After a legal challenge, the European Court of Justice (ECJ) ruled that ‘gender discrimination’ is illegal when deciding how much people pay for their insurance and the income they receive from their pensions when they retire. There are now changes to the UK Equality Act to implement the judgement – the Gender Directive, by the European Court of Justice (ECJ), which removes the ability of insurers to use gender as a factor in pricing policies and determining benefits.
The date of implementation of the ECJ judgement is 21st December 2012. An interesting time for the insurance industry, when you consider that the impact of the Gender Directive is swiftly followed by the implementation of the Financial Services Authorities Retail Distribution Review (RDR) within the financial services industry on 31st December 2012; two major pieces of legislation over Christmas and the New Year!
HM Treasury has been consulting with the industry and the EU Commission, and has confirmed that the ECJ judgement only applies to new contracts entered into after 21 December 2012. The Commission has also provided specific examples of what is considered a ‘new contract’, and examples of gender-related insurance practices which are compatible with the principle of unisex premiums and benefits. These practices range from the calculation of technical provisions to reinsurance pricing, medical underwriting and targeted marketing.
One of the positive outcomes of the changes could be that insurers become more sophisticated in the ways they assess insurance risks so that rather than making generalisations about how men and women pose differing risks, each person is treated as an individual risk. Until now most consumers have seemed to be generally happy with how insurance is priced but falling into line with the Gender Directive means men and women will now have to be treated equally.
The two areas of insurance cover most frequently identified by commentators, where the impact of the Gender Directive could be significant, are in relation to a decrease in the amount paid by men for life insurance and an increase in car insurance for women as prices are equalised. However the full impact on the price of insurance by the Gender Directive on 21st December 2012, is still not clear as insurance companies are still working out how to deal with the changes, remain profitable and keep their customers.
Sources: www.hm-treasury.gov.uk; www.nextlevelportal.co.uk