Women's low car insurance premiums ruled unfair
Published 01/03/2011 | 10:23
European judges rewrote the rule book for insurance companies today by banning risk assessment based on gender.
Using differences between men and women as a risk factor in setting premiums for car and medical insurance and pension schemes breaches EU rules on equality, declared the European Court of Justice in Luxembourg.
The verdict - which applies from December 21 2012 - will force changes in the current standard practice across Europe of basing insurance rates on statistics about differing life expectancies or road accident records of the sexes.
Until now, discrimination in setting insurance rates has been explicitly permitted under EU equal treatment rules, "if sex is a determining risk factor... substantiated by relevant and accurate actuarial and statistical data".
But today the judges followed advice from the court's Advocate-General that "higher-ranking" equality provisions set out in the Charter of Fundamental Rights of the Lisbon Treaty must now apply.
Insurance companies can carry on discriminating between the sexes until December next year - the time when current EU equality rules are due to be reviewed.
The delay will also give insurance companies and risk assessors time to change the template for risk assessment by ignoring traditional statistical gender-based evidence.
Today's judgment said: "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."
The judges pointed out that the Lisbon Treaty, which includes the Charter of Fundamental Rights, aims "in all its activities, to eliminate inequalities and promote equality between men and women".
However, the use of "actuarial factors related to sex" was widespread in the provision of insurance services at the time when the EU's equality rules were adopted, and it was accepted that changing the law to bring in "unisex premiums and benefits" should be done gradually.
But until now there was no time limit set for when the current exemption from equality for insurance premium assessment should expire.
The judgment concluded: "Consequently, the court rules that, in the insurance services sector, the derogation (exemption) from the general rule of unisex premiums and benefits is invalid with effect from 21 December 2012."
AA Insurance said it was disappointed with the decision but welcomed the delay until December next year.
AA Insurance director Simon Douglas said the use of gender in calculating insurance risk has been a fundamental principle of the risk-based motor insurance structure for decades, although it has been a thorn in the EC's side since 2002.
Mr Douglas said: "However, it's important not to confuse equality with fairness.
"The calculation of car insurance premiums based on risk is by definition fair, but is incompatible with gender equality."
He went on: "Young women have, until now, paid car insurance premiums that are typically up to 50pc cheaper than men. In the short term, they will see their premiums rise significantly while those for young men are likely to fall a little."
Mr Douglas said he believed insurers would quickly start to adjust their pricing in a way which put greater emphasis on the individual risk presented by motorists and that premiums would start to settle down.
But he warned that some insurers might pull out altogether from the young driver market which would reduce competition and lead to higher prices.