Insurers can no longer charge different premiums

Insurers cannot charge different premiums to men and women because of their gender, the European Court of Justice (ECJ) has ruled.

Under the ruling from December 2012 women will no longer be allowed to be charged a lower car insurance premium then men.  The requirement for unisex insurance premiums will start on 21 December 2012, giving national governments and the European insurance industry time to adjust.

The ruling stated:

Taking the gender of the insured individual into account as a risk factor in insurance contracts constitutes discrimination

The rule of unisex premiums and benefits will apply with effect from 21 December 2012

Directive 2004/113/EC1 prohibits all discrimination based on sex in the access to and supply of goods and services.

Thus, in principle, the Directive prohibits the use of gender as a factor in the calculation of insurance premiums and benefits in relation to insurance contracts entered into after 21 December 2007. By way of derogation2, however, the Directive provides that Member States may, as from that date, permit exemptions from the rule of unisex premiums and benefits, so long as they can ensure that the underlying actuarial and statistical data on which the calculations are based are reliable, regularly updated and available to the public. Member States may allow such an exemption only if the unisex rule has not already been applied by national legislation. Five years after the transposition of the Directive into national law – that is to say, on 21 December 2012 – Member States must re-examine the justification for those exemptions, taking into account the most recent actuarial and statistical data and a report to be submitted by the Commission three years after the date of transposition of the Directive.

The Association belge des Consommateurs Test-Achats ASBL and two individuals brought an action before the Belgian Constitutional Court for annulment of the Belgian law transposing the Directive. It is within the context of that action that the Belgian court asked the Court of Justice to assess the validity of the derogation provided for in the Directive in the light of higher-ranking legal rules and, in particular, in the light of the principle of equality for men and women enshrined in EU law.

In today’s judgment, the Court first points out that, under Article 8 TFEU, the European Union is to aim, in all its activities, to eliminate inequalities and to promote equality between men and women. In the progressive achievement of that equality, it is for the EU legislature to determine, having regard to the development of economic and social conditions within the European Union, precisely when action must be taken. Thus it was – the Court states – that the EU legislature provided in the Directive that the differences in premiums and benefits arising from the use of sex as a factor in the calculation thereof must be abolished by 21 December 2007 at the latest. However, as the use of actuarial factors related to sex was widespread in the provision of insurance services at the time when the Directive was adopted, it was permissible for the legislature to implement the rule of unisex premiums and benefits gradually, with appropriate transitional periods.

In that regard, the Court notes that the Directive derogates from the general rule of unisex premiums and benefits established by the Directive, by granting Member States the option of deciding, before 21 December 2007, to permit proportionate differences in individuals’ premiums and benefits where, on the basis of relevant and accurate actuarial and statistical data, sex is used as a determining factor in the assessment of risks.

Any decision to make use of that option is to be reviewed five years after 21 December 2007, account being taken of a Commission report, but, ultimately, given that the Directive is silent as to the length of time during which those differences may continue to be applied, Member States which have made use of the option are permitted to allow insurers to apply the unequal treatment without any temporal limitation.

Accordingly, the Court states, there is a risk that EU law may permit the derogation from the equal treatment of men and women, provided for by the Directive, to persist indefinitely. A provision which thus enables the Member States in question to maintain without temporal limitation an exemption from the rule of unisex premiums and benefits works against the achievement of the objective of equal treatment between men and women and must be considered to be invalid upon the expiry of an appropriate transitional period.

Consequently, the Court rules that, in the insurance services sector, the derogation from the general rule of unisex premiums and benefits is invalid with effect from 21 December 2012.

The British Insurance Brokers’ Association (BIBA) said currently the cost of the average car claim by an 18-year old man was £4,400, while that for an 18-year old woman was £2,700.

“The industry will have to change its model and effectively females will now pay a cross subsidy for males on their insurance premiums.”

Simon Douglas of AA Insurance predicts that around £400 will be added to the annual cost of car insurance for a young woman.

How will this new ruling affect you?