While the British government dithers and discusses the ban on gender rating of insurance, with an insurance industry that is mostly dragging its heels and complaining about Europe upsetting its comfort zone, the European Commission has published guidance to Europe's insurance industry to ensure non-discrimination between women and men in insurance premiums.
The European Commission guidelines are to help the insurance industry implement unisex pricing, after the Court of Justice of the European Union ruled that different premiums for men and women constitute sex discrimination.
In its ruling on the Test-Achats case on 1 March 2011, the Court of Justice gave insurers until 21 December 2012 to treat individual male and female customers equally in terms of insurance premiums and benefits.
Following consultations with national governments, insurers and consumers, the new guidelines respond to the need for practical guidance on the implications of the ruling. They aim to benefit both consumers and insurance companies.
EU Justice Commissioner Viviane Reding says,” By adopting these guidelines a full year ahead of the deadline to comply with the court's ruling, we have lived up to our commitment. It is now up to the insurance industry to ensure that there is a smooth transition to fully equal treatment of men and women in insurance. We will remain vigilant in how the industry implements the court's ruling. I expect that insurers that move to a unisex tariff first will have a competitive advantage."
EU Commissioner Michel Barnier adds: "There have been some concerns among insurers as to the impact and consequences of this important judgment, in particular at this time when insurers as all other financial market participants face important challenges. I believe that these guidelines will be helpful for the industry and assist them in adapting their contracts and premiums to be able to ensure timely and full compliance with the judgment. This will be beneficial for both the industry and policyholders."
The guidelines cover a series of issues that emerged from in-depth consultations. For example, they clarify that the ruling applies only to new contracts, in particular to contracts concluded as from 21 December 2012. They also give specific examples of what is considered a new contract to ensure a comprehensive application of the unisex rule at EU level from the same date.
In addition, the guidelines provide examples of gender-related insurance practices that are compatible with the principle of unisex premiums and benefits, and therefore will not change because of the Test-Achats ruling. These practices include medical underwriting and targeted marketing.
Gender is a determining risk-rating factor for life insurance and private health insurance. It is likely that a transition towards unisex pricing will have consequences on premiums and/or benefits at the individual level for men and women. Depending on the product concerned, premiums might increase or decrease for certain categories of consumers.
The insurance industry is competitive and innovative. It should be in a position to make these adjustments and offer attractive unisex products to consumers without unjustified impact on the overall price level. Price reductions resulting from unisex pricing should be passed on to consumers with the same level of fairness as price increases.
It is worth remembering that according to the original law, agreed by all EU states including the UK, was that by 21 December 2007 the use of sex as a factor in the calculation of premiums and benefits for the purpose of insurance and related financial services shall not result in differences in individuals' premiums and benefits. Insurers used a technicality to take no action on this, and really have nobody but themselves to blame if they are not ready for gender equality.