European court ruling on gender

1st March 2011 is a date that insurers await. A possible EU rule change means millions of consumers could pay a bit more for some policies but millions of others could see prices fall slightly. Insurers currently set different rates for men and women on many different policies.

A European Court of Justice opinion issued by Advocate General Kokott in September supported the case brought by Belgian Consumer Association, said that as a general principle differences in premiums and benefits in insurance contracts based on gender are illegal.

The outcome is uncertain, but UK insurers expect that there will not only be a ban on the use of gender when insurers determine the price of cover, but insurers will be banned from keeping internal records of policy numbers or claims by gender – to stop them making hidden price alterations.

There has been much hysteria in the trade and consumer press, much of it based on wrong information.

Myth - It will never happen.

Reality - the ECJ has upheld 80% of all advocate opinions, and insurers only get away with gender pricing now due to a loophole in the law, that the EU reluctantly accepted.

Myth - There will be up to three years for insurers to change their ways.

Reality - It is unlikely as previous rulings have been instant.

Myth - It will retrospectively apply to current policies.

Reality - European law is not retrospective. Only if there is a major amendment during the policy year will insurers probably have to recalculate premium; such as on a motor policy where the lady driver changes care or home. Such mid term amendments that affect pricing are rare on health, protection and life policies. It would be illegal for insurers to change the prices on life and other policies where they guarantee a fixed price for the life of the policy or a set period. Legal opinion is divided as to whether or not the ruling would apply to the renewals of existing annual policies, or just new applications.

Myth - Insurers will have to stop new business for weeks as their systems cannot cope.

Reality - Not only is it a pretty poor system if that is true, but there is a stunningly simple short-term answer; you just lie to the computer that all females are males or vice versa- so you just quote the same irrespective of gender-which is what the law may require! 

The European Court of Justice will rule on 1 March whether insurers can still use gender as a means of determining what men and women pay. Gender particularly tends to influence the prices paid:

  • Life insurance. Men tend to pay more than women because they often die earlier so there is more chance insurers will pay out early
  • Health insurance. Women tend to pay more than men because they are more likely to visit their doctor when feeling ill and are more likely to suffer from certain chronic diseases.  

Some insurers welcome the potential change, as they believe not only that current lifestyles throw into doubt some of the historic insurance wisdom/prejudices of the differences between men and women; but also that insurers should use a more individual approach to pricing than a very unsatisfactory one of gender as there are more differences within each sex than between the two.


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