can be priced accurately," he said. "If other factors such as age and disability were also to be outlawed, we would be left with highly expensive 'one price fits all' products which come with a long list of exclusions."
Matt Morris, senior policy adviser at specialist protection intermediary LifeSearch, described the ruling as a "horrible mistake."
"It is essential for insurers to use gender to calculate risk based on solid actuarial evidence and statistics," he said. "It is price differentiation, not discrimination, as it is not a decision that comes down to the whim of an individual.